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January 31, 2012 To NEW YORK STATE THOROUGHBRED BREEDING AND DEVELOPMENT FUND CORPORATION SARATOGA SPA STATE PARK 19 ROOSEVELT DRIVE-SUITE 250 SARATOGA SPRINGS, NY 12866 Since 1973 PHONE (518) 580-0100 FAX (518) 580-0500 WEBSITE www.nybreds.com DIRECTORS EXECUTIVE DIRECTOR John D. Sabini, Chairman Tracy Egan and Chairman of the NYS Racing & Wagering Board Darrel Aubertine, Acting Commissioner NYS Dept. of Agriculture and Markets CHIEF FINANCIAL John A. Tesiero, Jr., Chairman OFFICER NYS Racing Commission Michael DeMarco Harry D. Snyder, Commissioner NYS Racing Commission Joseph G. McMahon, Member John A. Graziano, Jr., Member REGISTRAR William B. Wilmot, DVM, Member Howard C. Nolan, Jr., Member Barbara C. Devine Edward F. Kelly, Member Jeffrey Cannizzo, Member January 31, 2012 To: The Honorable Andrew Cuomo Members of the New York State Legislature On behalf of the Board of Directors of the New York Thoroughbred Breeding and Development Fund, I am pleased to present this annual report for 2011. This report includes information about revenue, award payments, research funding, promotional spending and operational improvements to the Fund during the past year. New York’s reputation as the home of world-class Thoroughbred horses continues to be bolstered by the Fund’s efforts. The Empire State is now the sought-after home for stallions from Kentucky, California and the rest of the country. Additionally, horses competing in New York are being claimed at unprecedented rates. The debut of Resorts World Casino New York City at Aqueduct in October marked a significant highlight for the Fund and the industry, which directly benefit from revenue generated by video lottery terminals (VLTs). Between the facility’s opening and January 2012, it contributed more than $1 million to the Fund, which will distribute the revenue to the breeding industry in the form of increased breeder awards. The Fund expects to receive a total of $7.6 million in revenue from Resorts World Casino New York City in calendar year 2012. The VLT revenue breathed new life into the Thoroughbred Breeding and Development Fund, as the Board of Directors increased breeders and stallion awards based on the anticipated revenue boost. Another positive development and an indication that New York-bred Thoroughbreds remain in demand is double-digit increase in the sale of New York-bred yearlings at the 2011 Fasig- Tipton sale at Saratoga. In the aftermath of 2010’s closure of New York City OTB Corporation, the developments of the past year signify optimism for the future of Thoroughbred breeding in New York State. Looking ahead through 2011 and beyond, the Fund will continue to deliver benefits to the Thoroughbred industry in New York and contribute to the agricultural viability and general economic health of the state. Sincerely, John D. Sabini, Chairman 2 Executive Summary As the thoroughbred industry looks back on 2011, we believe experts will say the business bottomed out, turned around and bounced back best of all in New York State thanks to gutsy breeders who survived the storm, political leadership that delivered on the VLT promise made ten years ago to the state’s racing and breeding industries, and decisions made by the New York Thoroughbred Breeding Fund’s Board of Directors. Industry observers such as Eclipse Award-winning Turf writer Paul Moran lauds our programs, saying “The New York breeding program is already the best in the U.S. in terms of incentives, and will see unprecedented prosperity.” This 2011 report highlights NY-bred performances on the racetrack, in the breeding shed, and in the sales ring. It also provides a full accounting of revenue receipts and disbursements of breeders’ award payments to breeders, owners and stallion owners. The reader will find analysis of the New York State Thoroughbred Breeding and Development Fund’s role in holding the line on farm count and foal production, and in attracting promising stallions to New York State. American and international earnings by NY-breds totaled $64,904,722 in 2011. The hero of the 2010 edition of Japan’s Grade I Mile Championship, A Shin Forward, retired at the end of 2011 to stand stud at Japan’s Lex Stud in Hokkaido. Bred in New York’s Hudson Valley by two-time NY Breeder of the Year Vivien Malloy’s Edition Farm, the Forest Wildcat horse retired as the second-highest-earning NY- bred ever ($3,421,360) with a record of 6 wins from 31 starts. Kentucky Derby winner Funny Cide remains the state’s top earner of all time with $3,529,412, earned strictly on American tracks. Other highlights of the year include back-to-back Grade I wins by the two-year-old NY-sired NY-bred Weemissfrankie, and the Breeders’ Cup Mile