The untold cost of NSW greyhound racing reform
THE saga surrounding NSW greyhound racing and the NSW Liberal-National government has been well covered and doesn't require re-telling, but the fallout from the repeal of the Greyhound Racing Prohibition Bill known as the Greyhound Racing Bill 2017 is still yet to be fully understood.
The passing of the bill in both houses of parliament was a foregone conclusion, with the NSW Liberal-National government receiving the blessing of the NSW Labor Party to give the bill the rubber stamp.
The co-ordinated approach of the two major parties had rendered the cross benchers largely irrelevant to the process, although a minor amendment from the Rev Fred Nile's Christian Democrat Party was allowed to sneak through.
The bill provides a $41 million compensation package over five years to assist, implement and fund reforms, with $30 million assigned to welfare based capital upgrades. This has been vaguely interpreted as Greyhound As Pets (GAP) improvements right through to new greyhound track developments and upgrades. As the old saying goes, the devil is in the detail; but in this case it would seem the devil will be very much in the implementation of the detail.
Regardless, the $8.2 million-per-year becomes obsolete after five years and the increased costs are to be absorbed by the existing industry revenue. Presumably, the five-year period has been determined so that any resulting industry turmoil will be something for the next government of the day to deal with. All current evidence points towards that not being the Liberal/National Coalition.
For such dramatic reform, it seems incongruent that neither the government of the day, nor the NSW Greyhound Alliance who have brokered the deal; have released any financial modelling to support the bill and its reforms.
How is it then possible for an industry participant, or even those charged with implementing the reforms; to foresee the shape of the industry five years from now?
The only logical conclusion is that the financial modelling has not been done. The reforms not costed. The pros and cons not yet evaluated.
This is a “how long is a piece of string?” reform that is aimed at plastering a bandaid over a festering wound created when Mike Baird succumbed to animal activists, and other vested interests from within his own party and the NSW National party.
The bandaid is only designed to hide the fundamental pathology until after the next election.
It's back-of-the-envelope financial governance at best. Irresponsible at worst.
In the spirit of fictional mathematics and forward financial planning, we thought we would run the ruler over the likely costs of these reforms, and gain some insight in to what the industry might look like going forward.
The Greyhound Racing Bill 2017 clearly outlines the basic organisational structure of the industry:
– Greyhound Racing Integrity Commission
– Greyhound Racing NSW
The Greyhound Racing Integrity Commission is to be headed by three highly qualified individuals and we costed the executive organisation as follows:
Greyhound Racing Integrity Commission executive costs
| Position | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Chief Commissioner | 1 | 250,000 | 250,000 |
| Commissioners | 2 | 175,000 | 350,000 |
| Chief Executive Officer | 1 | 250,000 | 250,000 |
| Chief Financial Officer | 1 | 175,000 | 175,000 |
| Welfare | 1 | 150,000 | 150,000 |
| Regulatory | 1 | 200,000 | 200,000 |
| Operations | 1 | 175,000 | 175,000 |
| Education | 1 | 150,000 | 150,000 |
| Investigations | 1 | 200,000 | 200,000 |
| Legal | 1 | 225,000 | 225,000 |
| Veterinary | 1 | 200,000 | 200,000 |
| Infrastructure | 1 | 150,000 | 150,000 |
| Project Management | 1 | 150,000 | 150,000 |
| Reform & Strategic Planning | 1 | 150,000 | 150,000 |
| Licensing & Code of Practice | 1 | 150,000 | 150,000 |
| Stewarding | 1 | 200,000 | 200,000 |
| Total Cost | 3,125,000 |
Of course any executive needs staff and we estimate that core staffing to be:
Greyhound Racing Integrity Commission support and admin staff costs
| Division | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Chief Executive Officer | 2 | 50,000 | 100,000 |
| Chief Financial Officer | 4 | 50,000 | 200,000 |
| Welfare | 20 | 50,000 | 1,000,000 |
| Regulatory | 10 | 50,000 | 500,000 |
| Operations | 10 | 50,000 | 500,000 |
| Education | 10 | 50,000 | 500,000 |
| Investigations | 20 | 50,000 | 1,000,000 |
| Legal | 4 | 50,000 | 200,000 |
| Veterinary | 4 | 50,000 | 200,000 |
| Infrastructure | 4 | 50,000 | 200,000 |
| Project Management | 4 | 50,000 | 200,000 |
| Reform & Strategic Planning | 4 | 50,000 | 200,000 |
| Licensing & Code of Practice | 20 | 50,000 | 1,000,000 |
| Stewarding | 20 | 50,000 | 1,000,000 |
| Total cost | 6,800,000 |
Notably as compliance, welfare and investigations are to have renewed enthusiasm, the staffing levels have not been underestimated.
