Exhaust and asphalt are very bad for horses, but if the Central Park horses are never exposed to either,
I believe they are, but that's all the more reason to support Ray's proposal that they simply not be.
If that turns out to be completely unfeasible then it may be time to consider a ban on animal welfare grounds, sure. Densely populated areas aren't
inherently bad for horses as a concept provided that their stabling is good enough but you're right in implying that urban areas are not what they were a hundred years ago.