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State reining in equine industry’s economic growth
By Dan McCue
Staff Writer
Standing at the top of a rolling hill with his back to his truck, Franklin G. Smith looks off into the distance toward a lone rider working a thoroughbred on his three-quarter mile track.
“That’s Malcolm Franklin,” says Smith, president of the Elloree Training Center Inc. and one of South Carolina’s most esteemed thoroughbred trainers and breeders.
“Malcolm’s in the 11th grade now, but he’s been coming around here steady since he was 10 years old, always insisting he wanted to grow up to be a jockey,” he explains. “He’s going to make it, too. This summer he’s going up to the Colonial Downs (race course) in Virginia for his second full season as an apprentice.
“It just goes to show how you can set a young person on the path to a career if you get them young enough, if they have the interest and you’re willing to provide them with an opportunity.”
In economically depressed Orangeburg County, Smith’s words and open door policy have been a clarion call to area youngsters and their parents. As Smith speaks, teenage boys and girls are busily at work throughout the large facility’s stable area.
But it isn’t just parents living near the Interstate 95 corridor who have recognized the economic performance and economic potential of enterprises like Smith’s.
Industry impact
In a report released Jan. 19, the U.S. Department of Agriculture estimates that the equine industry as a whole, including thoroughbreds, quarter horses, Tennessee Walkers, ponies, donkeys and specialty breeds, has an annual economic impact on the state of $478 million.
The industry survey, prepared by the department’s National Agricultural Statistics Service and containing data current to Dec. 31, 2004, is the first analysis of the economic impact of the equine industry in the state since 1979.
The effort, overseen by Robert A. Graham, the USDA’s director of South Carolina agricultural statistics, estimated the value of the state’s 84,300 horses at $332 million.
Forty-seven hundred of those horses are boarded in Charleston, Dorchester and Berkeley counties.
According to his analysis, total expenses incurred in 2004 by places with resident horses, equine owners who boarded their animals and individuals with equine expenses totaled $402 million statewide.
Total sales of horses in 2004 topped $30 million, while $46 million in income was received from boarding fees, breeding fees, training and lessons.
“I think the horse industry is one of the most overlooked business sectors in the state,” says South Carolina Thoroughbred Owners and Breeders Association President Lee Christian, a longtime Charleston area resident who keeps several thoroughbreds on James Island.
“Right now, our primary goals as an organization are to end our days as a well-kept secret and to foster support in the Legislature for an incentive program for thoroughbred breeding operations,” he says. “Not only would that help our member owners, but it would have a significant ripple effect throughout the equine business community.”
Richard Scelfo, a Seabrook Island resident and the owner of Seaboard Brokers, an importer of fine wines, agreed.
Scelfo, whose involvement with thoroughbreds goes back to his high school years, moved to Charleston from his native New Jersey because he loved being able to live near the beach while also being near a thriving city “with so many cultural aspects and great restaurants.”
Economics, however, forced the half dozen horses he now owns, mostly mares and fillies, to remain out of state.
“What you’ll find, I think, among thoroughbred owners who live in Charleston and those throughout the state, is that while we’d all love to keep our horses here, it’s difficult to do, particularly in light of the incentives offered by state’s like New York, Kentucky and Maryland.”
All three states Scelfo mentioned are home to thoroughbred racetracks, and the incentives paid to owners are typically awarded from race earnings by horses finishing first through fourth position.
In New York in 2004, the latest year for which statistics are available, the state breeding and development fund paid more than $7 million to breeders of registered New York-bred horses.
The fund paid another $2.2 million to the owners of the stallions of New York-bred horses and $1.1 million to owners of horses that earned purse money in open company races.
“If South Carolina had any kind of program like that, there’s no question I’d have my horses here. The trouble is, we just don’t seem to get a share of the agricultural funding in the state,” Scelfo says.
“If our lawmakers created an incentive program or gave the equine industry a bigger piece of the funding pie, I think you’d see a domino effect in the industry. People would bring their horses here, breed them, winning offspring would draw the better quality stallions from other states and all the while you’d be creating jobs for people who could really use them.”
Workers’ compensation
For Jane Dunn, owner of the Holly Hill Training Center a short drive from the Dorchester County border into Orangeburg County, creating jobs has never been the problem. Her annual payroll now stands at about $600,000. The challenge is being able to keep people on in the face of ever-climbing workers’ compensation rates.
“Workers’ compensation is the reason I left California 13 years ago,” she says as she accompanies five two-year-old thoroughbreds and their riders to her training track. “Unfortunately, the situation is getting almost as bad here, particularly so if you’re considered a high risk industry like we are. My workers’ compensation costs rose from $45,000 to $100,000 in just one year.”