The existing 2016 investigation team of 11 has been expanded to 20 and includes administrative staff. Similarly, welfare, operations, reform, GAP, education and licensing see increases given the GRIC will be responsible for the lifetime tracking welfare, compliance, education, tracking, investigation, licensing and inspection of almost 35,000 greyhounds, 5,300 trainers, owners, breeders, attendants and muscle men.
Likewise, the administrative teams to support those functions will expand to handle the onerous data collection, collation and reporting required.
The commission must implement a Greyhound Industry Welfare Committee of five people. Additionally, it is able to setup as many committees and sub-committees as it sees fit.
But we can only cost the one committee that we know must be set up.
Greyhound Industry Animal Welfare Committee costs
| Position | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Committee person | 5 | 50,000 | 250,000 |
| Total cost | 250,000 |
One of the key reforms of the bill is the lifetime tracking of greyhounds. The implementation and maintenance of which will be well above the reach of the current OzChase database.
We estimate a minimum of four key IT staff to manage the database serving 20 compliance officers charged with inspecting and assessing compliance.
Life time tracking staff costs
| Position | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| IT | 4 | 150,000 | 600,000 |
| Compliance | 20 | 75,000 | 1,500,000 |
| Total cost | 2,100,000 |
Additionally, we expect at least 12 support staff to assist the in the area.
Life time tracking support and admin staff costs
| Division | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| IT | 2 | 50,000 | 100,000 |
| Compliance | 10 | 50,000 | 500,000 |
| Total cost | 600,000 |
Another key reform requiring implementation was the provision of back to base CCTV monitoring of all tracks and trial tracks.
There are 33 greyhound tracks and we've estimated trial tracks to be 10 in number, although that number could be substantially-higher if trainer's own tracks are included.
But for the sake of costing, we calculated the implementation and monitoring of 43 tracks with back to base tamper-proof night and day vision CCTV units.
Club and Trial Track CCTV costs
| Position | No. | Salary ($) | Cost ($) |
|---|---|---|---|
| Implementation | 43 | 50,000 | 2,150,000 |
| Monitoring | 6 | 75,000 | 450,000 |
| Compliance | 4 | 75,000 | 300,000 |
| Total cost | 2,900,000 |
We've estimated the assistant and administrative requirements to be minimal of just two staff:
Club and Trial Track CCTV support staff costs
| Division | No. of staff | Value ($) | Cost ($) |
|---|---|---|---|
| Compliance | 2 | 50,000 | 100,000 |
| Total cost | 100,000 |
Minimum standards and the as-yet-undelivered code of practice will be key to delivering reform outcomes. Their implementation, education and compliance will attract a significant portion of the available workload.
The results of those efforts will distribute further resources to facilitate a liaison with animal welfare groups, the RSPCA and the NSW Police in accordance with the requirements of the bill.
Minimum Standards and Code of Practice leadership costs
| Position Title | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Implementation | 10 | 75,000 | 750,000 |
| Education | 4 | 75,000 | 300,000 |
| Compliance | 30 | 75,000 | 2,250,000 |
| Liaison with RSPCA, Welfare groups etc | 2 | 75,000 | 150,000 |
| Total cost | 3,450,000 |
We estimate a further 22 assistants and administrative staff will be required to support these efforts at a cost of $1.2 million.
