Workers Compensation Insurance in the thoroughbred racing industry - next target for reform?

We just had a horrific experience trying to help a trainer obtain Workers Compensation insurance in the state of Florida. Despite having a perfect insurance paper trail for many years in another state, it took him ONE MONTH to navigate the process of getting insurance in Florida. It took that long despite a very helpful Florida agent who was the go between for the underwriter and the trainer as she methodically asked for each piece of documentation required by the underwriter.

Trainers are busy people who do not generally spend all day in the office, on the computer and phone to take care of this kind of problem, so I offered to help. What I learned about Workers Compensation insurance was eye opening. I heard from several people that some states/racetracks have an insurance pool for trainers to make it much easier to satisfy track requirements. This is only hearsay, but I heard that the horsemen's organization in Louisiana handles the insurance pool, and trainers just hand over some $ and they are done. If anyone can shed light on this insurance pool and how it works, I would appreciate some information.

For Florida, no less than 15 emails were exchanged between trainer and insurance agent, and no less than five long phone calls to the trainer's "old" insurance company to obtain documentation required by the new insurance company. Part of the problem was a certain amount of obstruction by the "old" company, which is such bad business. After all, the trainer will need his old policy again when he returns from Florida in the spring.

Another thing that I discovered in Florida is a company that provides WC insurance to a trainer if the company is hired to run the stable's payroll. Good idea except for the requirement of this company that the trainer turn over control of his or her checking account. Plus the trainer must sign a contract giving the company the right to withdraw funds at any time in any amount with no binding terms for ending the agreement. Before doing something like this I'd say get a lot of references from the company's current and former clients.

Worker's Compensation insurance is incredibly expensive, and varies depending on the size of the stable and number of employees. All aspiring trainers should beware that a PERFECT paper trail showing that payroll is done "by the book" is mandatory. So before considering a career training horses at the track, carefully consider how much $ Workers Compensation insurance - and a reliable bookkeeper - is going to cost!

What is the Keeneland September Sale really like?

The Paulick Report (paulickreport.com)and Indian Charlie (indiancharlie.com) provide the most compelling accounts from the Keeneland Sale, here's just a small sample, "Spot On" >>

It's not easy to get a trainer's license in some (or most) states

Recently a question came up at RaceHorseTrainers.com, "I would like to know how to get the license for race horse trainer in Florida. I have not found any information about this."

So I set about getting the information. It's a little easier if you show up in person at the racing commission office at the track in Florida during a live racing meet. The office will be staffed at that time and ready to provide and process applications.

But if it's the off season, you can find some information at the Florida Department of Business Professional Regulation web site, on the page there for PROFESSIONAL INDIVIDUAL OCCUPATIONAL LICENSE.

Fingerprints are required. You can get fingerprints taken at the local police station, or some cities may have private services listed in the yellow pages.

If you have any kind of criminal background, you will be called to give details about that. If you have been convicted of a felony, you will not get a trainer's license.

If you have never had a trainer's license before, you will have to take some form of test, and in our experience this testing will vary from state to state. You must inquire at the state racing commission office to get testing details. Racing Commission contact details can be found at OwnerView.com.

You may be wondering about the reason for the stringent requirements of the background check and extensive information required on the trainer license application. This came about when racetracks started hosting casino style gambling. We believe that with the spread of casino gambling at racetracks, the rules of racing and licensing requirements must be standardized nationally.

Joe D. captures the beauty of mornings at the track.

Here is a really nice piece from Joe Drape of the New York Times, about a visit to Saratoga during training hours. Joe captures the beauty of mornings at the track. Every owner should come out regularly in the mornings, and every fan/handicapper should have the opportunity to hang out on the "backside" in the mornings occasionally. There is a wealth to learn and understand about the "game" that is only possible during training hours, up close to the horses and the people who care for and train them.

