KEVIN DIXON PLACES THE BRISBANE RACING CLUB'S CURRENT POSITION AND VIEWPOINT ON THE TABLE
By Kevin Dixon | Monday, February 20, 2012
HRO guest blogger Kevin Dixon is the Chairman of The Brisbane Racing Club (BRC). As such he is perfectly placed to provide valuable insight into the Metropolitan club’s current position and viewpoint with regard to the ‘funding distribution debate’ which currently seems to plague racing in Queensland at every turn.
I was recently pleasantly surprised when asked to contribute this guest blog to the horseracingonly website.
Having never blogged before I was keen to have a crack. It seems to me that this method of putting forward views and opinions is far superior to the reams of unattributed and unsigned emails that seem to constantly circulate the internet based sites.
Doing a bit of homework therefore on what you do on a blog, I read a few of the recent past blogs on this site by both Rob Heathcote and David Fowler. Having seen how well they go, this may be my only invitation at this caper, so it may go on a bit as I try to get as much in as possible.
In a recent blog from Rob Heathcote he touched on the ugly side of politics in racing. This struck me as worthy of some comment, since it seems to engulf us these days, which is shame given the enjoyment that a day at the races can give if allowed to do just that.
It is with some amusement, but also some frustration that I saw a recent example of the ugly side when I read Bob Bentley's recent response to a piece written by Mark Oberhardt in the Courier Mail. Mark is entitled to an opinion. The use of RQL to make political statements I think is unfortunate.
Since that exchange occurred, I have been weighing up the pros and cons of responding. Clearly, responding only gives credibility to the noise, however, it is also very annoying to those trying so hard to make forward progress to concentrate on the job at hand.
Over the last week I have been approached by many in the industry to provide some facts, so I will attempt to do so here. I have also provided these facts to Mark so that he can use them as he sees fit.
The situation surrounding the industry funding is quite complex, and it is this complexity that allows individuals to be selective on the bits they use to make their case. As such I have tried to summarise the situation below:
1: In 2005 a major change occurred in the way the industry is funded in Queensland. The major source of revenue to the industry is that which flows from the TAB and also, more recently from Corporate Bookmakers.
Up until 2005, this revenue was paid directly to the clubs, but in 2005 a decision was made by Queensland Racing that all wagering revenue was to be redirected from clubs to QRL (now RQL).
The clubs apparently were doing a poor job of getting the priorities right in spending this money between the competing aims of prize money, infrastructure development and operations.
2: When this redirection occurred, and since that time, RQL has therefore been responsible for capital development, prize money and keeping clubs viable. This is the way it is described in the appropriate legislation.
3: In the case of keeping clubs viable, a deal was struck in 2005 that the clubs would receive a subsidy from RQL that would assist in the costs associated with maintaining and providing racing facilities that would be used to run race days, including the ongoing costs of tracks, training facilities, stewards, jockeys facilities etc etc … but not including infrastructure improvements which were intended to be funded by grants to clubs from QRL, from time to time as required, and as prioritized by RQL.
4: In addition the government pays a training subsidy, calculated on the basis of the number of horses in work at a venue, to offset some costs associated with the provision of training. This was $440,000 in the current year to BRC.
5: In 2005, the subsidy was set at approx. $1m for each of Eagle Farm, Doomben, Ipswich, Gold Coast, Sunshine Coast and Toowoomba. It was paid for the first time in the 2006 financial year.
With the exception of the BRC, it remains at the same amount in 2012 as it was in 2005 (ie no increase despite costs skyrocketing in that time) for all clubs (except Sunshine Coast where RQL now pays cost direct - well in excess of the $1m).
The BRC however, was reduced to half that subsidy at the time of the QTC/BTC merger, since RQL maintained that by now being one club the BRC subsidy should be reduced to a total $1m (from the approx $2m before), despite the club having the same infrastructure to operate, the same number of race days and the same amount of horses using the training facilities as before.
This amount varies slightly through the year. If you lose a meeting you get docked, if you run extra you get a bit more.
6: For BRC, (and any club that from time to time did not play QRL's games), there was simply no additional grants given, notwithstanding that was one of the fundamentals of the arrangement.
Also, costs have gone crazy in that time, as everyone knows, and crowds diminished through the EI and GFC years, but still no extra funding from RQL, except some one of relief around EI.
So BRC is pegged at 50% of the 2005 level. RQL have indicated there is no intention to raise this subsidy, and have frequently raised the prospect of further reducing it.
7: The relevant financial snapshot of BRC is:
RQL Admin Subsidy:
$1.900 million - 2006 (QTC/BTC):
$1.182 million - 2011 (BRC)
Training Subsidy:
$440.000 - 2006 (QTC/BTC)
$440.000 - 2011 (BRC)
Total Subsidy
$2.340 million - 2006 (QTC/BTC)
$1.622 million - 2011 (BRC)
Cost of Track and Training Maintenance
$7.267 million - 2006
$9.311 million - 2011
Therefore, whilst in 2011 we received $718,000 less in subsidies than 2005, costs have increased $2,044,000.
This means that if everything else remained equal we are $2,762,000 worse off.
This is by far the biggest contributor to our losses in recent years.
If we assume the subsidy was set about the right balance in 2005, then if maintained at that level and increased for inflation, it would now be approx. $3m for the BRC, and $1.3m for each of the other clubs. I suspect most clubs would be happy with this.
As you can see, the cost of relieving the financial pain to clubs is not great, but RQL, it seems, has no desire to meet their legislative obligation of keeping clubs
viable.
8: In addition, as you know, BRC have been trying to do as much improvement as we can to the facilities at Doomben and Eagle Farm with the limited financial resources we have.
