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The Washington Post
Puerto Rico's Takeouts Don't Deliver
by Andrew Beyer
June 25, 2001
CANOVANAS, Puerto Rico - To a visitor from the United States, horse racing at Hipodromo El Comandante at first may appear comfortingly familiar. The clubhouse could belong to any modest American track, with only the palm trees and the pastel color scheme suggesting a Caribbean flavor. The types of wagers, the classes of races and the format of past-performance data in the program are American-style. And many of the horses who compete here are American-bred.
Even the problems in Puerto Rican racing are similar to those in the United States. Executives at El Comandante fret about declining on-track business, competition from other forms of gambling and too much governmental regulation.
The main difference between El Comandante and other tracks is the sheer severity of these problems, which all seem linked to one doleful fact: Puerto Rico squeezes money from its racing fans more greedily than almost anywhere else, making it difficult for a skilled bettor to win or for a rational person to wager at all. The only saving grace of horse betting here is a wager called the Poolpote, which generates island-wide enthusiasm and much of the track's revenue.
The thoroughbred sport has a long and rich history in Puerto Rico. Organized racing began here early in the 20th century and it has produced stars who have made a major impact in the states. Bold Forbes came from El Comandante to win the 1976 Kentucky Derby. Mister Frisky, hailed as the "Puerto Rican wonder horse," won the Santa Anita Derby in 1990 before his 16-race winning streak was snapped at Churchill Downs. Angel Cordero Jr. literally was raised on a racetrack backstretch in Puerto Rico and established himself as one of the greatest jockeys of all time.
Throughout its history, horse racing has operated under heavy-handed government control. Even today, state regulators have to approve minute details of El Comandante's operations -- how many exactas can be offered, for example. The government also reaches its hand deep into customers' pockets, taking 10 cents in taxes from every dollar bet. With this tax added to the shares to the track, horsemen, breeders, etc., the parimutuel takeout in Puerto Rico averages out to an extortionate 41.6 percent.
"The takeout has always been high, but our racing fans are used to it," said Alex Fuentes, vice president for racing affairs. "It's not a problem."
Indeed, El Comandante has generated solid betting figures over the years. But as competition has grown from casinos, slot machines, lotteries and cockfights, racing hasn't been able to keep pace -- despite the existence of an efficient island-wide, off-track betting system.
El Comandante brings its product to customers through 675 OTB outlets known as agencies, mostly bare-bones operations consisting of a television and a tote machine. All of the track's races are televised live on cable TV; complete past performances are printed in a pullout section of a daily newspaper. This ought to be an ideal arrangement for growing the sport. "Most tracks in the U.S. would give anything for our distribution system," said General Manager David Yount.
Yet, total betting at El Comandante has been declining steadily, from $1 million per day five years ago to $900,000 per day now. On-track business has dropped to almost nothing, with only about 300 people in the clubhouse on a typical weekday.
It isn't hard to understand why. At U.S. tracks, takeout averages about 20 percent, and even that cut is deemed too high to give diligent players a reasonable chance to win. The Puerto Rican takeout turns racing into a sucker's game. At one point in the wagering on last Sunday's first race, the co-favorites were both at even money, with another horse 5-2 and another 5-1. Compared with that tote board, a slot machine looks like a good bet.
The one wager that generates interest here is the Poolpote, a version of the pick six, which locals say was invented on this island in the 1920s. It has this special feature: Four percent of each day's wagering goes into a jackpot that is paid out when a single ticket holder has all six winners. The betting unit is 25 cents, giving the Poolpote a broad-based appeal and the average daily pool is about $380,000, accounting for more than 40 percent of El Comandante's business. One day this week, a single winner collected $356,907. Despite the sky-high takeout, it is an enticing wager.
The Poolpote action has kept Puerto Rican racing relatively healthy. While purse money is not high, training costs aren't either, so owners manage to stay in business. "To keep a horse here," said owner Tito Conde, "costs only $700 a month, plus medicines. You can make money." The purses are sufficient to support the island's breeding industry and also to motivate owners to buy yearlings at sales in the United States.
But everyone can see the worrisome downward trend of betting at El Comandante, and the track's corporate parent hired Yount as general manager to reverse it. He is trying to get permission to offer simulcasts from New York and Florida on the track's dark days and to intersperse such simulcasts on the live racing card. (Currently, the track can offer three California simulcasts after live racing ends.) Yount hopes to improve the track's operations to lure customers back for live racing. Like most of his American counterparts, he would like to get some slot machines installed.
Perhaps some of these changes can boost the sport and Puerto Rican racing can prosper despite its excessive takeout. But there is plenty of evidence throughout the gambling world to suggest that it cannot. It's hard to imagine how any racetrack or gambling operation can attract new customers in a competitive marketplace while charging them 41.6 percent for the dubious privilege of placing a bet.