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For Immediate Release
March 15, 2006

Legislature Approves HB 453
Paving the way for Kentucky Quarter Horse Association Breeders Incentive Fund

“In January of 2005 the Kentucky Quarter Horse Association began to plan ahead to the day when there might be an economic boost to the breeding, raising and selling of Kentucky-bred and foaled American Quarter Horses in the Commonwealth. Now fifteen months later, the Quarter Horse industry in Kentucky was successful in lobbying for the passage of HB 453 which might just be the single most important piece of legislation in the history of our association - the approval of the Kentucky Quarter Horse Breeder’s Incentive Fund.” - Norm Luba, 2006 KyQHA President

What follows is an overview of the program that was presented at the annual meeting of the KyQHA on December 3, 2005, at the Executive Inn in Louisville. Additional details of the program will be released to the Quarter Horse industry once the Kentucky Horse Racing Authority approves the final regulations for the program. Watch for more announcements on our Kentucky Quarter Horse Association web site: kyqha.com

Introduction: The Kentucky Quarter Horse Association Breeders’ Incentive Fund

The Quarter Horse is the world’s most popular breed, and the American Quarter Horse Association (AQHA) registers more than 150,000 foals annually. Because of their versatility, Quarter Horses owned in Kentucky are dispersed among many more counties and towns than any other breed. The Commonwealth, best known for its Thoroughbred industry, has more verified Quarter Horses (36,198 in 2004) than Thoroughbreds. The Quarter Horse industry is a vital element in Kentucky’s collective equine industry.1

The Kentucky Quarter Horse Association (KyQHA) has presupposed that, based on horse demographics, as well as the unusually broad range of Quarter Horse activities in the Commonwealth, that the Quarter Horse breed will qualify for a significant portion of the funds to be made available by the new Kentucky Horse Breeders’ Incentive Fund (KRS 139.531). The distribution of the funds allocated for Quarter Horses will be made through the Kentucky Quarter Horse Association Breeders’ Incentive Fund ( KyQHA BIF).

The Kentucky Quarter Horse Association The only official affiliate of the AQHA in Kentucky, the KyQHA, a state-chartered not-for-profit corporation designated by the IRS as a 501(c)(6) organization, will administer the KyQHA BIF under the laws of the State of Kentucky.

Oversight of the KyQHA BIF

To ensure compliance with regulations and legislative intent, both as to recipients of the funds and also the way in which they are distributed, oversight has been invested in the Kentucky Horse Racing Authority (KHRA). The KyQHA will provide an annual report, or any other attestation required by the KHRA, in a timely fashion.

Administration of the KyQHA BIF

The intent is that the KyQHA BIF avoid to the maximum extent possible the need for burdensome recordkeeping and administrative costs. Therefore, the KyQHA will utilize a system in which incentives are based for performance horses on points earned through the AQHA Incentive Fund, and for racehorses on racing points awarded according to conditions and order of finish for races recognized by the AQHA. AQHA Incentive Fund points and AQHA racing points are collected and maintained as a regular procedure by the AQHA. Once the KyQHA confirms eligibility, calculation of incentives will be straight forward. By utilizing existing resources, direct costs of administration will be minimized.

The KyQHA Approach: Incentivizing Demand

It is a firm consensus of the KyQHA board that, regardless of breed or sport use, creating breeder incentives to supply more horses (for which there may not be a sufficient demand) will foster mediocrity and, of necessity, depress their market price. Therefore, the KyQHA has committed to creating incentives only that will enhance demand. Establishment of incentives to boost demand for Kentucky-bred Quarter Horses, leaving their supply to respond in a natural market fashion, cannot fail to improve the prices proffered for them. This is a vastly more efficient method of encouraging production than stimulating supply artificially and directly rewarding producers of foals demanded by no one. In addition, increasing the demand has the not-insignificant advantage of increasing the bona fide profit opportunities for horsemen.

Encouraging people to breed horses is an ethical goal only if there is a legitimate chance of economic return. Limiting incentives to the demand side is the only approach that assures this. The primary goal of the KyQHA is increasing equine economic activity related to the Quarter Horse breed, by enhancing profit opportunities for both new and existing owners and breeders. The program developed was designed by individuals experienced in showing and racing, in the development and administration of incentive programs, and in the record of similar initiatives in other jurisdictions. The KyQHA BIF was also designed with input from AQHA officials.

Horsemen who participate in sanctioned competitions, whether those are licensed pari-mutuel races or nationally recognized shows, tend to invest more money and time in their equine pursuits than their peers. Whether amateurs or professionals, these people tend to be more active in their associations and more politically active. They are, in short, the economic leaders of this industry, and this reality provides rationale for incentive fund emphasis on racing and showing.

Two pre-requisite qualifications for KyQHA BIF eligibility have been identified by the Kentucky Legislature. Horses need to be bred and foaled in Kentucky for that eligibility.

