Interim Joint Committee on Agriculture


Subcommittee on Horse Farming


Minutes of the<MeetNo1> 2nd Meeting

of the 2013 Interim


<MeetMDY1> November 13, 2013


Call to Order and Roll Call

The<MeetNo2> 2nd meeting of the Subcommittee on Horse Farming of the Interim Joint Committee on Agriculture was held on<Day> Wednesday,<MeetMDY2> November 13, 2013, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Susan Westrom, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Sara Beth Gregory, Co-Chair; Representative Susan Westrom, Co-Chair; Senators Paul Hornback and Dennis Parrett; Representatives Lynn Bechler, Derrick Graham, Martha Jane King, Tom McKee, Michael Meredith, David Osborne, Sannie Overly, Tom Riner, Rita Smart, and Wilson Stone.


Guests: Vince Gabbert, Keeneland Vice President and Chief Operating Officer; Corey Johnsen, Jack Smith, and Bob Heleringer, Kentucky Equine Education Project; and Rusty Ford, Office of the Kentucky State Veterinarian.


LRC Staff: Lowell Atchley, Stefan Kasacavage, and Kelly Blevins.


Minutes of the October 9 meeting were approved, without objection, by voice vote upon motion by Representative Graham and second by Representative Stone.


Keeneland Association

Mr. Vince Gabbert, Vice President and Chief Operations Officer, Keeneland Race Course, spoke about Keeneland Race Course, located in Lexington. He talked about the North American Thoroughbred foal crop, of which Kentucky plays a prominent part. He further discussed Keeneland sales results, attendance at race meets, and Keeneland’s place in the industry as a whole.


Responding to Co-Chair Gregory, Mr. Gabbert said that Keeneland has rebounded in Thoroughbred sales. Sales figures in 2013 are expected to surpass the $500 million mark. Industry insiders are seeing more demand for Thoroughbreds. The strength of the weanling market represents the future of the industry.


Responding to Co-Chair Westrom, Mr. Gabbert indicated Keeneland decreased its purses somewhat during the recession. Purses are set prior to a meet based on what Keeneland feels should be offered in races. Purses are not at the levels of states like Florida or New York because of gaming revenues; nevertheless, Keeneland is in the top tier. The race course offers the largest daily payout of tracks in the state.


Regarding the extra race days that became available this year, Mr. Gabbert said to Co-Chair Westrom that Keeneland considered the opportunity to offer additional race days, but decided to maintain its usual race calendar. Churchill Downs took the extra days.


Responding to Senator Parrett about the future of horse racing, Mr. Gabbert indicated that “under the current landscape with no incentives or changes” perhaps a rocky road is ahead, with some smaller horse farms going out of business and the larger farms faring better. The same could be said for the tracks that have struggled. Kentucky is still the best state for breeding and raising racehorses.


In a response to Representative Overly, Mr. Gabbert said Keeneland continues to look for proactive legislation. A gaming bill will be unveiled in January that will reflect changes from earlier bills. He said the industry continues to work with the Horse Racing Commission in making changes at the regulatory level.


Kentucky Equine Education Project

Mr. Jack Smith, Kentucky Equine Education Project (KEEP) Grassroots Committee chair, Mr. Corey Johnsen, KEEP Board chair, and Mr. Bob Heleringer, the new Executive Director of the organization discussed KEEP.


Mr. Smith discussed KEEP’s outreach through its Grassroots Committee. KEEP has contacts in every county and contributes funds to local equine events, such as horse shows.


Mr. Johnsen gave statistical overview of Thoroughbred racing. In 2000, only two states funded purses with casino money, but since that time, a number of states bolster their horse racing with gambling revenues.


He discussed the recent University of Kentucky equine survey that showed the industry has lost jobs, but still has a $3 billion impact in the state. Also, about 14,600 tourism jobs in the state can be attributed to the horse industry. Representative Smart emphasized the importance of tourism spending.


Mr. Johnsen discussed three tax equity issues that will be brought to the General Assembly: eliminating the sales tax on equine feed, supplies, and equipment; repealing the 3.5 percent retroactive tax on live-racing wagers; and lowering the tax on simulcast wagers from 3 percent to 2 percent.


Mr. Heleringer, a former member of the General Assembly, introduced himself. He discussed his background in horse racing and his experience as a member of the legislature.


Senator Parrett indicated he agreed with the sales tax exemption for horse feed, supplies, and equipment.


Responding to Senator Parrett, Mr. Johnsen cited Thoroughbred racing data that shows purses in Kentucky averaged over $300,000 on race days in 2012; however, purse averages in some states are higher. He mentioned New York in particular.


Responding to Representative Graham, Mr. Johnsen said the elimination of the sales tax on horse farm production goods would cost the state an estimated $6 to $12 million, depending on what a bill would encompass.


According to Mr. Johnsen, in response to Representative Graham, the retroactive tax on live-racing wagers usually is not applied because a daily average handle threshold must be reached, which generally serves as a disincentive for the industry to improve its business.


Responding to Representative Graham, Mr. Johnsen said KEEP would not want to lower the tax on simulcast wagers to 1.5 percent, rather than 2 percent, in order to preserve funds for the Kentucky Thoroughbred Development Fund.


Representative Graham emphasized the importance of maintaining contact with KEEP and Keeneland. Mr. Johnsen in turn mentioned the success of Franklin County horsemen Fred Bradley and his son, Buff Bradley.


Commenting on the sales tax proposal, Representative Stone mentioned his experience in seeing horse farm owners having to pay the sales tax on supplies for their farms.


Discussing the vibrancy of the horse industry, Mr. Johnsen observed there should be no reason the state could return to the 10,000 foal production level. He said Kentucky is the best state in which to raise race horses.


Responding to Representative Bechler, Mr. Johnsen described how the retroactive tax on live-racing wagers works and how tracks sometimes have to deal with the live handle threshold.


According to Co-Chair Westrom, legislators outside central Kentucky may not often see the importance of the racing industry to the state. Representative Meredith said that many legislators in other parts of the state are aware of the issues. He plans to file a bill to eliminate the sales tax on equine feed, supplies, and equipment.


Office of the State Veterinarian

Mr. Rusty Ford, Equine Director, Office of the State Veterinarian, discussed the regulatory duties and service-oriented functions of the Office of State Veterinarian (OSV). State personnel at times are involved in issues at all hours of the day.


Mr. Ford discussed the viral disease surveillance that his office undertakes. The office has tracked cases of the West Nile Virus this summer, plus outbreaks of Eastern Equine Encephalitis, which has not occurred in several years. One reason there has been an increase in the West Nile Virus is that horse owners have failed to vaccinate their stock. OSV will publicize the importance of horse owners having their mounts vaccinated.


Mr. Ford talked about the work of the Equine Health and Welfare Council. One of the goals of the council is to offer a voluntary certification of equine retirement and rescue facilities. One facility has been certified--the Kentucky Equine Humane Center in Nicholasville.


Co-Chair Westrom lauded the effort and talked about the importance of certifying those facilities.


Representative McKee, who serves on the council representing the General Assembly, discussed the activities of the council. He thanked Mr. Ford for his leadership in chairing the council.


Documents distributed during the subcommittee meeting are available with meeting materials in the LRC Library. The meeting ended at noon.