Minimum Standards and Code of Practice support and admin staff costs
| Division | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Implementation | 10 | 50,000 | 500,000 |
| Education | 2 | 50,000 | 100,000 |
| Compliance | 10 | 50,000 | 500,000 |
| Liaison with RSPCA, Welfare groups etc | 2 | 50,000 | 100,000 |
| Total cost | 1,200,000 |
The total annual staffing requirements of the Greyhound Racing Integrity Commission could run as high as 321 staff at a cost of $20.625 million. Notably, the NSW Govt compensation package will only contribute $2.2 million annually and will end after five years.
GRNSW are tasked with race day operations and race club licensing, in addition to their current media and marketing, wagering, track maintenance, grading, registrations and greyhound adoption areas of responsibility.
We estimate the ongoing GRNSW executive areas and staffing to look like this:
GRNSW executive costs
| Position | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| GRNSW Directors | 7 | 50,000 | 350,000 |
| Chief Executive Officer | 1 | 250,000 | 250,000 |
| Chief Financial Officer | 1 | 175,000 | 175,000 |
| Legal | 1 | 200,000 | 200,000 |
| Media/Marketing | 1 | 200,000 | 200,000 |
| Racing | 1 | 150,000 | 150,000 |
| Clubs | 1 | 150,000 | 150,000 |
| Greyhounds As Pets | 1 | 150,000 | 150,000 |
| Track Maintenance | 1 | 125,000 | 125,000 |
| Customer Service | 1 | 100,000 | 100,000 |
| Wagering | 1 | 100,000 | 100,000 |
| Compliance & Minimum Standards | 1 | 100,000 | 100,000 |
| Reform & Strategic Planning | 1 | 100,000 | 100,000 |
| Registrations | 1 | 100,000 | 100,000 |
| Grading | 1 | 100,000 | 100,000 |
| Total cost | 2,350,000 |
The assistant support and administrative staffing will add:
GRNSW support and admin staff costs
| Division | No. of staff | Salary ($) | Cost ($) |
|---|---|---|---|
| Chief Executive Officer | 2 | 50,000 | 100,000 |
| Chief Financial Officer | 4 | 50,000 | 200,000 |
| Legal | 2 | 50,000 | 100,000 |
| Media/Marketing | 8 | 50,000 | 400,000 |
| Racing | 8 | 50,000 | 400,000 |
| Clubs | 4 | 50,000 | 200,000 |
| Greyhounds As Pets | 12 | 50,000 | 600,000 |
| Track Maintenance | 4 | 50,000 | 200,000 |
| Customer Service | 8 | 50,000 | 400,000 |
| Wagering | 4 | 50,000 | 200,000 |
| Compliance & Minimum Standards | 4 | 50,000 | 200,000 |
| Reform & Strategic Planning | 4 | 50,000 | 200,000 |
| Registrations | 8 | 50,000 | 400,000 |
| Grading | 8 | 50,000 | 400,000 |
| Total cost | 4,000,000 |
This would see GRNSW running roughly at a cost of $6.35 million per-annum with 101 staff.
Of course, staff would all require somewhere to work, office equipment, fittings, furniture and computers, and motor vehicles given the heavy travel and inspection requirements of the reforms.
We have estimated the motor vehicle costs to be roughly 3.5 times the current provisions, the furniture, fittings, equipment and computers to be roughly four times current provisions, and office space at the absolute minimum 10sqm/person at an approximate Sydney space cost of $1,500/sqm.
