Southeast Pennsylvania Horse Farms: Can the Small Survive?

As gaming heats up all over the state, legislators have created a support system for the horse industry, where big farms are edging out smaller operations. Most farms aren’t finishing in first, but far too many are getting stuck in the back of the pack.

A foal at Castle Rock Farm in Unionville. (Photo by Jared Castaldi)
It was 1971, and Rick and Dixie Abbott were spending their honeymoon at a yearling sale in Saratoga, N.Y. Then a second-year law student at Villanova University, Rick was realizing just how tough it was to sell show hunters, the couple’s earliest equine business. At Saratoga came an epiphany: Thoroughbred sales could be a more “liquid market.”

By 1973, the Abbotts had their first sales consignment in Timonium, Md. And before long, their Cochranville-based Charlton Bloodstock Agency would become the stuff of legend.

The Abbotts have always been in the business. Rick grew up in Willistown Township and was active with show horses and foxhunting. Dixie, a Glen Mills native, was once a three-day eventer. They met when Rick was in the Radnor Hunt Pony Club and Dixie in its Rose Tree counterpart.

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Today, the Abbotts own a 37-stall barn on 157 acres in Highland Township—prime Chester County horse country. Rick says the farm is one of the few good investments he’s ever made—at least, he hopes so. They’ve recently put it up for sale.

They’ve foaled more than 1,000 mares in 40 years, but the time has come to significantly slow down. They will remain in business—just a scaled-back version.

All these years, horses have left Charlton Bloodstock Agency without ever having worn saddles. Charlton (Dixie’s maiden name) has also represented selling clients at thoroughbred auctions in Saratoga, Timonium and Lexington, Ky. Annually, Charlton has sold more than 250 horses. Many have won major stakes races throughout the world.

Though hardly an easy life, it’s been a lucrative one for the Abbotts. In October 2010, one Charlton thoroughbred attracted the highest price at Timonium: $250,000 for Market Strike, the yearling offspring of After Market and mare Christmas Strike. The latter has been a “gold mine for us,” Rick says.

Then there’s the yet-to-be-named foal of Christmas Strike and her stud, Hard Spun, who sold for $195,000 in 2011, and her 2010 colt by Harlan’s Holiday, which commanded $180,000.
Another Christmas Strike foal, Double Down Vinman is now 8 years old and still racing. The horse sold for just $40,000 and has since won 20 races and $530,000. Another sold for $65,000 and recently claimed a $39,000 purse, paying $4,700 in breeder rewards to the Abbotts, who currently track results for about 15 horses. Even so, Rick suggests that the only way to make $1 million in the horse business “is to start with $5 million.”

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Of late, the major incentive to breed and race thoroughbreds here is Pennsylvania’s lucrative breeders’ fund. It rewards horses through awards, owner bonuses and enhanced purses at state racetracks. It’s been around since 1974—the year after horse racing was legalized in Pennsylvania—but it began to take on a life of its own in 2004, when then-Gov. Ed Rendell signed the Pennsylvania Race Horse Development and Gaming Act. By 2006, the first slots were operating, and money began pouring into the racing fund just before the recession hit, helping  us leapfrog Maryland and keep up with New York.

Rick suggests that the only way to make $1 million in the horse business “is to start with $5 million.”

The legislation allocates 12 percent of terminal revenue at racetrack casinos—the money that slot machines keep, or what the house makes—to the racing industry, as opposed to the previous 1 percent. Of the new windfall, 16 percent goes directly to the breeders’ fund. As mandated, first-, second- and third-place finishers pay between 20 and 30 percent (out-of-state horses and Pennsylvania-sired, respectively) of what the horses earn back to the breeders. Anything additional is used for bonuses to owners of Pennsylvania-bred horses and to pay for purses restricted to in-state races.

In order to participate in the fund’s rewards, mares must be in the state by Oct. 1 and foal in Pennsylvania (typically between January and May)—or live here year-round. “The idea was to
prevent carpetbaggers who’d only have their mares in the state for a few days,” says Rick. “[The idea] was to create a nexus of business within the agricultural community.”

