Dan Liebman: Editor-in-Chief

Dan Liebman: Editor-in-Chief

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Commentary: Fresh Start

Whether he was bluffing or not, we, thankfully, did not find out. But legislators took New York Racing Association chairman Steve Duncker seriously when he threatened to shut down racing in the state rather than accept another short-term franchise extension for the organization while negotiations in the state capital continued.

Though a state oversight board had approved a third extension to March 6 (the franchise to operate Aqueduct, Belmont Park, and Saratoga expired Dec. 31), Duncker threatened to cease racing Feb. 14. Legislative leaders, knowing what would hit the fan if racing in the state came to a grinding halt, agreed to a bill Feb. 13 granting NYRA a new 25-year franchise extending to 2033.

In order to receive the right to operate New York racing for another quarter century, NYRA, which received its first 25-year franchise in 1955, had to give up its longstanding stance that it owned the property upon which the three tracks sit. That NYRA threatened to have the ownership issue decided in court did not sit well with government officials. NYRA had a good chance of winning that argument, since it has paid more than $450 million in taxes on the land over the years. Still, others thought a 1983 agreement extending the franchise and creating the Thoroughbred Racing Capital Investment Fund made it clear that if NYRA did not receive the franchise, thus ceasing to exist, the land would go to the state.

In the new deal, NYRA will receive up to $105 million to help it emerge from bankruptcy. The money will be paid back by whomever is granted the right to operate slot machines at Aqueduct (and possibly Belmont). As part of the agreement, the state will decide who will operate the casino-style gaming.

Another major item concerned the makeup of the NYRA board, with the association still controlling the majority, but the state gaining more seats at the table. The board will consist of 25 members, with NYRA controlling 14 appointments, down from 20 of 28. Thus the state will control 11 rather than eight, with seven to be appointed by the governor—though of that group, one each will come from recommendations from horsemen, breeders, the state’s six off-track betting corporations, and unions. The senate majority leader and assembly speaker—both heavily involved in the negotiations—will appoint two each.

No one disputes the importance of New York racing to the industry. Recent numbers showed the three NYRA tracks run less than 5% of races in the United States, but dole out slightly more than 10% of purses and generate close to 25% of handle.

But the franchise extension is only the beginning. NYRA still has many hurdles to clear if it expects to come close to profitability.

Maintaining the franchise for another 25 years, but continuing to have more expenses than revenue, is obviously not acceptable. That the state has more oversight may help in this regard, though the state has continuously looked to the association for more and more money.

When NYRA was framed by John Hanes, Christopher Chenery, and Harry Guggenheim, it helped preserve the quality of racing in New York. But it was created at a time when racing had a monopoly on wagering, and when offered a chance to operate the OTBs in 1970, NYRA officials declined. NYRA has been in financial trouble since that decision was made.

Now, NYRA has a chance to open new dialogue with OTB operators. Or it can do nothing and hope slot machine revenue will be the short-term fix, as in many other racing jurisdictions.

The legislation tells us who will operate New York racing until 2033. It does not tell us how they will do so. State regulators will be watching. So will the industry.