The sale of the TAB was never going to be straightforward, but the government’s hoping it can pick a winner.
The extent to which government should fund sporting activities is always a topic of intense debate.
After all, promoting healthy, active lifestyles is something governments like to be seen to be doing, not to mention the down-the-line savings for the health system from having a healthier population.
In Western Australia, many sports are funded or part funded by Healthway, the state government agency set up to specifically promote healthy activities. But there are some notable sports that access funding from other government streams.
The WA Football Commission, for instance, used to supplement its dividends from ownership of the very profitable West Coast Eagles and Fremantle Dockers AFL teams with the money it made from managing Subiaco Oval, for which it only paid a peppercorn lease.
That 99-year leasing deal and regular government-funded upgrades to the facilities at the ground were effectively state funding.
When the state government wanted the WAFC to relinquish the remaining 72 years of its lease at Subiaco to make way for urban renewal, it agreed to provide compensation by funding football for at least a decade to the tune of $11 million a year.
But the other big state funding deal for sport is even more interesting, and about to become more complex.
In 2020-21, Racing and Wagering Western Australia, which was set up to run thoroughbred, harness and greyhound racing in WA, made a profit of $71.5 million on revenue of almost $398 million.
To put that in perspective, the WACA and the WA Football Commission sit in second and third spot respectively in terms of revenue generated by sporting organisations (see Data & Insights, p39).
Both received more than $32 million last financial year: less than 10 per cent of RWWA’s revenue.
Unsurprisingly, 94 per cent of RWWA’s revenue comes from the WA TAB, or almost $374 million last year.
And now the TAB looks set to be sold. Instead of using the agency to fund the sport, the state government plans to pocket around $1 billion from its sale.
When the sale of the TAB was first proposed, pre-COVID, the deal required the successful buyer to continue funding racing.
That’s no longer the case, meaning the state will have to fund racing after the TAB is sold, likely to ASX-listed Tabcorp or the Australian arm of FTSE-100 company Entain.
A few back-of-the envelope calculations, based on somewhat vague line items in RWWA’s 2020-21 annual report, show that the amount of money required to run racing (excluding the TAB) was just shy of $200 million.
And the non-gambling income was about $143 million.
So, if the government sells off the TAB, the state must find $57 million each year to fund the racing industry.
That makes football’s $11 million a year look like a bargain.
Now, some of that $57 million is already covered by an annual allocation from the state government of 30 per cent of the money it receives under the state’s gambling tax.
Last financial year, that amount was $35 million, which means RWWA is still $22 million short.
That leaves Racing and Gaming Minister Tony Buti with only a few levers on which to pull.
And, on a side note, it’s interesting to point out that Dr Buti also led the recent inquiry into the WAFC’s funding and expenditure.
To fund racing, Dr Buti could allocate some of the $1 billion sale proceeds to RWWA as a one-off payment.
He could offer RWWA some sort of annuity from the sale proceeds, or he could increase RWWA’s take from the state’s gambling tax.
If I was a betting man, I would say the last option would be the most palatable to a Labor government that wouldn’t see gambling as something it should have as one of its core businesses: the industry would effectively be paying for itself, albeit with the money first washing through government in the form of a tax.
But I’m not a betting man, so I’ll wait to see what Dr Buti comes up with at the end of the sale process, which is at the starter’s gate as I write this column.