In 2007, the first full year of slots nearly doubled previous distribution award totals, from $8.7 million in 2003 to $15.8 million. In 2012, $20 million went into the fund—“impressive” numbers that Rick says are better than anyone thought possible. The breeders’ fund took off like one of the best-ever PA-bred thoroughbreds, Smarty Jones, the 2004 Kentucky Derby winner that joined Lil E. Tee as the only Pennsylvania-bred horse to win that esteemed race. His popularity increased attendance at races and boosted TV ratings, attracting breeding-rights offers as high as $40-$50 million.

Without Smarty Jones and his Bensalem trainer, John Servis, there isn’t a state slots bill, says Rick. And without one, Servis would’ve moved his talents and top horse out of state. In fact, he did for a while. A mid-level-quality stallion in Kentucky, Smarty Jones is “a star up here,” Rick says. Since coming home, he was bred to 66 mares in Pennsylvania in 2011—including two of the Abbotts’—and 60 mares here last year.
 

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Jeb Hannum, executive secretary of the Pennsylvania Horse Breeders Association. (Photo by Jared Castaldi)But progress can be fraught with peril. As another foaling season ends, this is a story about the state’s racehorse industry—its rise and, perhaps, its fall. While almost a decade of change has boosted business for some, it’s squashed it for those long grandfathered into the industry who can’t afford to race, or can’t win. Today, big farms are king, and smaller Pennsylvania operations say the gaming industry is putting them under.

The state’s racing program is now a $3-billion-a-year industry—and it may have become too attractive too quickly. With an enhanced profile, it drew better breeders with better horses,
prompting an exodus even from states like Kentucky. But the increased in-state competition and the economic downturn have pressured some local breeders, kicking them into desperation mode amid claims that they can’t survive.

The shift of money—an unforeseen and inequitable one, opponents say—benefits only the most successful, many of them newcomers to Pennsylvania. It’s a classic case of the rich getting richer, even in an already rich man’s game. And let’s face it, “thoroughbred breeding farms are dealing in luxuries,” says Peter Giangiulio of Castle Rock Farm in Unionville. “Most people don’t need racehorses.”

Moreover, the breeders’ fund is so lucrative and attractive that politicians from two successive administrations have tapped it as a slush fund—and that’s putting it kindly. Others say the fund has been “gutted.” First Rendell and now Gov. Tom Corbett have used it to help balance state budgets. Rendell’s tinkering was legislated. But Corbett’s has the industry spinning as if on a merry-go-round ride, not a track.

A breeder didn’t always need great horses—just consistently good, useful ones.

“Not anymore,” says Peter Giangiulio, past four-term president of the Pennsylvania Horse Breeders Association. 

Pennsylvania newcomers who breed especially good horses spend “absurd” money, Giangiulio says. Guys like George W. Strawbridge Jr., whose Cochranville-based Augustin Stable and racing headquarters breeds thoroughbreds worthy of winning the Kentucky Derby. But Strawbridge has limited company in Pennsylvania. “He has this formula, whatever the hell it is. He knows what he’s doing, but George Strawbridge is here because the purses are good,” says Giangiulio. “Those like him are at the top, now that the purses [in Pennsylvania] warrant participation. Most of the rest have to be survivors.”

Giangiulio believes that the industry needs to keep working for the people and horses already here. “Is [the competition] unfair?” he poses. “No. But it is unfortunate for the horses that can’t compete. The allowance for those of yesteryear is zero.”

At the tracks, the increased competition has pushed out longtime resident trainers and horsemen—those suddenly without consistently competitive horses. Each track decides who’s in or out. “It’s great to make adjustments, but adjustments in this business are long-term,” Giangiulio says. “They take three to five years, but I need help now. I’m desperate, and I’m not alone.”

One advantage in Pennsylvania is that awards are paid in full at the end of every month. “But 100 percent of nothing is still nothing,” says Giangiulio.

Purses and breeders’ awards are better, but further out of reach. Coupled with economic woes, breeding and sales are actually down. Giangiulio had 36 mares foal in 2008, his high when the state (1,600) and the nation (36,000) also peaked. He was down to 19 last year, with 14 scheduled for this year. “We thought [business] would ramp up, but it didn’t,” he says. “It jumped up, and I can’t jump that high or that fast.”

Even at Charlton, the Abbotts own just eight mares; the rest belong to clients. In all, 31 mares foaled at Charlton last year. In 2011, it was 39. The year prior, it was 56.

Like most, the Abbotts had to cut back. There was a time when 40 late nights or early mornings in the spring were enough, Rick says. Now, even that’s too many in the determined slowdown. Now, roughly 25 mares live year-round in Cochranville. Another 15 arrive by the Oct. 1 deadline.