Our improvements at Doomben have been met with enormous praise, and Eagle Farm is currently under a very significant upgrade due for completion in April.
For accounting purposes some of these costs are expensed in the year they are incurred, others capitalised and depreciated. A snapshot of these costs are below:
Capital Improvements BRC
$000
$296 000 - 2009 actual
$5.664 million – 2010 actual
$3.663 million – 2011 actual
$5.322 million – 2012 actual
$14,945 Total BRC Capex
Tracks & General Maintenance Costs
$000 (not capitalised)
$6.893 million – 2010 actual
$7.649 million – 2011 actual
$8.071 million – 2012 actual
$22.613 Total BRC Maintenance Opex
Therefore, BRC in its short life has expended $37,558,000 on infrastructure maintenance and Improvements.
Some of these are obvious to track visitors … some not so much, such as the $2m on fire safety systems at Eagle Farm.
The contribution from RQL has been zero, except for some minor allocations to things like Stewards facilities and swab stalls, despite this being part of their charter.
Our spending has been roughly 50/50 on EF and Doomben.
9: The third plank of the RQL charter was prize money. There has been no increase to prize money at BRC races in the period 2005 to 2012.
There have been some changes to QTIS which allows the numbers to be manipulated, but base prize money has not increased.
I continue to believe that, despite the denial of RQL, much of the funds spent on everything from aborted super track plans to public relations, consultants and lawyers as well as over capitalisation of the Sunshine Coast could have been used to support prize money increases.
RQL argues that they cannot because they are one off spending and prize money must be from recurring income.
Well perhaps if you are spending on "one offs" every year it really is recurring?
At the end of the day, all of this spending came from TAB distributions.
10: RQL maintains the BRCs need less subsidy because BRC has best races and best dates. However, we also have far higher costs and need to operate at a premium level.
There is an enormous difference in the cost profile of a BRC meeting to that of, say, an Ipswich Friday meeting.
The BRC incurs costs for a Saturday meeting of at least $45,000 before we open the gates. So a race day has to meet those costs, as well as make up for the subsidy shortfall, as well as pay for the capital maintenance and improvements.
The short answer is that it can't.
We do not argue that we need a huge subsidy increase, but it is clear that the BRC, who generate about 60% of RQL wagering revenue do not receive a fair distribution.
It is our belief that we should be returned to the level of 2005, increased by cost inflation up till the current year. Our dates are the same as 2005, prize money has deteriorated in real terms since 2005, so I am not sure the RQL position is valid.
11: In regard to infrastructure funding, RQL is correct in that BRC is confident that the current master plan project is anticipated to earn sufficient funds to dramatically enhance the BRC's facilities.
I have said so on a number of occasions, many of these quoted in the recent RQL statement.
The issue is, though, that the process is lengthy. We have to earn the money before we can spend it. I have requested of RQL on many occasions that they consider advancing BRC funds to "get started" then BRC repay these as they are earned.
This way, BRC gets moving and the funds are still available to be allocated to Queensland wide initiatives.
Yes some of those will be delayed two or three years, but that still might be a better answer.
RQL have refused to entertain this approach.
Should an LNP government win the next election, I will continue to lobby for exactly the same approach as I have currently, that is, the advancement of some funding to get the master plan started, to be repaid and made available for other needs around Queensland.
I will also lobby for the restoration of the subsidy to levels outlined above to keep all clubs viable. I do not agree with, nor would I support, a return to the direct payment of TAB funds to clubs.
This would dramatically reduce the economies that can be obtained if accountable, transparent and fair processes are put in place.
12: In regard to RQL recently playing the "Doomben " card, this is laughable and smells of desperation.
To my memory only one person has proposed the sale of Doomben - Bob Bentley.
On each occasion it has been vigorously opposed by the club and the industry.
Just recently RQL was in the press complaining that we wouldn't even sell it to them.
This item in the recent response by RQL was designed to put doubt in the minds of people as they go to the polls shortly. It was the brainchild of a PR consultant
who in the past has worked for BRC and knows that this was an emotive issue.
But time has moved on. The BRC constitution now holds a provision that would require unheard of support from the BRC members in a vote before either track can be sold.
In addition we have spent over $15m in the last 3 years on Doomben.
All I can say is nice try but you missed on this occasion.
No doubt my overview of the facts will be responded to and challenged.
Let me say though that all the numbers above are present in our audited accounts. These accounts are not only audited by our BRC's appointed auditor, but by one appointed by RQL as well.
In addition, we are required by RQL to submit monthly accounts, budgets and forecasts every month.
BRC complies completely. None of these numbers are new news to RQL. The recent attempts to cast doubt over BRC finances I'm afraid is difficult to understand since RQL is as aware of our finances as we are.
In addition, in regard to our capital spending on improvements and infrastructure, BRC is not permitted to spend greater than $50,000 (of our own money) without seeking RQL approval supported by a business case.
We then typically are required to submit regular progress reports and projections.
RQL is very aware of the projects we undertake and the cost to the club. We often, as part of these submissions, highlight costs that we believe should be met by RQL under the 2005 arrangement.
A recent example being the new jockey facilities as part of the current Eagle Farm redevelopment. As was the result in this case, these are more often than not denied.
I think it is a shame that a similar industry oversight is not required regarding spending by RQL themselves. RQL have up till now, not been required to explain a business case regarding their projects to anyone.
The industry has to work on the "trust us" basis.
I hope that this somewhat lengthy blog has added some understanding in regards to the questions I am so often asked.
As I said at the beginning, this is likely a once only blog, so I would like to take this opportunity to wish everyone an enjoyable and profitable involvement in racing, and I hope to see you at the races.
Best regards,
Kevin Dixon.
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