Pataki Sees 'Significant NYRA Reform' in Deal

The New York Racing Association will be placed under the watchful eye of a state oversight panel, Gov. George Pataki announced June 23, while the bidding process for the rights to the franchise to operate NYRA's three tracks will be accelerated.

In turn, NYRA's move to award a no-bid contract with MGM Mirage to develop and manage its 4,500 video lottery terminals at Aqueduct racetrack will be accepted by the state. The future approval of the VLT contract by the state is expected to keep NYRA's bid to get the VLT casino operating by the middle of next year on track.

Pataki said the new deal will lead to "significant NYRA reform and oversight."

The governor had sought a panel earlier this year to oversee NYRA, but lawmakers rejected that plan. The new deal eliminates the Thoroughbred Capital Investment Fund, which Pataki said is "not something we have felt comfortable with." In turn, a five-member oversight board will be formed, composed of three Pataki appointees and two picks from the Legislature.

The oversight board will have vast powers, including review of NYRA's internal operations and finances. In the extreme, if NYRA could not for any reason complete the terms of its franchise before its scheduled end on Dec. 31, 2007, the new oversight board could take over NYRA's operations.

The state oversight board comes as a monitor appointed as part of NYRA's deferred prosecution agreement is set to expire at the end of the month.

The oversight board will review and make recommendations concerning a host of areas, including NYRA's annual budget, its internal accounting and security procedures, and its expenditure policies. It can scuttle NYRA capital plans, and involve itself in collective bargaining agreements and vendor contracts, according to a copy of the legislation.

Its recommendations must be implemented by the NYRA board in "a timely manner." If not, the NYRA board must respond in 30 days in writing why the oversight panel's plans were not implemented. The panel will also report on its activities each quarter to the governor and legislature. The board will have the help of the New York State Racing and Wagering Board to conduct its oversight.

The agreement was approved June 24 by the state Assembly and Senate. "This agreement represents, in large part, what the Senate has been calling for to provide greater oversight and accountability for NYRA, and to move forward more quickly with the franchise bidding process for the next operator of the state's racing facilities," Senate Majority Leader Joseph Bruno said in a statement.

But Senate racing committee chairman Sen. William Larkin said there is now only "limited oversight" of NYRA. "This oversight board should be created to closely regulated the racing industry in New York in a way that will maintain the public's confidence and trust in the system," Larkin said in a written statement.

NYRA supporters have privately questioned the need for the greater oversight, considering the racing group is already regulated by the state racing board and comes under the jurisdiction of the state attorney general and comptroller's office; additionally, Pataki appoints six members to the NYRA board of trustees.

But NYRA President Charles Hayward said he supports the oversight panel and that it could end up helping NYRA's chances of keeping the franchise. "If it helps us all educate ourselves about what we ought to be doing, I think that's good for everybody," Hayward said.

Hayward said he does not believe the oversight board is coming in with any preconceived notions about NYRA's future. "I have to assume that the people coming in here will have an open mind and want to understand and improve racing. I just have to believe that," he said. "If that's their motive and goal then we're going to be on the same page."

The racing legislation approved by lawmakers did not address the video lottery terminal revenue sharing dispute at Aqueduct. Horsemen and breeders were trying to get a statute requiring NYRA to distribute VLT revenues at a set level. A revised state law earlier this year let NYRA work out the VLT splits as part of a contract with horsemen and breeders. Hayward said NYRA already offered to share the VLT proceeds at levels that had been set at an earlier state law. They are awaiting a response from the horsemen and breeders.

The governor and legislature have also tentatively agreed to move up the bidding process for NYRA's tracks at Aqueduct, Belmont and Saratoga. Currently, a nine-member committee – three Pataki appointees and six from the Legislature--is to be created not before Dec. 1 to begin the process of putting the franchise out to bid.

The new deal moves that committee's formation up to anytime before Dec. 1, putting new pressure not only on NYRA but also on the growing number of potential suitors for the lucrative franchise. The governor last year attached a $250 million fee as one possible price a future franchise owner might have to pay the state for the contract, which is expected to run 10 years in length.

The deal between Pataki and legislators, crafted on the scheduled last day of the 2005 legislative session, also permits the MGM Mirage VLT operation at Aqueduct to move forward. There has been criticism in some quarters that NYRA violated proper procedures when it did not put the contract to run the casino out to a formal bid.

Pataki said the arrangement worked out June 23 "allows the ratification of the contract that was entered into by NYRA" with MGM. The state has a financial stake in the NYRA casino. It gets a share of the VLT proceeds and legislators in the past have said the state has lost $1 billion in revenue for the delays in opening the Aqueduct casino.

Though details had not yet emerged, deals were also said to be close to permit NYRA to avoid paying the state a pari-mutuel tax it would otherwise have to remit from on-track bets made during three days this October when it hosts the Breeder's Cup. The same tax break was permitted the last time NYRA hosted the event; NYRA officials say the money goes to pay the extra expenses associated with the event.

Killed during racing negotiations over the past couple days were efforts to raise the takeout on NYRA wagers. OTB officials say the lower takeout has been hurting their finances and that NYRA has benefited little by the takeout levels in the past couple years. Also gone was a bid by OTBs to be able to offer Internet wagering on their simulcast signals. Harness industry lobbyists, meanwhile, beat back a measure to lower the revenue sharing they get from OTBs.

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