Meeting these qualifications should lead to higher demand, hence higher prices, for virtually all Kentucky- Bred Quarter Horses in the future.

What inputs would be needed and where would they come from?

From the KHRA each year:

  1. Dollars to be allocated from the Kentucky Horse Breeders Incentive Fund (KRS 139.531) to the KyQHA for the implementation of the KQHBIF.

From the AQHA:

  1. The number of Kentucky-bred Quarter Horses that earned racing points in the program year being computed.
  2. The number of Kentucky-bred Quarter Horses that earned show points in the program year being computed.
  3. The total race points earned by Kentucky-bred Quarter Horses for the program year being computed.
  4. The total AQHA Incentive Fund (IF) points earned by Kentucky-bred Quarter Horses for the program year being computed.
  5. Contact information for owners, breeders and sire owners and nominators of Kentucky-bred Quarter Horses for the program year being computed.

How would the KyQHA BIF be computed and allocated?

  1. KHRA determines the total dollars to be allocated to the Quarter Horse breed in Kentucky based upon the percentage of active registered Quarter Horses versus percentages of other active registered horses in the state.
  2. The dollars to be allocated to Kentucky Quarter Horses that race versus those that show will be computed for each program year. The allocation will be the percentage of race horses and the percentage of show horses where the total population of horses will be those that started in an AQHA approved race or AQHA approved show in the program year being computed.
  3. AQHA will provide by March 1 each year, data for the previous program year, to include: 1) the number of AQHA racing points earned by Kentucky-Bred or -Sired Quarter Horses that started in a race the previous year, along with an itemized list of the horse’s name, points earned, owner, breeder and sire owner; 2) the number of AQHA IF points earned by Kentucky-Bred or –Sired Quarter Horse show horses, along with an itemized list of the horse’s name, points earned, owner, breeder and sire owner or nominator.
  4. Total dollars available for each segment (#2 above) will be divided by total points earned for each segment (#3 above) to determine the KyQHA BIF point values for racing and showing for that year.
  5. The KyQHA BIF payout per horse will be determined by multiplying the number of points earned by each Kentucky-Bred or -Sired race horse and each Kentucky- Bred or -Sired AQHA IF horse by the value of each AQHA race point and each AQHA IF show point identified in #4.
  6. The distribution of payouts to each horse will be as follows:
    • 80% to owner of the KyQHA BIF eligible horse
    • 10% to breeder of the KyQHA BIF eligible horse
    • If eligible, 10% to owner or sire nominator of the KyQHA BIF eligible horse at time of breeding.
  7. If the sire did not stand the entire breeding season in Kentucky, the 10% sire owner or nominator allocation for that horse will be distributed among the eligible sires as a supplemental award in the same proportion as earned payouts.
  8. KyQHA will distribute award checks beginning March 1, and will have distributed all award checks for the previous program year by June 30 of the current year, so long as all requirements have been met.

Conclusion

The basis for any program should be to create economic activity for non-racing breeds in an effort to maintain Kentucky’s status as the “Horse Capital of the World.” The health of our Kentucky economy is contingent on ensuring the long-term viability of the horse, racing or non-racing, and thus maintaining the quality of life that we all recognize as uniquely Kentucky.

Enhancement of Economic Development of the Quarter Horse Breed in Kentucky

  1. Simply stated, the goal of the KyQHA BIF is to create significantly higher demand for Kentucky-bred Quarter Horses, hence higher prices for the breeders. This will drive economic activity.
  2. The KyQHA BIF will promote the breeding of quality horses that are capable of competing in open competition anywhere in the world. Because the requisite achievements, whether performance or racing, can be made in any state/province/country, not just Kentucky, the maximum incentive impact will be achieved. This approach correctly addresses the debate over “restricted” programs and captures the objectives of a true incentive program.
  3. Rather than require the policing of residency, the preferred approach is to require that the stallions stand in Kentucky, and that mares are both inseminated and also foal in Kentucky. This promotes additional, and significant, economic activity in the Commonwealth of Kentucky.
  4. Kentucky breeders will benefit as a result of the fact that in order to qualify for the KyQHA BIF, horses will be designated as “Kentucky-bred.”
  5. The KyQHA BIF will also encourage more ownership of Quarter Horse stallions by Kentucky residents, as well as encourage non-residents of Kentucky to consider standing more stallions in our Commonwealth. This is encouraged and accomplished by paying 10% of KyQHA BIF available dollars to stallion owners if the stallion stands the entire breeding season in Kentucky. This further drives economic activity associated with Quarter Horse breeding endeavors.
  6. Sales prices would eventually reflect that buyers would adopt the conviction that, all things equal, Kentucky Quarter Horses are worth more. Kentucky residents would benefit from the higher sale prices, thus invest in higher quality breeding stock. The cycle would repeat with the eventual result being even higher demand for Kentucky-bred Quarter Horses.