Speech on release of Messara report on racing industry

 “Reform or die - there’s no encore substitute.”

Introduction

Good evening,

As you are all well aware, the government commissioned Mr John Messara to provide an independent assessment of the New Zealand racing industry.

Mr Messara has been the best man for the job. Passionate about our industry, he is experienced and successful in running his own breeding business, and he has played a leading role in transforming the NSW racing industry.

Such is his passion for this industry, he has conducted this review without charging. The only cost to the government has been relatively small consultancy report fees from several of Mr Messara’s assistants.

For this reason let me record the Government’s gratitude for his assistance, and appraisal contained in this report. He has been a service to the New Zealand racing industry.

State of the industry

As Racing Minister, I commissioned this report because for far too long this once great industry has been sitting in its hands.

It is being killed by inertia.

Mr John Messara’s report confirms our worse fears.

Not only is the industry in a state of serious malaise but it has reached, in his view, a tipping point.

That means we are staring at a downward spiral from which we may never recover.

The vital signs of our industry are dreadful.  

In other words it is an industry in a self-perpetuating decline which is nothing short of terminal.

The data is disturbing:

Decline of NZ foal crop:

1994/95                   5,264

2016/17                   3,448

 

By comparison to New South Wales the returns to New Zealand owners are low:

2016/17                    Return to NZ owners                      22.9%

2017/18                    Return to NSW owners                  48/1%

In reality the numbers are against us. Add it all up and the NSW owner’s returns are double that of a NZ owner.

Messara was given, in effect, a blank sheet with this review.

He has been allowed to develop his own thinking on what the New Zealand racing industry needs. 

He has had the chance to talk to a lot of people about what this industry needs.

This is what an independent review does.  It wasn’t an exercise of ghost writing for a Ministerial office wish list.

What you have in the following recommendations is a clear view on what needs to be done.

In summary the recommendations:

  • Current governance structure needs to change
  • Outsourcing TAB commercial activities to an international operator to help increase prizemoney
  • Amend the distribution formula to the codes on a more equitable basis
  • Repeal the betting levy paid by NZRB to the government
  • Construct three synthetic all-weather tracks
  • Increase thoroughbred prizemoney, potentially doubling to about $100 million per year
  • Reduce the number of thoroughbred race tracks
     

Race course consolidation

One aspect of the Messara report is the way he outlines the past history of reports on racecourse consolidation. This includes:

  • The 1965 Reid Committee on Racing
  • The 1970 McCarthy Royal Commission on Racing
  • The Ministerial Committee on Race Betting in 1991
  • The Ministerial Task Force on Racing 2000
  • NZ Thoroughbred Venue and Infrastructure Review 2007

And there have been more.

The point here is that even 50 years ago it was identified that New Zealand has an excessive number of race courses, the cost of maintaining this infrastructure is drowning the industry, and the number of race tracks has to be reduced in the greater interest of the industry.

Same message today.

  • Far too many tracks for the scale of NZ industry needing consolidation
  • Reduce the number of thoroughbred racing venues from 48 venues to 28 venues – the remaining venues are listed here.
  • This does not require the closure of any clubs
     

The challenge for the industry

Now, I know the racing industry. It is full of people not shy in coming forward and expressing their view.  Many of you will have plenty to say over the coming months about the Messara report, and fair enough.

Some of you may be upset by his findings and recommendations, some may think he is simply wrong, some may say it’s too radical, and some may say it is exactly what the industry needs.

Let me say this. Many of those reactions should be judged against what’s critical for New Zealand racing industry to survive and flourish.

We all have an opinion but the choice is yours.

This choice is yours. This choice is whether as an industry you accept that you are at a crossroad. 

Do you accept the status quo which evidentially offers a continual, gradual decline? 

Or do you accept a need to adopt change, and are willing to approach that change in a constructive way?  

The government’s next steps

When receiving the report one of my staff members advised me the racing industry was going to “freak out” from this report.

The reason being is that the Messara report pulls no punches and offers a very prescriptive plan on governance, licencing, and particularly on consolidating race tracks.

This means, as previously mentioned, consolidating from 48 venues to 28 venues.

But compare that with how many venues in NSW.

For this reason it is important to set-out the government’s reaction and intended next steps to this review.