There’s no question the work trainers like Dunn and Smith do is labor intensive and hard. Even with large staffs, being in the horse business is a seven-day-a-week job for the trainers.
Both Dunn and Smith specialize in turning foals into race horses, taking young horses that have never been ridden before and teaching them to carry a rider on their back, to run at high speed in tight quarters, to walk into a starting gate and to remain calm and keep their wits about them.
Because the job revolves around animals that weigh close to a ton, everyone that works with them is in peril of an accidental injury. Last year, after yet another hike in her workers’ compensation rates, Dunn says she had to make a difficult choice: she automated a specific job task—walking horses to allow them to cool down after running the track, known as “hot walking”—and laid off six long-time employees.
The automatic hot walker at the far end of her main barns looks almost exactly like a roofed carousel, a carousel in which the horses walk around and around in gated sections.
“It cost $70,000, roughly two salaries covering the payments, but it also eliminated the need for those other workers,” she says. “I hated to let those people go, but given the financial realities, you really are forced to make hard decisions based purely on the survival.”
Some business decisions come particularly hard because of the close bonds formed between workers and employers in the horse industry, Dunn said. Not only does the boss provide a paycheck, but many times also steps in to provide workers with car loans or advances on rent money.
“You do the best you can by people, but you can’t jeopardize your business,” she adds.
Top trainers
Dunn and Smith are at the top of their game. Dunn, for instance, trains horses for Claiborne and Pin Oak Farms, two of the most storied thoroughbred breeding farms in the nation. And a horse that left her barn last year to begin his racing career, First Samurai, is the presumptive favorite in this year’s Kentucky Derby.
Among the 215 horses currently in Smith’s barns is a son of Lemon Drop Kid, who in 1999 won the Belmont Stakes, denying Charismatic the thoroughbred racing’s Triple Crown.
Like Scelfo, Dunn thinks state lawmakers don’t understand the importance of the equine industry, especially on the local level.
“It’s not just about the 30 people I employ directly, but also about the people I pay for services and goods,” Dunn says, pulling a list of typical expenses from a jacket pocket.
“The blacksmith, $40,000 a year; repair and maintenance, $72,000; grain, $50,000; the veterinary clinic, $120,000,” she recites. “And then there are the people like the retired woman up the road who earns an extra $300 a week selling chicken and catfish lunches to my workers. If I was forced to move on again, how would she make up that extra income in Orangeburg County?”
Opportunity on the horizon
One way the state’s training facilities are earning extra income is through diversification. Both Dunn and Smith, for instance, rehabilitate injured race horses.
Smith, who employs 45 and manages a $700,000 annual payroll, also operates a growing breeding program and was the SCTOBA’s breeder of the year in 2004.
In addition, Smith occasionally races his horses and currently has a filly that has won more than $100,000 in purses during the past year.
Every March, Smith’s facility also plays host to the annual Elloree Trials, a day of races and outdoor events that draws thousands to the tiny community.
“We have food vendors and local artisans set up booths,” Smith says. “We have races beginning at 1 p.m., and we literally get people from across the country, many of them, the owners of the horses we train.”
This year’s race is March 26, and among those expected to attend is William Backer, the Charleston native who during his 25-year career at McCann Erickson created some of the most successful advertising campaigns in history.
“Remember ‘I’d like to buy the world a Coke?’” Smith says, recalling the famous Coca-Cola commercial from the early 1970s. “That was Mr. Backer. He’s a great, great guy and a terrific, insightful horseman.”
Backer, who now lives in Virginia and was also responsible for Coke’s “It’s The Real Thing” jingle and Miller Lite’s “taste great/less filling” ad campaign, sends a number of his horses to Elloree, including, most recently, half-siblings of Bandini, a horse that ran in the Kentucky Derby last year.
“A love of horses is what gets you into, and keeps you in, this business, but the people you get to meet and associate with is also a real joy,” he says. “It’s a special kind of industry.”
One with a real chance to grow in the near term, Smith says.
“Without question, people who are in the horse business, or interested in it, are gradually migrating to South Carolina,” he said. “The climate is ideal for thoroughbreds, the land is fertile, and land in places like Ocala, Fla., which has long been a very active horse area, is just getting too expensive for them to stay there.
“At the same time, horse people from up North are settling here because of the warmth, because of the cultural amenities of places like Charleston and because the word of mouth about our training facilities is spreading. It’d be nice if the state could get behind us a little more. We really are ideally situated right now to become a dominant agricultural industry in the state,” Smith says.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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