From Good to Bad in a Blink of an Eye - this is how it happens

I saw this article mentioned on LinkedIn today: From Good to Bad in a Blink of an Eye

This caught my eye because it brings back so many memories of the considerable number of people that I saw get injured over the years of working with horses. There are so, so many. It is important to make sure young people who want to do any job with horses knows the considerable risks so they are properly trained and always aware.

For instance, at an arabian breeding farm I saw the manager pinned against the wall by a stallion that had her back in his teeth. I saw a co-worker hit in the head by a yearling thoroughbred colt that reared up in the stall and came down on him with a hoof. That man had to have a part of his skull removed due to a fracture. My husband was run over by a stable pony at Gulfstream Park while he was standing on the rail during training hours, hit in the head with a hoof and rolled on - he was not seriously injured. So many exercise riders slammed into walls by horses walking under tack in the shedrow, and exercise riders fallen on, rolled on. I don't want to think about the all the jockeys. Oh yeah and many hotwalkers and grooms dragged down to the pavement by horses running off while on a lead shank as their handler bravely tried to hang on - this happened to me once or twice when I was green and just starting as a groom.

Farriers are not only skilled at taking care of hooves but they also have to be incredibly skilled at avoiding injury. I remember the incredible Sam Jorris who trimmed all the yearlings while they were turned out in a big pasture. I was there just to keep the other horses off him and try to keep the horse he was working on fairly stationary. I marveled every month that we got that job done without mishap.

We talk so much about the horse injuries that can happen in and out of competition but it's important to remember the risks that all the people involved take because they want the honor of working with horses.

thinking about horse auctions

The article I just read at The Paulick Report, "YEARLING SCOPES MAY NOT REVEAL ISSUES AT EXERCISE" inspires a few thoughts. I always thought that buying horses at auction is not smart and I wonder why so many people do buy horses this way.

My wish is that breeders would sell their horses direct from the farm and skip all the sales prep and commissions to sales companies. I've noticed that sellers nearly always price their horses at double what buyers are willing to pay, so objectivity is definately a barrier to successful sales. If breeders can sell their horses objectively they can be successful doing it themselves. Expenses will be controlled, mob hype will be eliminated from the process, the horses will be better off, buyers will learn by seeing horses in their natural environment and by doing the research that they should do before buying a horse. Vet exams and scopes of horses for sale should be planned and negotiated between buyer and seller on a case by case basis.

I know that industry insiders like the big sales because they meet up with other insiders there and these meet-ups often drive their business, but the people who are paying for the horses rarely benefit from attending and buying at auctions versus private sales.

I haven't written a lot in the last few months because frankly not much is going on in racing for the average joe trainer and owner in the U.S. Many are out of business as purse money fails to keep up with the expense of keeping a horse in training. This spring 2013, my husband and I are not involved in racing directly. Instead we're growing a racehorse quality hay crop on the farm of an Illinois thoroughbred breeder. We started the experiment last year, offering to cut and bale the hay in exchange for a percentage of the resulting bales. We would not have made it through the whole racing year in 2012 without the savings we had with this hay deal. So this year we reseeded the hay fields early with what we consider the perfect racehorse hay - mostly timothy with some clover, orchard grass and alfalfa. We are currently anticipating the first cutting late May.

So we've learned a lot about hay. I remember being on the racetrack back side back in the 1990's, walking by the famous stables at the track like D. Wayne Lukas, and seeing brightly colored and very uniform bales of timothy hay. I don't know how that hay gets the unnatural hue, but I do know it was very expensive. This expensive hay never had any sign of weeds in it. I think owners should know that feed and bedding is the 2nd highest expense that most trainers have, only after payroll. Fancy looking hay can only be considered superior in superficial appearance to less expensive but thoughtfully cultivated, cut and cured racehorse hay that may include a few weeds.

On the subject of weeds, we only removed those weeds from the hay fields that horses won't eat or are harmful to eat. Horses know which weeds are bad for them and usually won't eat them unless they are starving. In addition, if you have ever watched a horse graze in the midwest USA, he will often go to two weeds, the dandelion and the plantain, before eating the grass. The dandelion flowers, leaves and roots have health benefits, and many "old-timers" know that dandelion is a natural diuretic - possibly a natural alternative to lasix/salix.

