Spitzer Aides: NYRA Right Choice for Franchise
by Tom Precious
Date Posted: 9/27/2007 4:00:09 PM
Last Updated: 9/29/2007 2:27:48 PM

The Spitzer administration has defended its recommendation that the New York Racing Association run the state’s Thoroughbred racing franchise, characterizing its competitors as having financial problems, conflicts of interest, or more desire to operate gambling ventures over racing.

“We believe that the selection of NYRA best serves the policy interests of the state of New York,’’ Patrick Foye, a top economic adviser to Gov. Eliot Spitzer, told a state Senate racing committee Sept. 27 in Albany.

With Senate Republicans questioning the recommendation by the administration to give NYRA a new 30-year franchise to operate Aqueduct, Belmont Park, and Saratoga, two senior Spitzer aides told lawmakers NYRA has reformed its operations and offered a plan to help restore the state’s racing industry, which has an impact on 35,000 jobs in the state.

Paul Francis, the governor’s budget director, said Excelsior Racing Associates has withdrawn from the bidding process because of a lack of support by the Assembly to permit video lottery terminal casinos at Aqueduct and Belmont. State law only allows a VLT facility at Aqueduct. Excelsior Racing’s backers include casino developers Steve Wynn and Richard Fields.

The chief of one of Excelsior Racing’s competitors, Jeff Perlee of Empire Racing Associates, later dismissed the claims as “a smokescreen,’’ saying he was convinced Excelsior Racing’s gambling and real estate partners are still working behind the scenes for a role at Aqueduct and Belmont.

The governor has proposed separating the racing component of the franchise from the future casino operations. While he has indicated NYRA should handle the racing, a recommendation has not been made who should operate a VLT casino at Aqueduct. NYRA’s competitors have believed the Spitzer administration wants to give the casino deal to Excelsior Racing, whose backers include individuals with political ties to the governor.

Foye and Francis refused to say which entities have submitted bids to operate a casino at Aqueduct; the deadline for entries is Oct. 15.

Despite NYRA’s legal and financial troubles in recent years, the Spitzer aides said the organization has brought on new management teams, incorporated new integrity provisions and, despite losing millions of dollars each year, has had a couple of straight years of successful meets. NYRA is also under federal bankruptcy protection.

“Frankly, this recommendation would not have been made had the old NYRA management been in place,’’ Foye said.

The two Spitzer aides said NYRA’s competitors in the bidding process--Excelsior Racing, Empire Racing Associates, and Capital Play--had their own problems that cost them the governor’s recommendation. Foye said points were taken from Excelsior Racing because its primary interest was not in racing but the casino side of the franchise.

Capital Play, Foye said, did not have experience running racing in the United States and also had its primary interest in the casino and simulcast business.

Empire Racing was rejected for a host of reasons, Foye and Francis said. They raised questions about the financial projections of the VLT casino by Empire Racing, whose partners include Magna Entertainment Corp., Churchill Downs Inc., and Woodbine Entertainment Group. Foye said there were concerns about the financial health of MEC, which has been selling tracks, along with antitrust concerns about giving a franchise to a company so heavily involved in the simulcast business.

Francis said Empire Racing failed to offer a “compelling reason’’ to select the consortium. Foye said the withdrawal of the New York Thoroughbred Horsemen’s Association from Empire Racing earlier this summer also hurt its bid.

“We believe that NYRA was the right choice,’’ Foye said. He warned the timetable is ticking and that it is “critical to assure continuity’’ by ensuring racing continues after NYRA’s current franchise expires Dec. 31.

Senate Republicans, however, have raised the prospect that a state board that now oversees NYRA’s finances will step in and run NYRA--as is permitted under state law--if the franchise issue is not settled this year.

A major sticking point was raised at the hearing: whether a casino will be built at Belmont. Francis and Foye said the governor supports a 4,500-VLT casino at the facility, but that Assembly Speaker Sheldon Silver has voiced public opposition to the idea.

Sen. William Larkin, chairman of the racing committee that met Sept. 27, urged Spitzer to get together with Silver, a fellow Democrat, and hear what the community around Belmont wants for the track.

At issue is money--lots of it. Francis believes each Aqueduct VLT machine will collect $300 in revenue per day, rising to $400 in three years. He acknowledged, though, that VLT revenue at other tracks, including nearby Yonkers Raceway, has not met expectations. Regardless, he said, the state expects more than $600 million in total VLT revenue from the Aqueduct facility, out of which would come various percentages for NYRA, purses, vendors, and the state.

Critics contend NYRA got a sweetheart deal from the state not offered to other bidders. Francis said all bidders were offered the opportunity for a longer franchise period than the 20-year period the administration originally sought. In the end, Spitzer offered NYRA a 30-year franchise.

But Capital Play president Karl O’Farrell said Richard Rifkin, a special counsel to Spitzer, told him several weeks ago no one was offered more than a 20-year franchise. He said the criticism offered of his team’s bid by the Spitzer aides Sept. 27 wasn’t accurate.

The Spitzer aides made clear that NYRA’s land claims--that it, and not the state, owns the racetracks--was a factor in recommending NYRA for another franchise. The Spitzer deal with NYRA calls for NYRA to abandon its land claims and for the state to become owner of the tracks. In turn, the state will again bail out NYRA with up to $75 million in financing and write off more than $130 million in debt NYRA owes the state.

Empire Racing’s Perlee questioned how the Spitzer administration could criticize MEC for its drop in stock-market prices the past couple years as one of the factors in not choosing Empire Racing.

“They criticized Empire because one of our partner’s stock price is down, and yet they went on to recommend an entity that itself is bankrupt,’’ Perlee said of NYRA. “So, I think there are a lot of holes in the logic.’’



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