Our approach:

  • The coalition government is intent on moving the industry forward. We are seeking to make progress and not be mired in the status quo.
     
  • The next step is for us is to all to fully digest this report. Many of the recommendations have serious merit but they require careful consideration rather than carte blanch approval.
     
  • This is because there are a number of “technical” considerations which require further advice, but all of that is capable of being managed.
     
  • My intention is to have officials draft a Cabinet paper with a set of recommendations for decision. This is appropriate due process, especially if structural governance and legislative proposals are being contemplated.
     
  • In summary, that cabinet decision will determine what revised legislation is required to reset the industry, consider TAB licensing, revenue and tax incentive settings, and other relevant matters to set future directions.
     

It is a matter of public record that many aspects raised in this report are matters which, as Racing Minister, I’ve expressed concerns about before.  In particular, governance structure and incentivising ownership investment.

If you think I’m a harbinger of doom of gloom, read the Racing Board’s annual report out this year.

Here’s a fact. Some of your code distributions and activities are being funded from cash reserves and borrowing.  

Does that sound promising? Or is that ominous? But to be honest you all know that alarm bells have been ringing for industry for years now.

Here is a fact. This year a three year revolving debt facility was established to supplement the NZRB balance sheet. 

And total equity is budgeted to decline by $15.6 million this year.

Some will argue that the Racing Board is turning the industry around.

But my bet is, like me, this hall is packed with people seriously concerned with the status quo.

Mr Messara has today offered a blueprint, especially on race course consolidation. It’s going to focus the attention of many of you.

And the government will take a look at it. We accept the need to make a real effort to restore the industry. 

What we cannot tell you today is how much of the Messara blueprint for race course consolidation will become a reality.

That’s not because we shy away from the challenge. It is because we want to test and consult on the proposals with all of you. And you all have to decide. Will it be parochialism and poverty, or change which gives racing a real chance to thrive?

It is also because we are a government of due process. 

As mentioned earlier, it is a matter for Cabinet consideration and also a matter for consultation with all of Parliament. Racing has for years been under the political radar screen and sadly so.

Racing reform today and into the future must now be above politics. However, we didn’t commission this report from an expert to then strip it of its value.

RITA

As this review identifies, a complex task and highly technical challenge is in front of us which requires careful management.

For this reason I have asked officials to also consider a transition agency. This is not an uncommon tool in a sector or industry about to undergo change. A transitional agency would smooth the operational process particularly if there are changes in racing governance structure. I envisage it playing an important role in changes signalled either today or by decisions to be made by Cabinet.

It would also play an instrumental role in racecourse consolidation. This is a process which requires good communication, good co-ordination, and proper consultation with our racing community.  

Many of you have dedicated your lives to racing, being it the thoroughbreds, the trots, or the dogs and your voice deserves to be heard.

Value proposition

As part of reviving the racing industry we need to assess the value proposition behind each step we take.  This is something all of you have to consider.

An example of a value proposition is this. 

If we accept a series of changes they will create a cycle to revitalise this industry.

The real question for many is this: are you prepared to accept the closure of a local venue, which has big running costs, if your club remains in existence and there is a better shared venue down the road? 

Would you accept track closures if it leads to saving your club, and a creating a greater pool in prizemoney to generate further investment in ownership?

And would you be prepared to accept the individual codes have greater powers but with different distribution models and betting levies?

The choice is yours.

The status quo has an inevitable outcome, a sad, not a happy one at that.

Change is challenging and difficult, but real reform is also the pathway to restoration of this once great industry.

These are John Messara’s 17 recommendations. The main ones of which we’ve covered in tonight’s presentation.

Ladies and gentlemen, as John Messara said in his introductory video, we have a chance to turn racing’s ominous present and future around.

We all know that so much of the legislation governing your industry was written not for the industry’s benefit, but for the convenience of politicians and bureaucrats. And all of us are to blame for allowing that to happen.

Tonight we have set before your industry a liferaft of reforms. It is over to all of you now – sink or survive and flourish.

It is to be hoped that the industry seizes this chance as comprehensively as possible.

It’s a now or never moment.

In the words of the genius of human motivation Shakespeare - “there comes a tide in the affairs of men which is taken at the flood, leads on to fortune”.