FAQ for Reopening

Some common questions have been raised to Board members who have done their best to respond to them. We thought it may be helpful
to summarize some of those concerns and provide detail to address
them which hopefully will bring some clarity to these recently addressed topics:
1) What went into the reasoning for the anticipated purse levels?
In April we did an initial analysis of the Purse account beginning with the balance on hand and then made certain estimates based
on current events of what we thought we could reasonably expect for
a reopening date for the racing and for the casino and at what phase in levels over the upcoming months. Those estimates are updated as new
information presents itself but the important factors and assumptions
to understand were:
The purse account is funded from two sources, the Video Lottery Terminal games (VLT’s) and our commission from betting handle both live
at our track and simulcast. The commissions vary by track and include
expenses that have to be paid related to the broadcast signals. VLT makes up approx. 87%, Handle 13% of the total. For purposes of the projections
we focused on the VLT revenue since it is the majority and it is basically the
total that falls to the bottom line for the purses.
Of the VLT revenue approx. 70% is generated by Saratoga Casino and 30% by Rivers Casino as they are contractually obligated to contribute to our
account as part of their casino licensing deal.
The timing of when we have access to the revenue is generally the next month for Saratoga and after each 3 month quarter for Rivers so there
is a time lag to factor in.
Normally the amount and timing of those cash flows is consistent but with the current events we have to use our best estimate as to how much
and when we will get the money before it can be committed as expendable
on a Condition Sheet.
Based on our conversations with Casino management we are currently hopeful for the casino opening on July 1 but only at a 50% maximum
capacity. There are so many subjective factors to consider related to the
financial results when the casino reopens and we will have to accept the
actual impact to our purse account as the time comes but for discussion and initial planning purposes we considered the following hypothetical results:
the first month revenue will be at 40% of the former normal monthly revenue. We expanded that to an estimated 70% revenue for the second
month and almost back to normal by the end of September, say 90%. So based on these assumptions we would basically lose a month of revenue over the next 7 months. This is on top of the half month we will use up by starting in mid-June ahead of the casino earning any new money so
that’s 1.5 months of revenue gone over the next 7 months or an approximate 21.5 % cut through the end of the season. Since we also lost a few months of racing handle and will likely take a hit in August, our largest VLT month, since out of town visitors will be down for the flat track, a blended 25% hit appears to be a reasonable expectation over the rest of the year.
2) Why is our current purse decrease even greater than the above explanation?
Besides the 25% mentioned above, for the first few months we have to factor in the timing of when the money will be available for distribution. We won’t have any of the Saratoga money until August at the earliest and that will be a reduced amount. The Rivers money owed to us from the first
quarter is still outstanding since it normally would have been received from them in late April and they were shut down similar to Saratoga. So that 30% contribution is not available to be spent yet and because it is not in our control it isn’t being considered currently available for distribution. If we did and increased our purses now and there was a delay we would run the risk of running out offunds in August.
3) Why do we appear to be racing for less or at a larger discount than other tracks?
It’s difficult to answer this definitively since each track has different schedules, number of race days, number of races per day, purse account balances, ownership etc. Some tracks hadn’t opened yet
before this all hit and should have had more reserves in their purse account at that particular time. We had already begun drawing at our full normal rate and actually raced for some period after the casino was closed therefore drawing on our purse account with no replenishment coming in. Some don’t race for as long as we do so they don’t have as long of a period to try to stretch their funds over before their season ends. Some tracks have owners who are willing to negotiate “loans” to the purse account that will eventually have to be repaid. We don’t borrow funds to support operating
expenses. Our approach is to budget for the losses and the cash flow timing issues by starting at conservative levels based on available cash and increase as the year goes on and revenue becomes more definite and in our possession.
4) When can we expect the purses to increase?
The Race Secretary has the discretion over this but it can be impacted by the receipt of our installment due from Rivers. The timing of this is something we will monitor but unfortunately is an unknown at this point. Also critical is the opening of our casino, at what level of activity it is allowed to operate and how successful that reopening is. As the Saratoga revenue increases so will our purses since our access to those funds is a shorter normal lag period and more controllable than the Rivers money. We also plan on expanding in mid-July to three race days a week at 13 races per day which will increase the gross amount of purse money being paid out.
In closing, in conversations with the Race Office although we are at an initial significant purse reduction the goal is to be back to as close as normal by the end of the year and start of 2021. Therefore our projected total loss will be blended in over the season. As purse money is earned and
received it is considered by the Race Secretary for distribution. There is no incentive on anyone’s part to stockpile purse money and the efficient management of that account has been very consistent. We will of course monitor the activity and raise any questions that may come up along
the way. Any setbacks in the general COVID situation and related shutdowns will obviously have a negative impact on the plans. If you should have any questions please ask a SHHA representative. If they can’t immediately answer your questions, someone will get back to you. This will hopefully
avoid misunderstandings and the potential spread of inaccurate information.
Thank you, Joe Battaglia-Treasurer/Secretary-SHHA

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