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Helmut Schmidt and Amy Dalrymple, Published December 20 2008

2009 critical for North Dakota Horse Park

The next two years will be critical to the survival of the North Dakota Horse Park in Fargo and for horse racing in the state.

Barring a big turnaround in betting receipts or other income, the $575,000 the North Dakota Racing Commission has authorized for the 110-acre north Fargo track in 2009 could be the last large influx of money from the state group.

The money represents more than a third of the Fargo track’s current $1.4 million budget.

At a Racing Commission meeting earlier this month, Horse Park General Manager Heather Benson said “2009 – if nothing changes – is the last year of racing in North Dakota.”

That’s backed up, in part, by a state Office of Management and Budget estimate indicating that the breeders’ purse and promotions funds will be nearly depleted by the end of the 2009-2011 biennium. Change is promised.

Benson recently told the Fargo City Commission that the track’s board of directors will be asked next month to consider a five-year plan to make the track financially independent. At the same time, she also convinced commissioners to give the track a three-year reprieve on special assessments – $118,000 of which would have been due early next year.

For its part, the Racing Commission now has three simulcast operators, compared with one just a few years ago, and is negotiating with more, hoping to capture tax revenues from simulcast betting around the nation.

The question is, will these efforts bear fruit, or will they be too little, too late?

Not enough cash

Figures from the state’s Management and Budget department show the three funds fed by taxes on wagering could soon be depleted.

The breeders’ fund, which started the 2003-05 biennium with $2.25 million, could end the 2009-11 biennium with $3,400.

Similarly, the purse fund had nearly $2.58 million to start the 2003-05 biennium, could be down to $4,600 by the end of the next biennium.

The promotion fund had more than $2 million to start the 2003-05 biennium, but may end the next biennium at $113,000.

OMB budget analyst Sandy Deis estimated there will be $30,000 in licensing fees available, if no changes are made.

State documents show a recommendation for the racing commission to get $442,576 for administration during the 2009-2011 biennium.

Figures released Thursday for 2008 by Racing Commission Director of Randy Blaseg show that as of Nov. 19, the promotion fund had $350,304. the purse fund had $536,862, and the breeders’ fund had $679,865, all down from the start of the year.

Racing in the state is split between the Fargo track and Chippewa Downs in Belcourt.

The Racing Commission voted Dec. 9 to allocate $418,000 for purses and $255,000 for promotions to the Fargo track and to Chippewa Downs in Belcourt.

Racing Commission figures put expected revenues from betting tax receipts at $1.5 million for the coming biennium.

However, that is nearly double OMB’s projections of $779,000 for the coming biennium.

Blaseg said the more optimistic forecast is not unwarranted. He said if more simulcast betting services are added, North Dakota could glean tax revenues from bets placed at kiosks around the nation.

“Will that be the answer to our problems, who knows?” Blaseg said. But he said the idea is the best “we’ve had in a long while.”

New business plan

The breeders’, purse and promotions funds were built up in a windfall of betting taxes collected between 1998 and mid-2003. That was when big-volume bettors placed wagers totaling as much as $8 million to $10 million per week. Those bettors stopped wagering in North Dakota when Racing Services Inc. of Fargo came under state and federal investigation.

Amounts wagered at off-track betting parlors plummeted. The Legislature has since lowered betting taxes in an attempt to draw bettors.

Benson said the Fargo track will become financially stable if it can develop a revenue stream for more than six weeks out of the year. Her aim is to make the track self-sufficient by 2013 by making it more of a year-round attraction.

There are discussions to construct a permanent grandstand, restaurant and off-track betting complex that would operate year-round, Benson said. That would help create a tax base to pay the special assessments for $1.5 million in sewer, water and other infrastructure built out to the park site at 5180 19th Ave. N.

The plan includes adding live horse shows, fairs, sales, rodeos, jumping, dressage and other events to reach out to the larger horse community in the region. Efforts will also be made to attract sponsors for events and advertising revenue at the track.

“We are in a position not only to stabilize the horse racing industry of North Dakota, but make it grow,” the five-year plan outline said.

Northern Sheyenne Development, which owns 40 acres adjacent to the park, is also working to develop the property that would create a tax base. Developer Jeff Schlossman did not return a call seeking comment.

The land is zoned for agriculture, but the city’s growth plan has it zoned as general commercial.

City officials have said the area will need about $5 million in development to pay off special assessments.

In addition, North Dakota State University officials are discussing whether to expand the school’s equine facilities at the track, said David Buchanan, head of the animal sciences department.

NDSU’s equine studies program is growing and a bigger facility would offer more opportunities for students, Buchanan said.

City Administrator Pat Zavoral suggests that instead of industrial development, perhaps NDSU could build housing for its equine students at the site.

‘Too early to tell’

Despite a failure to see development around the track in the last five years, Zavoral said it’s too early to speculate on what the city would do if the track were to fail.

“I think it’s just too early to tell,” he said.

The special assessments owed to the city, deferred for now, are not the only funds owed by the track.

Horse Race North Dakota, which operates the Fargo track along with the North Dakota Horse Park Foundation, received a $250,000 loan from the precursor to the Greater Fargo-Moorhead Economic Development Corp. Payments on that loan kick in a little more than three years from now.

The agreement, signed at the end of December 2001, gave Horse Race North Dakota money to buy land. There was no interest, or payments, on the unsecured loan through Dec. 31, 2011. The first quarterly payment will be due in April 10, 2012, and the loan is to be paid in full by Dec. 31, 2021.

Brian Walters, president of the GFMEDC said he doesn’t know what action his agency would take if the track failed. “I think that would ultimately be up to our board to discuss. Hopefully, they don’t.”

Profits for the North Dakota Horse Park during 2008 rose 8 percent or $20,000, over 2007, Benson said, despite a season that was seven days shorter.

The horse park also saw a 109 percent increase in concession revenue in 2008.

But the track will have to work on getting bettors to fork over more cash, according to Benson’s outline for the future. According to Horse Park figures, the average person spends $17 a day at the track, compared with a national average of $82.

If bettors wagered $3 more a day, the track would net more than $120,000 a year, according to Horse Park figures.

For 2009, the horse park will have an eight-week season, Benson said.

Benson said she thinks the track will ask for less money from the Racing Commission in 2010.

Fargo City Commissioner Mike Williams, who voted against deferring the payments, said it will be important for commissioners to review the agreement annually.

Readers can reach Forum reporters Amy Dalrymple at (701) 241-5590 and Helmut Schmidt at (701) 241-5583