By Sage Policy Group, Inc., November 2016
This analysis concludes that economic impacts stemming from Maryland’s horse industry support almost 10,000 jobs, an associated $481.8 million in labor income, and roughly $1.15 billion in business sales. If the current pace of industry expansion persists though 2020, by that time the industry will be associated with nearly $1.5 billion in economic impact and support more than $620 million in employee income and more than 11,000 jobs. These impacts support over $68 million dollars in state and local tax revenues.
A Renascent Maryland Industry
This Sage Policy Group, Inc. (Sage) study measures the economic and fiscal impacts of Maryland’s horse industry. In order to conduct the analysis, the Sage study team conducted a survey of industry participants in conjunction with the Maryland Horse Breeders Association, Maryland Horse Council, Maryland Horse Industry Board and a set of closely aligned stakeholders (list attached). Nearly 700 surveys were completed, with respondents representing each of Maryland’s twenty-four major jurisdictions. Economic impacts were calculated using IMPLAN modeling software, which incorporates contemporary purchasing coefficients and other data pertaining specifically to Maryland’s economy.
Based on results of the survey, after years of decline Maryland’s horse industry is finally moving in the right direction. Though breeding thoroughbred horses in only a fraction of the State’s horse industry, the availability of slots revenues to support purses via a 2008 referendum represents a key inflection point. Between 2002 and 2010, inflation-adjusted industry spending declined by nearly 45 percent. By stark contrast, industry-wide spending increased by 19 percent between 2010 and 2015 in real terms and by 29 percent in nominal terms. It is important to note that the analytical findings discussed below do not embody the impacts of racetrack operations. Correspondingly, Sage’s analytical findings should be viewed as highly conservative. The Preakness race itself generates more than $30 million in statewide economic impact each year.
Sage’s IMPLAN model concludes that in 2015 the industry supported more than 9,100 full-time equivalent positions in Maryland. Of this total, approximately 5,800, or 63 percent, were supported directly. Total worker compensation attributable to industry operations is roughly $482 million (all dollar figures are in $2016).
Thanks to the resumption of industry growth in or around 2010, Maryland’s horse industry is again a billion dollar industry. As of 2015, the industry directly and secondarily supported $1.15 billion in economic activity in Maryland, up from roughly $930 million in 2010. Exhibit 1 supplies relevant summary detail.
Despite the uptick in activity in recent years, Sage estimates that industry spending remains 13.5 percent below its 2002 level. If one adjusts for inflation, that figure rises to more than 34 percent. In other words, Maryland’s horse industry is still healing.
Economic impacts translate into fiscal impacts. To compute fiscal impacts, the Sage study team relied heavily upon data from the Maryland Office of the Comptroller’s FY2015 Comprehensive Annual Financial Report. Based on the relationship between Maryland wage and salary income and State income tax collections, the effective State income tax rate used in this report is 3.77 percent. Based on wage and salary income of approximately $482 million attributable to the industry, this translates into State income tax collections of $18.2 million. The effective local income tax rate is estimated at 2.3 percent, which translates into a local income tax impact of $11.1 million. The industry also supported about $16.5 million in sales tax collections in 2015 and $15.5 million in State and local property tax collections.
Maryland’s horse industry is renascent. The local industry needed the ability to compete on a more level playing field within the Mid-Atlantic region, and now it is. In addition to supporting more jobs, income, business sales, and tax revenues, the industry is better positioned to help Marylanders preserve open space. The last five years have represented a stark contrast from the prior three decades when Maryland’s horse industry was in decline. The advent of slots programs in West Virginia, Delaware and Pennsylvania had tilted the competitive playing field away from Maryland. By 2013, the state could count only 30 thoroughbred stallions, or one-sixth the population of thoroughbred horses twenty-one years prior.
But industry recovery has begun and appears to be accelerating. During a recent year+ period, Maryland experienced a 15 percent increase in Maryland-bred thoroughbred mares and a 23 percent increase in new thoroughbred stallions. In 2010, as the statewide industry plummeted toward its nadir, only 20 Standardbred mares were bred in Maryland. That number increased by more than 1,000 percent by 2014, when the State produced roughly 250 mares. Maryland’s 2015 Thoroughbred and Standardbred foal crops were the largest in several years. According to an article published in the Baltimore Business Journal in May 2014, Country Life Farm and Merryland, two farms owned by the Pons family, delivered 45 foals in 2014, their largest crop since 2003. The growth extends to all breeds. With farms and related businesses across the state continuing to experience improving financial performance and the proliferation of all horse types across the state, more growth and impact can be and is anticipated.
Importantly, the study team’s analytical findings do not incorporate the activity at Maryland’s racetracks, including the activity associated with the Preakness. By itself, the 2014 Preakness supported more than $31 million in activity, an impact not included in Sage’s $1.1 billion industry impact computation. The study also does not include the contributions made in the form of open space preservation. Were the State or local governments to pay for the amount of open space preserved via ongoing horse-related operations, the total expense would likely be in the billions of dollars.
Capitol Polo Club
Maryland Jockey Club
Cloverleaf Standardbred Owners' Association
Maryland Department of Agriculture
Maryland Horse Breeders Association
Maryland Standardbred Breeders Association
Maryland Horse Council
The Maryland State Fair
Maryland Horse Industry Board
U.S. Pony Racing