Even so, the overall numbers are still up. Prior to 2004, there were 12 mares a year at Charlton. When the slots bill was ushered in that fall, residency doubled. The next year, there were 30, and that number doubled by the end of the decade until the recent reduction—one that’s “unrelated to deman.” Rick says.

Mirroring the nation, new statewide foal numbers are receding after they peaked. In 2011, there were 937 new Pennsylvania-breds registered with the Kennett Square-based PHBA, down from 1,354 in 2010 and 1,406 in 2009. In 1972, the state produced just 200 foals. By 1979, there were 900 foals—about the same as the expected 2013 figures, hence the merry-go-round.

But proponents continue to insist that the slots bill saved racing. “Pennsylvania horse racing was once in Class AA baseball, but now we’re in the major leagues,” says John B. “Jeb” Hannum III, who in June 2008 was named the PHBA’s executive secretary.

What some have called contraction reflects both the economy and breeders who’ve become cautious rather than over-zealous. More of them are busy upgrading their stock. After all, why breed 10 mares if seven better ones will more effectively serve the purpose?
 

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Peter Giangiulio with nursing mare Miss A.G. and Patrick, an orphan she took as her own after the foal was saved by Castle Rock Farm manager June Hillman. (Photo by Jared Castaldi)
The Abbotts have bred mares to Smarty Jones, Jump Start, E Dubai and Fairbanks—four stallions who are among the best in the world. And they’ve all returned to Pennsylvania because of the enhanced purses.

Last year, 16 Pennsylvania-breds were nominated to the Triple Crown Series, an unheard-of number. In 2012, Parx Casino hosted the Pennsylvania Derby and the Pennsylvania Cotillion Stakes (the first Grade I race ever in Pennsylvania). Outside of the Breeders’ Cup, it marked the first time in U.S. racing history that two million-dollar races were held on the same day (last September) in one state.

“It has been the best of times and the worst of times,” Hannum admits.

With contraction, Rick Abbott sees fewer racing days as purses continue to go up–and payouts for 150 currently mandated racing days, as opposed to 200.

It’s a good trend, he says. If the state is saturated with racing days, there’s no incentive for patrons to “go to the track today when they can go next week.”

Abbott has long had his finger on the industry’s pulse. For 13 years, until 2009, he sat on the state’s horseracing commission, a three-member body. For the last nine months, in his third appointment, he was the only standing member.

Until Abbott retired from the commission, his participation as a breeder wasn’t prohibited, and he could receive awards. “Now, it’s considered a conflict,” he says. “The new commissioners can’t breed or race. But the way I see it, that’s a conflict: If you’re not involved in either, why would you want to be involved?”

From a financial standpoint, Abbott couldn’t forsake breeders’ awards, which have typically amounted to $45,000 a year. In 2012, he received $72,574.

It’s about money—and about $250 million has come into the racing fund since the slots bill passed. And yet, despite all the hype and the initial quadruple economic impact on the thoroughbred racing industry following Act 71, the fund’s pot of gold is under siege.

Money to the Race Horse Development Fund has decreased due to the limp economy, along with new competition within the state and from Ohio, New York and Maryland. The fund had decreased by $1.33 million this past January, compared to the same time last year.

Before leaving office, Rendell imposed a temporary, legislated four-year annual transfer of $50 million from the racing fund to help balance the state budget. That ability to tap the fund expires in June. By then, it will have cost the fund $200 million. “That was the first shock,” Hannum says. “It was like getting a nice present from your parents, but then they tell you there are restrictions on it.”

Then, in February 2012, in the midst of foaling season, Corbett—once considered a friend to the industry—announced his plan to take an additional $72 million from the fund (a total of $120 million for the year) to help balance his 2012-13 budget. “It would’ve put the racing program back to where it was prior to the slots bill,” says Hannum. “It spooked our people.”

In response, the industry reignited the Pennsylvania Equine Coalition, a once-dormant lobbying mechanism representing more than 10,000 trainers, owners and breeders. The group negotiated the $70 million “raid “(as it was termed) down to $5 million. Half of that funded the Pennsylvania Farm Show; the rest went to support the harness-racing industry.

All of which made the losses “easier to swallow,” Hannum admits. But it also left the industry wary, distrustful and vigilant.
 