The plantain herb is said to have a myriad of medicinal benefits including speeding cell replacement. The photos show the dandelion and two common varieties of the plantain weed, one broad leafed and the other narrow leafed, both edible and beneficial.

What we believe is that racehorses are finely tuned athletes that require finely managed daily care in their diet, training, competition and recovery routines. The most expensive routine is not necessarily the best, so we have to constantly keep learning while trying to make the best decisions for our horses.

Here's a couple interesting links for information on health benefits of dandelion and plantain:

about plantain >>

about dandelion >>

Oh boy did the Daily Racing Form come up with a great educational article about the racing business, trainers and jockeys. Click here to read this article >> It's long but is a must read for new owners. The problem that keeps on raising its ugly head is owners who can't face the high cost of owning racehorses. Too often an owner thinks it's ok to gamble that a horse will be able to support himself with purse money, but this kind of gambling always leads to disaster for everyone involved.

This is an insightful article and comments about how skilled exercise riders and jockeys really are - READ THIS!

Tax issues that thoroughbred racehorse owners should consider

reprinted from: Catanese & Wells, a Law Corporation, provides a quarterly newsletter to the equine industry of and concerning legal, tax and business issues for participants in the horse business or sport. www.cataneselaw.com.

The issue addresses the general question of the "Hobby Loss" provisions of the Internal Revenue Code.

Section 183 provides that losses from a horse activity cannot be deducted against income from other sources unless the horse activity is a business and not a hobby. The IRS has issue various regulations interpreting Section 183. Generally, whether a horse activity will be treated as a business is determined by the facts and circumstances of the case. The critical inquiry is whether the activity has an objective of making a profit. Nine factors are normally considered by the IRS when it determines if the taxpayer has a profit objective.

The nine factors which are considered include:

(1) How you carry on your horse business;

(2) Your expertise;

(3) The time and effort you spend on the business;

(4) Whether you expect appreciation of your assets (horses) used in the business;

(5) Your success in similar businesses;

(6) Your history of income or losses in the horse business;

(7) Whether your horse business has profits during its history;

(8) Your financial status; and,

(9) How much pleasure or recreation is involved in the horse activity.

Even though these factors seem easy to answer, case law indicates that there are nuances regarding each factor. How these nuances are addressed many times is the difference between success in a Section 183 audit or failure. For example, even though personal pleasure may be a factor against finding the business to be for profit, if other facts and circumstances show the business is operated for a profit, the IRS will allow the horse business deductions. See Foster v. Commissioner (T.C. Memo 1973-14).

To conclude, it is very important to understand Section 183 in the organization and operation of a horse-related business. We recommend that persons engaged in the horse business be familiar with and understand how Section 183 applies to their business. In doing so, if the IRS does audit the horse business operator, they will have a better chance of obtaining a no-action result.

New or prospective racehorse owners should know this

If you are a new horse owner with not a lot of hands on experience with horses, you should read this article about suitability of horses for certain careers - http://www.thehorse.com/articles/30795/equine-performance-and-psychological-factors-linked

Before investing a lot of money buying horses, owners should understand that an expensive, royally bred and physically perfect horse is not a guaranteed race winner. Also, if an expensive, royally bred and physically perfect horse is not able to win a race, and if that horse is part of a "mega-stable" that makes an individualized program for one horse difficult or impossible, you might want to try a different trainer for a few months before giving up on your horse's racing career.

Of course all this assumes that an owner who buys an expensive horse can afford the huge ongoing expense of maintaining a horse. It's always good to remember that the maintenance cost of a horse is almost always more than the purchase price.

