$72.5 million emergency support package for racing with RITA only days away from default

Minister for Racing Winston Peters has announced a $72.5 million emergency support package for the racing industry, $26 million of which will go to paying outstanding bills.

“There has been a dramatic plunge in revenue while costs have remained fixed, and the bills have been backing up,” Peters said in delivering his speech in the Beehive.

“RITA’s lenders also advised they could no longer extend credit. It means RITA faced the risk of defaulting on it’s supplier commitments by this Friday.”

Peters said he could not gild the lily and the result would have been devastating for many in the regions.

“The racing industry has experienced several years of financial under-performance and been hit by the perfect storm of COVID-19 while in a weak financial state and in the midst of a reform programme,” Peters said.

“As a result, there is a genuine risk of insolvency and the industry losing the future gains of its reforms.”

Peters said Treasury engaged PricewaterhouseCoopers to provide a financial assessment of RITA.

“The analysis underlined that RITA had a very weak equity position and that an immediate grant was the most effective means to prevent default.

“PWC also advised close consideration should be given to recapitalising RITA and this work will proceed over the next three months.

“The Government has a respond, recover, and rebuild strategy for COVID-19. This announcement is the first step towards a long term restoration of racing,” Peters said.

Support package

The support package consists of:

* A $50 million relief grant for the Racing Industry Transition Agency (RITA).

* Up to $20 million from the Provincial Growth Fund to construct two new all weather racetracks at Awapuni and Riccarton Park. (A new one at Cambridge, costing $6.5 million, is nearly finished.)

* $2.5 million for the Department of Internal Affairs to fast track work on the online gambling revenue, and address loss of revenue impacts on community and sport groups.

“Of the immediate grant, $26 million will be used by RITA to pay its outstanding supplier bill which it hasn’t been able to do because of strangled revenue. The other share of this package will ensure RITA, and each of the racing codes, can maintain a baseline functionality and resume racing activities,” Peters said.

“The racing industry is seriously under-estimated for its economic contribution.

“Past studies indicate racing contributes $1.6 billion to the economy each year. There are 15,000 full time racing industry jobs and nearly 60,000 jobs which participate in the industry in some shape – from vets to equipment suppliers, and owners. There are 15,000 owners, 800 trainers and 200 jockeys. New Zealand bloodstock is world class and a significant export earner.”

“Over the next three months officials will assess recapitalisation options. Ministers will need to be assured industry reforms are making progress to ensure any such future investment is well directed,” Peters said.

Cambridge Jockey Club CEO Mark Fraser-Campin with the new synthetic training track behind him.Synthetic tracks

On synthetic tracks, Peters said compelling arguments existed for them because they reduced the number of cancelled events due to weather or poor surfaces.

“In the 2018 year there were 32 races (sic. meetings) abandoned which cost the industry millions of dollars.

“Synthetic tracks offer consistency and reliability, they sustain a higher workload for both training and racing and they are safer for the horse. That translates to retaining income, and not losing it.

“We not only want to save the industry we want it to have viable assets for the future.”

“COVID-19 has also impacted on funding available to community and sport organisations which receive a share of gambling revenue. There has also been an increase in New Zealanders gambling offshore through online platforms.

“Both trends are concerning. For that reason the government is fast tracking a programme of work by the DIA to re-evaluate the gambling framework of our community, sporting, and racing groups.

“If there is going to be gambling by New Zealanders then it is our country that will benefit, not another.

“And in doing so, we will be better able to address harm minimisation, and make sure our community benefits.”