win by Caleb’s Posse, a son of the leading NY sire for 2011, Posse. Another New York powerhouse stallion, Freud, sired Giant Ryan, who had a six-race win streak in 2011 and took the Grade I Vosburgh in a typical burst of gate-to-wire speed. And New York- bred Mission Approved, who was claimed for a tag of $35,000 in 2010, took a long break to come back stronger than ever and take down the lion’s share of the $400,000 purse in Belmont’s Grade I Manhattan Handicap in June of 2011. NY-breds continued to perform admirably compared to runners from other states, with average earnings per starter in North America of $18,126. Milestones Sadly, 2011 saw the passing of both equine and human stalwarts who nobly served the New York racing industry. 3 Joseph Lynch, Chief of Operations of the NYS Racing and Wagering Board, died at age 64 in January. He wore his title humbly but knew that his colleagues in the industry gave him the affable moniker “the go-to guy” for his ability to answer questions based on his deep knowledge of racing rather than having to look up the answer in a book. The Saratoga native would have been proud that a race for NY-breds was named “The Joe Lynch Memorial” in his honor this past August. On the equine front, NY-bred and Eclipse Champion Fleet Indian was euthanized in October after developing complications from colic. A foal of 2001, Fleet Indian won the Eclipse Award as champion older mare in 2006. Her accomplishments will forever be intertwined with the passion for thoroughbreds exhibited by Olivia M. Saylor, the late daughter of Paul H. Saylor who raced Fleet Indian in his colors for the mare’s remarkable record of stakes wins in 2006. Henceforth, the scholarships provided by the Race for Education for the children of industry workers will be called the Olivia M. Saylor/Fleet Indian Scholarships. Olivia was only 21 when she died tragically in a house fire in January 2011. Video Lottery Terminals The New York Thoroughbred Breeding and Development Fund Corporation (“the Fund”) and its stakeholders held their collective breath as they waited for the frequently delayed opening date of the Resorts World Racino to finally arrive. On October 28, 2011 the gates opened, the parking lots filled, and approach roads backed up with traffic for many city blocks as a public longing for its first taste of a New York-based casino-style experience made its way to the betting palace. Visitors must have liked what they found at the racino, because the Video Lottery Terminals took in an average of $445 per machine per day between the start date and midnight on New Year’s Eve.* This was crucially important to the Fund, as it receives 1% of the casino’s profits during the first year of operation. For 2011, the brief two-month operation brought in $898,572 to the Fund. With every delay, the Fund recalculated the tight 2011 budget and maintained a 30% withholding rate on breeders’ awards to ensure that breeders whose horses earned awards money at the end of the year would not be impacted more severely than those with award winners at the beginning of the year should the VLT start date be pushed back to 2012. With 2011 wrapped up, it’s clear that all withholdings will be paid out by the Fund in early 2012 (pending approval of the Board of Directors at their Feb. 16 meeting). Financial Outlook The Fund finished the year in good financial shape for several reasons: ¨ We estimated a daily win rate per machine far below what actually occurred. ¨ Lower amounts than forecast were paid out in breeders’ awards. ¨ We correctly anticipated that the handle would continue to decline both on-track and at the state’s remaining Off-Track Betting operations. ¨ We instituted cost-saving measures in 2011. 4 ¨ The pickup in NYRA business made up for roughly one-third of the revenue lost by the Fund due to the demise of NYC OTB. Promotion This improved financial landscape allowed the Fund to conduct some promotional spending on its own behalf and to plan for the establishment of scholarship programs for college students who are likely to pursue careers in the equine or agricultural industry here in New York. The Fund also conceived an idea to link tourism and racing, as outlined in our Promotion and Advertising section. Rule Change The Board of Directors brought closure to a sad episode of animal abuse at the former Center Brook Farm in Climax, NY by adopting a formal rule that animal abusers will be barred from collecting any amount of awards money from the Fund’s programs. Mission Statement Change The Authorities Budget Office requested that the Fund board review its original mission statement with an eye towards revamping it to reflect current Fund goals.
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