Spitzer Recommends NYRA Maintain Franchise

New York Gov. Eliot Spitzer has formally recommended the New York Racing Association continue to operate Aqueduct, Belmont Park, and Saratoga racetracks.

New York Gov. Eliot Spitzer has formally recommended the New York Racing Association continue to operate Aqueduct, Belmont Park, and Saratoga racetracks while a separate operator for future casino developments at Aqueduct and possibly Belmont would be tapped down the road.

The racetrack franchise, which expires Dec. 31, could stretch as many as 30 years under the Spitzer plan.

The long-awaited proposal by the Democratic governor still needs final approval by the state legislature, a sizeable question mark given the sour state of relations between Spitzer and Republican lawmakers.

“After careful consideration, I concluded that a reconstituted NYRA is the best entity to operate Thoroughbred racing in New York state,” Spitzer said in a statement released Sept. 4. “The state, in consultation with NYRA, will choose an experienced gaming operator to operate the VLT franchise at Aqueduct. This will ensure that we have the best possible operator for both the racing and the gaming franchise.”

The NYRA board the morning of Sept. 4 approved a memorandum of understanding with the state to make several changes to its operations and, for the rights to another 30-year franchise, to give up its land ownership claims of the racetracks.

The NYRA board will decrease from 28 to 19 members and include the appointment of two members by the governor, one each by the leaders of the Assembly and Senate, and one each by the groups representing horsemen and breeders. The deal calls for racing to continue at Aqueduct; the Spitzer administration had floated a plan to shut down and sell part of Aqueduct while turning part of the facility into a casino.

The deal also calls for revenue from video lottery terminals at Aqueduct—and possibly Belmont—to go to improving the tracks, increasing purses, and creating a new fund for New York state breeders.

NYRA chairman Steven Duncker said the announcement “is the culmination of NYRA’s efforts over the past several years to reinvent itself. The governor’s support is a testament to the efforts undertaken by NYRA to become the racing industry leader in integrity and corporate governance.”

NYRA held a press conference in Saratoga Springs, N.Y., Sept. 4 to discuss the franchise. “This is a great day for racing in our state," Duncker told reporters.

NYRA vice chairman Jim Heffernan said the end of the land-claims dispute with the state means NYRA is relinquishing its ownership in about $1-billion worth of property at the three tracks. In return, the state is forgiving about $130 million NYRA owes it, including about $30 million provided over the past year.

Duncker said it is his understanding that any private company can now make a pitch to the state to run the casino operation tied to the franchise. He said that could include existing bidders as well as other companies. He raised the possibility of NYRA contacting MGM Mirage, which bowed out earlier this year of a casino contract for Aqueduct, to see if it might again be interested.

NYRA president Charles Hayward became emotional during the press conference and had to end his remarks as he discussed the difficulty for NYRA employees withstanding criticism from its opponents over the year. “This should not be reported as NYRA wins the franchise…The real winner here is the racing industry and all of its constituents,’’ he said.

The MOU, which is non-binding until a later date, includes provisions that the state—from casino revenue at Aqueduct—will provide up to $75 million to help fund a plan to get NYRA out of its Chapter 11 bankruptcy protection. Until the casino revenue flows, the state or the future casino operator will provide “reasonable and necessary fund to meet NYRA’s operating obligations." The deal also includes the state forgiving tens of millions of dollars in loans NYRA currently has with the state.

The MOU also said the new NYRA board will select the officers of the corporation, which may or may not include current officers. The MOU states that “initially’’ all non-executive employees of NYRA will be retained under the new franchise.

The agreement also calls for 4% of Aqueduct’s VLT revenue to pay for upgrades and maintenance at the three tracks, 3% for racing operations, and up to 6.5% for purses.

Other groups that bid for the franchise are Capital Play, Empire Racing Associates, and Excelsior Racing Associates. An Excelsior Racing spokesperson said the company had no immediate comment, but in a state, Empire Racing said: “Empire Racing commends the governor for trying to tackle a complex problem, but his recommendation to retain the failed status quo is bad for horse racing and bad for New York taxpayers. It fails to provide for economic development upstate and the kind of creative vision that racing needs and deserves. It must be rejected.”

A Senate committee will meet Sept. 12 to discuss the NYRA recommendation.