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Dixie and Rick Abbott with mare Lost Letters and her still-unnamed foal. (Photo by Jared Castaldi)
This past February, Corbett offered his preliminary 2013-14 budget—and his plan to divert $31 million from the racing fund, half for agricultural programs and half for the general fund. By PHBA estimates, this would result in a $5-$15 million decrease in funding available to supplement purses and provide breeding incentives compared to 2011-12. Already suffering, some tracks have reduced purses by 10-13 percent in 2013. “This lingering issue continues to erode confidence in the racing program,” says Hannum.

Trainers and owners who brought their horses and businesses to Pennsylvania could easily pull up stakes and move elsewhere. That could send the state’s thoroughbred industry—which tripled employment figures from 13,870 to more than 41,100 since the slots bill—backward. But some wouldn’t mind.

This past February, Corbett offered his preliminary 2013-14 budget—and his plan to divert $31 million from the racing fund.

At Valhalla Farm in Chester Springs, it was a daughter-in-law who painted the picture Marcia Solda didn’t necessarily want to see. Her son’s wife questioned how the veteran thoroughbred breeder could keep foals for two years, then sell them into a life that amounts to a stall at Parx and breathing in turnpike fumes, where turnouts are limited to exercise periods—and races, of course.

“It’s criminal, really, to grow up like this and then to go into this other world,” says Solda. “Mostly, I just want to see farms being farms. You can be growing dogs, pork or thoroughbreds and giving back in the form of grain, hay, straw, labor. That remains possible in Pennsylvania.”

Valhalla Farm’s Marcia Solda with mare Fly Silver Fly. (Photo by Jared Castaldi)Solda’s position is understandable. She sits on the Agricultural Development Council in Chester County and was formerly on the Pennsylvania Farm Bureau’s standing women’s leadership committee. But good trainers and thoroughbreds who can now qualify as Pennsylvania-bred are pushing out existing resident horses, who either go to a lesser trainer or don’t race at all.

Without income, smaller thoroughbred farms can’t keep up with the Smarty Joneses. “You have to have a $1 million sire or mare to compete,” says Solda. “On the other side, you can’t even give a horse away today because the next person can’t afford feed.”

At Valhalla, Solda has had notable mares. Two were the great-granddaughters of Kentucky Derby winners Secretariat and Seattle Slew. Her best thoroughbred to date was Tanto Gusto (Much Pleasure), who had a $600,000 career in the mid to late 1990s.

So obviously, Solda has known success since buying her 160-acre farm in 1982, arriving from Long Island and her native Cuba before that. Seeing recent developments as fertile ground for a fight, she first spoke out about the industry’s newest inequities a few years ago at a Chester County farming summit, then contacted the state’s department of agriculture and even equine lawyers.

Presiding over what’s now 48 acres and a 24-stall barn, Solda openly lobbied for slots  legislation, assuming there would be “special races to give us a chance.”

Still, Solda was no dummy. She knew that better breeders and trainers would follow the money. “You talk to all the big shots and they say they want to win the Kentucky Derby,” says Solda. “That’s good and well, but what about all of these other farms who are supporting agriculture?”

Solda hasn’t bred in three years because of the downturn in the economy, industry uncertainty and health issues. In fact, she was ready to go out of business until she helped usher restricted races back into track schedules.

Last year, both Hollywood Casino at Penn National Race Course and Presque Isle Downs & Casino began running a larger number of races restricted to horses foaled in Pennsylvania. Though not as competitive as open races, it was a concession. Last year, $11.5 million was set aside for Pennsylvania-bred races, “a safety net that gives you another opportunity,” Giangiulio says.

For his part, Hannum admits that inequity is one of the dynamics playing out along with progress. “There’s frustration, anger and resentment because some say the program should do more to protect those who have been involved in the industry for a long time,” he says.

But a hard fact remains. “The people who will do well long-term in the Pennsylvania program are those who will breed better horses, sending their mares to better  stallions,” says Hannum. “Better horses do better, and it’s not without its costs to get better.”

It’s not hard to upgrade, Abbott says. But you have to pay for it. “And if you don’t, other than a fluke, you won’t be competitive,” he says. “As a breeder, if you’re not competitive, it’s your own fault.”

» Read Raising Royalty: The Chester County Thoroughbred Breeding Industry

» Read About Chester Springs Equestrian Callan Solem
 

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