On the subject of how much to spend on buying a racing prospect - if you are buying a horse that is currently racing and ready to run, your best chance for success, in my opinion, is with a horse that can be purchased in the price range of $10,000-$100,000. In other words, please don't buy a horse for $1000 and please don't buy one for $1,000,000.

how to become a trainer - UPDATE

here is the general answer I gave about "how to become a trainer" in my blog a few years ago (www.thoroughbredracingworld.com) -

"In general there are not "courses" for learning how to become a trainer, most trainers work for another trainer starting at the bottom level job (hotwalker or groom) and working up to assistant trainer. Then you take the "trainer test" in the state where you wish to train when you feel that you are capable. If you already know horses and good horsemanship in general but you are not familiar with racing, you could possibly achieve this goal within several years, about the time it would take to get a university degree."

here is my update to that answer:

There are some ways now to do it a little differently but the old fashioned way is by far the best road to success. There are organizations that offer training for grooms and also trainers but I'd say it's mostly geared toward understanding the rules and regulations. You just can't learn good horsemanship by taking a course, that only comes with real world experience.

There are university degrees for racing related jobs offered by university of louisville and I think university of arizona but a degree is not needed to get a trainer's license - experience is really the key.

Some rich owners and children of influential/wealthy people have been known to "buy" a license without having any significant prior working experience with a licensed trainer, but in my experience these people don't stand the test of time in the business - this road to becoming a trainer is not recommended.

The "racing commission" in each state is the organization that licenses trainers and the racing commission will have an office at any actively racing racetrack, so you can visit that office at any track where you are interested in basing your business - please note - if you go there when there is not a racing meet going on there will generally not be anyone staffing that office. The racing commission will give you information about the licensing forms and tests required in that state.

If you want to know what's really going on in Kentucky racing, subscribe to Indian Charlie

I haven't been writing much in this blog because I just don't have much to say right now, but I'm so happy that Indian Charlie is still around to sum it all up as only he can. The latest Indian Charlie newsletter is a great example: READ INDIAN CHARLIE TODAY FROM KEENELAND >>

THANK YOU TO PSY for promoting horse sports!

Gotta watch it - http://youtu.be/9bZkp7q19f0 - everybody will have their own take on this Korean hit "Gangnam Style". Maybe Psy's making fun of the rich who show off expensive horses among other things, but I like to think he's promoting the idea of horses for all, and the horse dance will certainly get you in shape for riding!

The Racetrack as a Microcosm

Microcosm - a community or other unity that is an epitome of a larger unity. If you've ever worked on the "backside" of a track like Churchill Downs, then you know it's a world of it's own. I think it's a lot like the bigger world outside and if you start looking at the economy of the racetrack from top to bottom, you'll find a lot of things similar to the problematic US economy.

The basics are: the giant racetrack corporations (CDI) boast record earnings and are flush with cash, while racetrack laborers including hot walkers ($5/horse or $200-$300/week), grooms ($100/horse/week or $400-$500/week), and exercise riders ($15/horse or $500-$700/week) are making EXACTLY the same wages as 15 years ago. The vast majority of the laborers do not own a home, do not have health insurance and do not have any savings.

This problem is not all due to high employment taxes, and it's not due to trainers being cheap because most trainers are as broke as their employees. Of course there are exceptions with the few stables at the highest end with the "star" horses, but I'm talking about the proverbial 99%. I don't mean to pick on Churchill Downs and CDI but those are the racetrack entities that I am most familiar with.

The HBPA Salix Position

The HBPA responded to a Thoroughbred Times article by pedigree expert John Sparkman by saying in a letter to the editor,

"Sparkman accuses American trainers of not believing "they can train without [Salix] regardless of the easily provable fact that trainers in nearly every other country in the world do just that.” That assertion, however, is not true. It is acknowledged industry wide that trainers in other countries, including England and Ireland, do train on Salix. The only difference is they are not permitted to use Salix on race day as we do in the U.S."

I hope somebody with some standing in the industry responds to that statement by the HBPA because I think it's misguided. Maybe the biggest european trainers with a megastable work/breeze every horse on Salix, but I doubt it. It's our understanding that european or south african or dubai trainers use Salix more as a tool and only on occasion, not as a matter of course for every horse and every workout.

