Minnesota lawmakers consider taxpayer bailout for wealthy thoroughbred owners

The House Agriculture Committee heard testimony this week on a bipartisan bill that would write taxpayer-funded checks to thoroughbred owners every time their horses compete on a Minnesota track.

The bill (HF 1540) allocates $7 million over the next two years for a pilot program that awards Minnesota-based thoroughbred owners $750 each day one of their horses starts a race. The money is doled out on a per-horse basis, meaning that an owner with three horses in competition would receive $2,250, regardless of how the horses perform.

Think of it as a taxpayer-funded participation trophy for the people rich enough to own a thoroughbred.

Some of the money would also be directed toward “mental health and education grants” for stable workers.

The bailout is necessary, its supporters say, because horse racing is a dying industry. “As everyone knows, racing has been struggling in Minnesota,” said Rep. Brad Tabke, DFL-Shakopee, one of the bill’s sponsors, at the hearing. But it’s worth saving, Tabke and others says, because the industry supports agricultural and other jobs across the state.

Canterbury Park sits in Tabke’s district and is one of Minnesota’s two racetracks. Daily wagers have been declining precipitously in recent years. “Declining interest in horse racing has had a negative impact on revenues and profitability in our horse racing business,” the company said in its most recent SEC filing.

For more than a decade, the industry in Minnesota had been artificially propped up by an infusion of marketing cash from the Shakopee Mdewakanton Sioux Community. But the agreement guaranteeing that cash flow recently expired.

As a result, the race tracks and thoroughbred owners have made multiple pleas to the state Legislature for a bailout. Last year, the ask was a multimillion dollar cash infusion for the tracks (it didn’t pass).

This year, Tabke was a co-author of a bill that would have legalized sports betting and directed a portion of the proceeds to Minnesota race tracks. The Senate version of the bill failed to pass its first committee.

Now the industry is proposing that the cash go directly into the pockets of the horse owners instead. The idea is that the money will trickle down to other sectors of the state economy, like the farmers who grow the feed, the veterinarians who treat the sick and injured horses and the vendors who work the Canterbury Park stands.

“Canterbury Park is a pillar of our community in Shakopee supporting thousands of jobs and hundreds of millions of dollars in the ag industry,” Tabke told the Reformer, referring to the results of a study funded by the Minnesota Racing Commission. “I will always work to support our Shakopee community and that is what this bill does.”

Economists say trickle-down policies like tax cuts for the wealthy make the rich even richer but otherwise have little to no effect on the broader economy.

Thoroughbred ownership is a game for the wealthy, who largely approach it as an enjoyable hybrid of investment and gambling. The horses themselves typically cost tens of thousands of dollars at the minimum, and require tens of thousands more in care, training, boarding and other expenses.

“What motivates thoroughbred ownership given the financial risks?” asks the Paulick Report, an industry publication. “The answer is simple — the gap between losing and breaking even represents the price people are willing to pay for the excitement of being involved and the potential to own a star horse (and in some cases make a big score).”

Thoroughbred ownership is recommended to the wealthy as a potential source of tax write-offs, thanks to indulgent provisions in the federal tax code. 

Horse racing has been mired in scandal and ethical controversy in recent years. Mexican cartels have relied on the industry to shelter proceeds from the illicit drug trade, and industry leaders have been involved in massive doping efforts in the hopes of pushing horses past their biological limits. Dozens of horses have died on Minnesota tracks.

The House Agriculture Committee heard testimony in favor of the bill from Justin Revak, a thoroughbred owner and vice president at UnitedHealth subsidiary Optum, who said that without a taxpayer bailout it would be a challenge to “make an honest business” out of the horse trade.

Revak heads a racing company with track earnings of nearly $1.4 million since 2013, according to Equibase, an industry data clearinghouse.

Nobody testified against the bill, which was laid over for possible inclusion in the upcoming state budget. 

Lawmakers crafting a budget face a daunting task as Minnesota confronts a structural deficit in the coming years.