New York Governor George Pataki and state officials agreed Dec. 30 to a $30 million bailout plan for the New York Racing Association to help stabilize its finances and keep racing going uninterrupted.
The agreement came just hours before NYRA was set to head to a bankruptcy court. NYRA President Charles Hayward said officials determined earlier this week that NYRA would not have enough money to pay this weekend's purses, and that a bankruptcy filing was needed by week's end.
"We're confident that the steps, taken today by the governor, state legislature, the oversight board and others, will accomplish our shared goal of strengthening NYRA's finances and improving the long-term health of the racing and gaming industry in New York State,'' said Carole Stone, chairwoman of a state NYRA oversight panel.
The deal calls for $5 million – $1 million being made almost immediately – from the Port Authority of New York and New Jersey for parcels of land near Aqueduct racetrack. An additional $5 million loan will be made through the Empire State Development Corp., the state's main economic development agency. Another $20 million in loans from the state Division of the Lottery is expected to be approved by the state Legislature early next year. The money will be paid back from revenues expected from NYRA's future video lottery terminal casino at Aqueduct.
"The financial deal is a very good deal and I also think the negotiations and discussions were really positive, which I think is a good thing for NYRA and a good thing for the state,'' Hayward said.
Hayward said he expected the state to wire the first $1 million as early as today. Still unresolved, though, is precisely which property will be purchased by the Port Authority. The state wants to purchase parcels of Aqueduct's parking lot, a portion of which NYRA might need as part of its future casino project; NYRA wants the state to buy some other land not directly part of the Aqueduct facility.
Hayward said he did not know how many parcels of land might be sold, though he noted that the last time NYRA sold the state some land more than a decade ago it raised $1.7 million per acre.
NYRA still has not made its 2005 pension payments and is behind on some of its property tax bills. Together, those two bills total $22 million. On top of that, Hayward said, NYRA has projected a net cash flow of between $7 million to $10 million next year. He cautioned that while the new state money will keep racing going, it will not cover all of NYRA's outstanding obligations."I think it's a great thing, most importantly for racing,'' Hayward said of the agreement.
NYRA, according to the agreement, will submit a cash management plan demonstrating how it will, with the help of the new state funding, meet its financial obligations through the end of next year. The move comes as NYRA officials were planning to file bankruptcy protection for the struggling racing giant. It also comes as state officials scrambled to ensure the near-term viability of the state's thoroughbred industry as NYRA's franchise to operate Aqueduct, Belmont and Saratoga racetracks is set to expire at the end of 2007. The bidding process for a new franchise holder is expected to heat up in the coming months.
"This deal is very important to bring stability to racing in New York and to protect the thousands of people working in the thoroughbred racing industry," said Senate Majority Leader Joseph Bruno, a Republican who helped broker the agreement. The legislative district for Bruno, who has been a thoroughbred owner himself, includes Saratoga.
Bruno had first proposed the loan deal for NYRA, which had wanted to raise cash by selling off land near Aqueduct. The state and NYRA has long had a dispute over who owns the racetrack lands, with NYRA insisting it is theirs and the state saying the land is ultimately controlled by the state. Hayward in September first raised the possibility of insolvency for NYRA, saying a cash flow crisis was so bad that the racing entity was looking at running out of money in November.
"New York State has always been the premier racing state in the country and with this agreement in place, we can continue to work toward a stronger future for an industry that employs 40,000 people and has an enormous economic impact on our state," Bruno said in a statement.
State officials said the loan money will be paid back from VLT revenues before the expiration of the NYRA franchise. Pataki administration officials said there will also be certain strings attached for the money, including a ban on using any of the state funds for entertainment purposes by NYRA officials.