NYRA Franchise Deal Approved

NYRA Franchise Deal Approved
Photo: AP
New York Governor Eliot Spitzer
The New York Racing Association will run racing for the next 25 years under legislation approved February 13 that provides hundreds of millions of dollars in direct aid and loan forgiveness to NYRA and new oversight abilities by the state.

The legislation, which stalled for several hours in the Senate due to back-room jockeying on unrelated issues, was approved 92 to 40 in the Assembly and 39 to 17 in the Senate.

Its demise thought certain a year ago when it faced considerable opposition to another franchise, the measure creates  a new NYRA,   according to Senate Majority Leader Joseph Bruno.

The legislation, a copy of which was obtained by The Blood-Horse, is part of a package that includes a $105 million bailout by the state of NYRA to help it emerge from its Chapter 11 bankruptcy protection and NYRA ending its ownership land claims for the three tracks.

The legislation, sponsored by Senate Majority Leader Joseph Bruno and Assembly Racing Committee Chairman Gary Pretlow, extends NYRA’s franchise until December 31, 2033. It turns NYRA into a not-for-profit corporation, ending its days as a non-profit entity, but includes a provision authorizing the state comptroller with power to audit its books. As a not-for-profit, NYRA will also come more directly under the oversight of the state attorney general’s office.

The deal also includes higher percentage payouts from VLT revenues to the state’s other tracks that run casinos. The provisions were lobbied for by harness tracks that claim they are losing money under the state’s current VLT revenue sharing arrangements.

The NYRA legislation creates a 25-member board, down from the current 28 members. NYRA gets to select 14 members, giving it control, while the state gets to pick 11 members. The governor controls seven of those members, and one each will be made on the recommendation of the off-track betting community, breeders, horsemen and the state AFL-CIO.

Additionally, two members -- selected by the Assembly speaker and Senate majority leader -- will serve on NYRA’s powerful executive board.

Current NYRA board Chairman Steven Duncker would face a term limit: the bill says he cannot serve more than four years.

The legislation creates a formula by which NYRA will pay an annual franchise fee to the state by April 5 every year. It also creates local advisory boards from the communities surrounding the three tracks that will have some input in matters such as future real estate development plans. NYRA must meet with the local boards, whose members include area politicians, at least twice yearly.

The bill also calls for NYRA entering into simulcasting deals with the OTBs so the OTBs can enjoy the same price that NYRA does for simulcasting. The bill does not, however, let the OTBs opt out of simulcasting NYRA races, as was being sought.

A series of “performance standards’’ is being imposed on NYRA, which will have to meet certain benchmarks relating to number of New York-bred races, jockey and equine safety, backstretch conditions, and handle and attendance figures. The standards will be reviewed every four years by the state, and NYRA could lose its franchise for failing to meet the conditions. However, language inserted into the final legislation says NYRA must “use its best efforts’’ to meet the standards, suggesting some wiggle room in the mandate.

The bill demands that NYRA competitively bid out projects at the tracks, and work will have to be approved by a state oversight board that was created several years ago during the height of NYRA’s legal and financial troubles. The oversight board will have an array of powers under the bill.

The legislation also calls for a series of election-year provisions for organized labor, guaranteeing, for instance, union jobs at future development projects at Aqueduct and Belmont.

With no tracks to serve as assets against which to borrow, the legislation says the state’s economic development agency can float bonds on NYRA’s behalf – thereby securing lower interest rates, as well – for future construction projects, such as improvements at the tracks.

The share of VLT revenues is also boosted for breeders and horsemen than what was negotiated last year by Gov. Eliot Spitzer and NYRA. Under the new deal, the breeding fund will get 1.5% of VLT revenues by the third year of operation while purses will get 7.5%by year three. Three percent of VLT revenues after payouts will go to general racing operations and 4% will go to track upgrades.

The deal is silent on who will operate the Aqueduct casino. A decision is expected in about a month. But the bill says the VLT casino will need approval by the governor, Bruno and Assembly Speaker Sheldon Silver. It also says the state could approve the opening of a temporary VLT casino at Aqueduct while a permanent facility is built.

The deal came on the day NYRA’s temporary extension to run racing at Aqueduct was set to expire. NYRA’s former franchise expired December 31.

NYRA has run the three tracks since 1955, and less than a year ago few in the industry saw NYRA being able to overcome its many legal and fiscal troubles to win a new franchise. It had faced opposition from a variety of groups that wanted the franchise, including Magna Entertainment, Woodbine, Churchill Downs and others in the equine and gambling industries.

But NYRA used its political muscle and close ties at the Capitol to beat back its competition, and was able to convince the Spitzer administration that its case that it owns the three tracks could win in bankruptcy court and thereby throw racing in New York into jeopardy.

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