A Federal Ministry of Racing may be the eventual outcome of tomorrow's crisis meeting in Randwick where powerful racing interests are expected to clash over how to alleviate deteriorating returns to trainers, owners and breeders.
The meeting, to be chaired by the broadcaster and owner Alan Jones, was already organised before last night's release of a report commissioned by the Australian Jockey Club and Sydney Turf Club arguing against a merger of the clubs.
The report by LEK Consulting identifies financial benefits of only $3.3 million from a merger, compared with an Ernst and Young report commissioned by the NSW Minister for Gaming and Racing, Kevin Greene, which found $21 million in savings.
Officials from the two clubs told Mr Greene yesterday that these savings were minor compared with the $100 million revenue gap LEK Consulting has found between the NSW and Victorian racing industries. The latter receives an extra $64 million in income from poker machines, together with a bigger share of Tabcorp wagering.
Corporate bookmakers, under pressure from owners and breeders to pay more for using race fields, are expected to crash the meeting at the William Inglis & Sons sales complex.
Breeders, including John Messara and Gerry Harvey, will attend the meeting. They will be joined by representatives from Victoria, concerned about punters switching to corporate bookmakers who contribute less to the industry than totalisator betting.
The Ernst and Young report noted the ratio of prize money to totalisator income has fallen from 94 per cent to 75 per cent over the past nine years.
"Only Commonwealth legislation can fix up the industry", said one of the owners, who is concerned at diminishing prize money.
Two court actions loom, both focused on NSW's decision to charge bookmakers a 1.5 per cent tax on turnover for the use of its race fields.
Betfair, half-owned by James Packer, is challenging the tax in a case set to be heard in November.
The Darwin-based Sportsbet, 51 per cent owned by the Irish group Paddy Power, is taking on the tax in another jurisdiction.
Queensland has joined NSW in choosing a turnover tax. Victoria, Western Australia, South Australia and Tasmania have opted for a charge on gross profits.
Because profit can be manipulated easily and sharing earnings effectively makes the corporate bookmakers partners in the race clubs, the AJC and STC argue Victoria has deserted them.
A federal model, where all wagering operators pay the same for their product, based on a percentage of turnover, is the only solution, according to some players, such as Tabcorp.
Federal interest in racing can be justified by its economic impact.
Owners claim it is the second biggest industry in Australia, after tourism, with the Ernst and Young report estimating it provides employment for 50,000 people in NSW alone, while generating $1.7 billion, with taxes of about $433 million.
A national fee on bookmakers gross profits, compared to a turnover tax model, could cost the industry $300 million a year, according to some estimates.
Reduced industry income leads to reduced prize money and inevitably results in less
reinvestment by breeders.
Of the 25,000 broodmares in Australia, only 1000 make money for their owners.
The Ernst and Young report notes: Owners, trainers and jockeys are being increasingly less remunerated, with the return to industry decreasing.
It is estimated that currently only about 50 per cent of an owner's operating costs is recovered through prize money.
The effect of corporate bookies and punters switch of sports are racing's biggest problems.
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