Unfortunately it is our experience here in the US that way too many trainers treat with Salix before every work as a matter of course - that means the vet comes to give Salix then comes again to rehydrate with intravenous fluids after - yikes that's expensive! I think most owners would prefer their trainer treat each horse like an individual on a case by case basis when determining if Salix is really necessary. Maybe banning Salix for racing in the US will force trainers here to rely on horsemanship rather than drugs to manage their stables. I'm with Mr. Sparkman on this one.

Important to remember, there is no sure thing

http://www.equinometry.com/2012/07/31/sure-thing-horse-racing-dont-bet-on-it/

Xpressbet asks, "Why does the New York Times continue to attack horse racing?"

Thoroughbred Times quote of the day features a link to an article at http://xpressbet.com/ReadOnTrack?id=4555 which asks the question, Why does the New York Times continue to attack horse racing? The writer comes to the conclusion that racing is an easy target for sensationalism that sells papers. I keep waiting for prominent writers to ask which powerful industry would benefit most ($) from the demise of horseracing in the US, because therein lies the answer.

An update to the blog's most popular post

Since "What does maintenance and training cost?" is the most popular post of the blog, I think anyone who reads it should also read the article at

http://racehorsetrainers.com/wordpress/article/do-you-know-where-your-day-rate-money-goes/

which breaks down the "day rate", or trainer's daily fee per horse, to show where that money goes. I think new owners sometimes assume that all or most of it goes in the trainer's pocket, but it's actually used to pay all stable employees and all feed for the horses (plus a lot of other business expenses) - employees and feed are the two biggest expenses a stable has. That means if a trainer is only charging $65/day in a public stable of claiming horses in 2012, the business is not viable unless it has some kind of outside investment.

Race Day Medication

The debate about banning all race day medication in the United States has surpassed the alternative gaming issue in the discussion about how to bring our sport back to national and international prominence.

My husband, trainer Jere Smith Jr., doesn't like to get involved in political debates, so when asked if he believes in banning all race day medication, he replies, "I can race with it or I can race without it." Despite his reluctance to enter the debate, we know that he will probably benefit from a ban on race day medication because he has the experience and skill to prepare horses to race successfully without drugs. We also know that a ban on race day medication could help struggling owners by eliminating some vet expenses. So from a purely selfish business standpoint, I support a ban on race day medication in the United States because it will probably help my husband's business.

My personal belief about Lasix/Salix in horses on race day is that it never made much sense to me. Horses on Lasix/Salix pee out their hydrating fluids in the hours before a race, then if they're lucky enough to have owners who can afford it, the vet comes out the following morning to rehydrate them through a tube after each race. Bute can cover up a problem that may get worse in a race, and the sooner the problem is dealt with and not covered up for a race, the better it is I believe for the horse and the owner in the long term.

I know there are all kinds of implications about the economics of racing in this issue. Owners, breeders, trainers, veterinarians, tracks and fans will have to lower their expectations and give horses the necessary time and attention to be ready to race without drugs - more time to develop, more time to prepare for each race and more attention to the overall health of the horse. I'm guessing there will be a "correction" in the US thoroughbred racing market after a sweeping drug ban, but just think of the possibilities if all major racing markets of the world operate on the same rules, making thoroughbred racing a truly global sport - the economic possibilities could be huge for all.

On a related subject, I recently read a comment from someone who said the US is the only black sheep in the major world thoroughbred racing jurisdictions that allow race day medication - but that's not true. Saudi Arabia is a small to medium size thoroughbred racing market which is patterned on a mix of european and US rules - and I'm sure there are plenty of other small countries with similar rules. But Saudi Arabia is a closed system - it's rare for them to race outside their country and rarer still for outside horses to come there to race. I found it to be a microcosm of US racing with a lot of the same problems.

When we were there we often wondered how great it would be if there was a true international thoroughbred racing league that includes Saudi Arabia and the rest of the middle east, all the Americas, Africa, Europe, Australia, Asia. It would be incredible and I hope I see it in my lifetime.