NYRA Wins 25-Year Franchise
by Tom Precious
Date Posted: 2/14/2008 10:06:43 AM
Last Updated: 4/24/2008 4:26:43 PM

The New York Racing Association, written off as dead a year ago by its competitors, has won the rights to a 25-year exclusive franchise to continue operating Aqueduct, Belmont Park, and Saratoga.

The deal, approved Feb. 13 by the state legislature in New York, calls for $105 million in direct state aid, the writing off of about $120 million in past debts to the state, new oversight provisions, added money for purses and breeders, and an end to NYRA’s ownership land claims of the three tracks.

“This is a great day for Thoroughbred racing in New York and for all the people involved with the state’s vital Thoroughbred industry," NYRA president Charles Hayward said.

The legislation, which for a couple of hours appeared in trouble because of some back-room jockeying in the Senate on unrelated matters, was approved 92-40 in the Assembly and 39-17 in the Senate.

Among the dissenters were Long Island lawmakers upset the measure does not authorize a casino at Belmont. And New York City mayor Michael Bloomberg blasted the deal for not including help for the New York City Off-Track Betting Corp., which he is threatening to close.

The franchise for “a new NYRA," as Senate Majority Leader Joseph Bruno called it, extends NYRA’s life until Dec. 31, 2033. A state panel that oversees NYRA held an emergency meeting the evening of Feb. 13 to temporarily extend NYRA’s ability to run racing at Aqueduct until March 7. That is two days after NYRA hopes to emerge from bankruptcy protection, which would legally begin the new franchise period, officials said.

NYRA and state officials believe the deal will not only help it satisfy its bankruptcy creditors, but craft a new business model to keep NYRA from returning to Albany on a regular basis for state bailouts as it has done for a couple decades. Between video lottery terminal proceeds from a future casino at Aqueduct, new provisions that include performance benchmarks, and added powers to a state panel overseeing NYRA, officials said Thoroughbred racing has been reconstituted in New York.

“I don’t think we’ll be bailing them out anymore," said Assemblyman Gary Pretlow, chairman of the Assembly racing committee.

The agreement 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 revenue to the state’s other tracks that run casinos – a measure worth tens of millions of dollars to the other tracks. The provisions were lobbied for by harness tracks that claim they are losing money under the state’s current VLT revenue-sharing arrangements.

The 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 executive board. Current NYRA board chairman Steven Duncker would face a term limit;  the bill says he cannot serve more than four years.

A state oversight board created a couple of years ago following a spate of legal and financial troubles by NYRA will remain in business and receive new powers. Its current members will be replaced, giving Gov. Eliot Spitzer a majority of appointments to the five-member panel.

The legislation creates a formula by which NYRA will pay an annual franchise fee to the state by April 5 every year. But it also contains an escape clause that permits NYRA to ignore the payment schedule if it runs into future financial problems.

The deal creates local advisory boards from the communities surrounding Aqueduct and Saratoga, giving them input in matters such as real estate development plans. NYRA must meet with the local boards, whose members include area politicians, at least twice yearly. Belmont was excluded from that deal, angering Long Island lawmakers.

Republican Sen. Dean Skelos of Nassau County blasted the deal for not permitting a Belmont casino. He called NYRA a bad neighbor to residents near Belmont and for being a “deadbeat" for failing to pay county property taxes.

The bill also calls for NYRA entering into simulcasting deals with the OTB corporations so they can get the same price NYRA does for simulcasting. The bill does not, however, let the OTB corporations opt out of simulcasting NYRA races, as was being sought. OTB officials, though, said the new provision will not benefit them since they already can buy out-of-state signals cheaper than NYRA.

Bloomberg repeated his threat to close down NYCOTB, and said Spitzer and lawmakers “missed an opportunity" to fix an inequity in the law the city says hurts OTB finances. NYCOTB president Raymond Casey said he is hopeful state officials soon negotiate a solution for the OTB problem so NYCOTB “can continue to generate the hundreds of millions of dollars in revenue and profit for all the stakeholders."

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 the state oversight board created 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 revenue is higher  for breeders and horsemen. Under the new deal, the breeding fund will get 1.5% of VLT revenue 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.

Some lawmakers hope Belmont will be approved for a casino, but Silver, who was credited by NYRA with brokering an impasse between Spitzer and Senate Republicans, said such a facility so close to Aqueduct would create a gambling “saturation." He said bidders for Aqueduct’s casino have told him the Queens casino would be valued less if Belmont were also permitted a casino.

Bruno said NYRA will be on a healthier track now, thanks to state money, a casino at Aqueduct, and new oversight that will keep better track of NYRA’s operations than in the past. “This is a major change from where we are," said Bruno, who came under criticism from some Saratoga Springs community leaders who believed he was blocking a deal.

Asked if NYRA is different than just a few years ago when state officials, including Bruno, were talking about stripping its franchise because of a series of legal and financial woes, Bruno said: “It will be when the new NYRA is reconstructed."

The deal came on the day NYRA’s temporary extension to run racing at Aqueduct was set to expire. NYRA’s former franchise expired Dec. 31, 2007.

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 Corp., Woodbine Entertainment Group, Churchill Downs Inc., and others in the equine and gambling industries.

But NYRA used its political muscle and close ties in the legislature 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.

“We got a resolution that I think puts New York state on the right track," Spitzer said of the deal.

New Yorkers React to NYRA Decision



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