The smug attitude of the Racing NSW Board in the wake of its devastating defeat and the criticism of Justice Perram in the Sportsbet case, can be partly explained by the announcement on Thursday of the $174 million government support package.

This is just the latest of a series of government bailouts which have filled the coffers of Racing NSW, concealing the fact that the organisation is terminally bankrupt.

First we had the Equine Influenza epidemic. Not only did that permit Racing NSW to run racing for the best part of a year without actually having to pay out any prizemoney, but it received other benefits such as the government picking up the $8 million tab for its workers compensation premiums, thus avoiding the tedious task of extracting them from the trainer's prizemoney accounts.

The next windfall was World Youth Day. With assistance from the now disgraced Minister for Major Events, Ian McDonald, $41 million of taxpayers money made its way to Racing NSW as compensation for the use of Randwick for the Papal Mass.

Now we get the real big payoff - $174 million to build a new grandstand.

Does anyone seriously believe that Randwick needs such an edifice? The VRC spent $45 million on its new stand at Flemington.

No doubt upgraded facilities are necessary and it makes sense to make them multi-purpose so that they can produce income on non-race days, but no amount of spending on buildings is going to magically rebuild racing's fan base.

Without attention to the basics, like assembling decent fields for people to come and watch, Racing NSW might as well dispense with running races completely and save itself the trouble of building a grandstand.

That it has the skills to do just that was highlighted during the EI crisis when its highly paid executives were able to continue to draw their full salary and benefits while freeloading on Victorian racing, for which it paid not a cent.

And now that Racing NSW has decided to support cartoon racing, its management may prefer to dispense with the mundane business of managing real horses and the people who look after them.

The big issue to be considered by the members of the AJC and the STC is not the shiny mockups of what the new facilities will look like, but what will really happen to the $174 million?

Initially it disappears into Racing NSW which had a deficiency of shareholders funds of $3.7 million at June 30th 2009. To that can be added many millions more from the mismanagement of the race fields levy, continued losses from workers compensation, reduced TAB distributions and the litigation costs of Racing NSW and Sportsbet, which it now has to pay.

Sportingbet has launched a Federal Court action against Racing NSW for $7.4 million of race field fees charged incorrectly from 2008-2010. When it wins, not only does Racing NSW have to repay the $7.4 million, but it will also incur further legal costs if it is stupid enough to fight the case.

There will be more.

Federal Court statutory interest charges are 10.5%. The interest that Racing NSW has been earning on its race field fees account is only 3% according to the 2008-09 accounts. Therefore it has to account for a potential liability of 7.5% on the $50-$60 million of race field fees currently in dispute due to them being collected illegally.

That's another $4 million.

It gets worse.

The government loan of $174 million will presumably carry a market related interest rate. In fact, given Racing NSW has a deficiency on funds, it should have to pay a premium.

So at a rate of 7%, the interest alone on the $174 million amounts to $12.18 million per year.

In May, when Racing NSW announced its strategic plan, we saw the first glimpse of the Trackside tactic. Back then it was projected to produce $3 million for Racing NSW in its first year. Last Thursday's announcement was hopeful that this would rise to $12 million in three years.

Trackside has been operating in Victoria for over a decade and is flat out producing that much for the Victorian industry now. With annual turnover of $160 million, Trackside produces about $29 million a year in gross margin for TabCorp. The whole Victorian racing industry gets 25% of that, so $7 million is split between gallops, trots and dogs from Trackside revenue.

We assume the New South Wales government has been convinced by TabCorp that Trackside will be a more compelling gambling product there than it is in Victoria where it has only 4% of the wagering market.

Marketed as Racetrax overseas by TabCorp, Trackside is based on a graphics engine, which can be programmed to feature any avatar you like as the competing animal. So the punter can bet on horses or dogs as we see at present in Australia or racing cars as is implemented in British Colombia.

The obvious concern is that encouraging younger punters to bet on cartoon racing does nothing to encourage them to participate as fans in the real thing. Its hard to get passionate about number 6 after all.

But more importantly for the future of the New South Wales racing industry, the probability is that the funds that come in from cartoon racing will be cannibalised from bets on real racing.

So all that will happen is that Racing NSW will have built a Taj Mahal of a grandstand that no one uses, it will carry a crushing debt of $174 million and the revenue that comes in from Trackside will be offset by the losses in conventional wagering revenue as racing's share of the gambling dollar continues to decline.

We know from past history that Racing NSW has no capacity for successful strategic planning. One government bailout after another has enabled it to struggle from crisis to crisis.

This plan is crazy. Cartoon racing devised by cartoon characters.