GRIC & GRNSW infrastructure costs and overheads
| Overhead and infrastructure expense | Cost ($) |
|---|---|
| Motor vehicles | 4,000,000 |
| Office space | 6,330,000 |
| Fittings, furniture, equipment & computers | 4,000,000 |
| Total cost | 14,330,000 |
Of course, there will also need to be substantial increases in swabbing, reform capital expenditure, increased veterinary costs due to the legal requirement for significant veterinary oversight to more routine race day and operational processes, and a significant increase in GAP expenses, which have proven to be deficient. We estimate these costs to be:
GRIC & GRNSW animal welfare, reform and integrity improvements costs
| Welfare, reform and integrity costs | Cost ($) |
|---|---|
| Swabbing | 3,000,000 |
| Reform | 9,000,000 |
| Veterinary | 3,000,000 |
| Greyhound Adoption Program (GAP) | 3,000,000 |
| Total cost | 18,000,000 |
The combined overhead, infrastructure, welfare, reform and integrity costs adding a further $32.33 million to the joint annual expenses of GRIC and GRNSW.
There is a concerted push to bring race day staffing under the direct employment of GRNSW, so that disciplinary and integrity issues can be more tightly-controlled and procedures more effectively administered.
Currently GRNSW contribute just over $11 million to clubs for administrative costs, including an obscene $2.698 million to the GBOTA for Wentworth Park alone.
Moving the race day staffing responsibilities back to GRNSW will free up this $11 million of existing operational costs, however any real terms savings will be dependent on GRNSW actually providing greater efficiencies.
We estimate GRNSW race day staffing costs based on the 2016 levels of 1208 annual race meetings to be :
GRNSW race day staffing costs per meeting
| Position | No. of staff | Rate per meeting ($) | Cost ($) |
|---|---|---|---|
| Lure driver | 1.5 | 250 | 375 |
| Starter | 1 | 250 | 250 |
| Identification | 4 | 250 | 1,000 |
| Catching pen | 4 | 250 | 1,000 |
| Kennel | 6 | 250 | 1,500 |
| Judge | 1.5 | 250 | 375 |
| Total cost per meeting | 4,500 |
GRNSW race day staffing costs annually
| No. of race meetings annually | Cost per race meeting ($) | Cost ($) |
|---|---|---|
| 1208 | 4,500 | 5,436,000 |
| Total cost | 5,436,000 |
With 2016 race day administrative costs reported at $11 million, the tables above demonstrate that the movement of race day responsibilities and payments away from the race clubs and toward GRNSW, could potentially produce savings of $5.5 million for the industry. The move has the potential to increase integrity and procedural standardisation across the state.
Based on our best estimates, the bottom line of the legislated reforms and operational changes that must be imposed upon the NSW greyhound industry could be as high as $64.741 million per year. In the absence of professional financial modelling from either the NSW government or the NSW Greyhound Alliance, the potential outgoing costs written against the greyhound code should cause industry participants grave concern.
Estimated annual cost of legislated NSW greyhound industry reforms
| Area of expense | Cost ($) |
|---|---|
| Greyhound Racing Integrity Commmission (GRIC) | 20,625,000 |
| Greyhound Racing New South Wales (GRNSW) | 11,786,000 |
| Combined other expenses | 32,330,000 |
| Total cost | 64,741,000 |
It must be clearly stated that many of these reforms will see the NSW greyhound industry become a nation-leader, even a global-leader; for animal welfare as far as racing codes and performance animals are concerned.
They will certainly provide a reference point for all animal industries, pressuring other racing codes in the country to sacrifice industry participant returns to establish large animal welfare centred bureaucracies.
But the cold hard facts of the matter are that the potential costs of these reforms greatly out-strip the NSW greyhound industries expected revenue; and not by a small fraction.
The GRNSW annual report listed 2016 total annual income at just $55.873 million. Lets repeat that so it can't be misread – total current annual greyhound industry revenue is less then $56 million.
Much has been made of the “compensation package” from the NSW government of $41 million over five years that accompanies these compulsory reforms. While some have been led to believe this is a dramatic improvement of fortunes for the code, the simple maths is that the NSW government will promise just $8.2 million toward the industry per year; and only for the next five years. After that period they are content to let the industry sink or at least become the problem of the next government of the day.
NSW greyhound industry annual income
| Source of income | Income ($) | 2016 GRNSW annual income | 55,872,933 |
|---|---|
| NSW Govt reform GRIC compensation | 8,200,000 |
| Total income | 64,072,933 |
You don't have to be a Rhodes Scholar to see there is a big red flag around industry income and industry expenses. There is a shortfall of $668,067 between expected income and forecast expenditure. Close enough to a $700,000 annual loss.
NSW Greyhound industry annual profit loss statement
| Income / Expense | Value ($) |
|---|---|
| 64,072,933 | |
| 64,741,000 | |
| NSW Greyhound industry annual loss | -668,067 |
But hang on, we've forgotten something. Participant returns and prize money.
We've so far made no provision for any participant returns whatsoever.
The 2016 GRNSW annual report shows that participant returns in the form of prize money payments and travel subsidies amounted to $23.5 million.
2016 NSW greyhound participant returns
| Industry return classification | Value ($) |
|---|---|
| Metro prize money and travel subsidies | 8,048,869 |
| TAB prize money and travel subsidies | 13,659,804 |
| Non TAB prize money | 1,795,420 |
| Total NSW greyhound participant returns | 23,504,093 |
Simple maths illustrates the dire state the industry will find itself in should the number of race meetings and participant returns attempt to be maintained at the their current levels. Without dramatic intervention the NSW greyhound industry will be staring down a blackhole of $24.172 million per year. Thats an operating loss of just over $24 million each and every year.
Annual NSW greyhound industry blackhole
| Income / Expense | Value ($) |
|---|---|
| NSW greyhound industry annual loss | -668,067 |
| NSW greyhound participant returns | -23,504,093 |
| Total annual NSW greyhound industry deficit | -24,172,160 |
The NSW greyhound industry is facing compulsory reforms and restructuring that will see it losing over $24 million a year.
NSW greyhound industry future
The questions confronting NSW greyhound participants are: What will the state of the industry look like carrying forward the burden of a yearly $24 million loss? If the industries expenses are legislated and largely compulsory; what then are the options to address the operating deficit?
There is little provision to increase revenue.
For all the reasons previously covered, RacingNSW will not allow a change to the Intercode Agreement and the NSW Government will not intervene.
Adjusting the Tax Parity distributions up from 10% to the industry's 2016 market share of 21% will not provide the necessary funds.
The only logical way forward is expenditure that might otherwise be committed to reform and implementation will be parsed back. Legislated reforms will fail to be fully implemented or incomplete.
Similarly, it is almost certain that participant returns will heavily cut. The quest to trim $24 million from a constrained budget can end in no other way. Prize money cuts will be necessary and dramatic.
The flow-on effect of reduced participant returns will cause resultant financial stress on participants who will be required to invest in their own capital upgrades to meet much higher and expensive compliance costs required through the new Code Of Practice and compulsory GRIC minimum standards.
Defaults and industry drop outs will be inevitable.
What of the reforms? What will be the government and the community expectations of industry reforms?
There is a provision in the bill for a three-year review of the success of the implementation of these changes. What happens when many of the reforms have been poorly implemented or have been constrained by the inability of the QRIC to adequately fund its best practice reforms? Will the outcome of a negative review apply pressure on the government of the day to close what will be portrayed as a financially-unviable industry?
Under the current revenue and reform obligations, the NSW greyhound industry has been set up for failure.
Will these forecast estimations prove to be inaccurate or on the money? Only the NSW government, NSW Greyhound Alliance, or time; will decide how close this financial model will be to the reality under the new GRIC and GRNSW reforms.
Australian Racing Greyhound would welcome proper financial modelling be made available to participants. It should be argued strongly that this should have already occurred. Participants who have been stuck in limbo for the past 10 months deserve no less.
Regardless of what the future may hold for NSW greyhounds and the industries stakeholders, there is undoubtedly going to be significant change with an administrative driven increase in spending, coupled with an exponential decrease in participant returns.