The New York Racing Association has filed for Chapter 11 bankruptcy protection, charging that the state of New York's failure to approve a long-stalled casino project for Aqueduct Racetrack has pushed it toward insolvency.The filing, submitted electronically Nov. 2 to the U.S. Bankruptcy Court in the Southern District of New York, could throw into a judge's hand everything from the future of the casino to the sticky issue of who owns the land upon which NYRA tracks sit. "We always viewed filing for Chapter 11 bankruptcy protection as a last option, and regrettably, NYRA's Board of Trustees felt that we were required to take this action to protect New York's Thoroughbred industry,'' NYRA President Charles Hayward said in a written statement.The bankruptcy filing throws confusion into the bidding process underway involving NYRA and two major competitors for rights to the franchise, which expires at the end of next year, to run Aqueduct, Belmont and Saratoga racetracks.The court route comes as NYRA turned down an offer this week for $19 million in funding from the state, saying further restrictions were imposed by the state – beyond what, it insists, was envisioned by state lawmakers – and that NYRA would not accept.NYRA officials sought to assure the industry that racing, purses and payroll should not be affected by the court filing. "Chapter 11 bankruptcy does not mean going out of business,'' Hayward said. He added it would give the racing group time to re-organize under the eyes of a bankruptcy court.A spokesman for Gov. George Pataki said the state has been a ready source of financial bailouts over the years for NYRA. "We are concerned that by filing for bankruptcy that NYRA has endangered uninterrupted racing in New York State. It goes without saying that the state did everything possible to assist NYRA in overcoming their ongoing fiscal challenges, including providing them with nearly $300 million in grants, loans, subsidies and access to private sector capital. In the end, NYRA refused to help itself,'' said Scott Reif, a spokesman in the governor's budget division.NYRA has been threatening bankruptcy for months, arguing that the state's failure to approve the Aqueduct VLT contract has put it on a path to insolvency. NYRA's cash flow problems become particularly severe each December, which was partly why the state put together a $30 million bailout program for NYRA. So far, $11 million has flowed, but state officials until this week said they could not provide the additional $19 million to NYRA until the VLT contract was approved. A state panel overseeing NYRA's finances then said earlier this week that the remaining money could go to NYRA, but in increments and only if NYRA provided assurances that it did not anticipate filing bankruptcy.State officials Nov. 3 said the NYRA bankruptcy filing will not harm its bid in the process underway to choose a franchise holder to run the three thoroughbred tracks beginning January 1, 2008. A week ago, the Ad Hoc Committee on the Future of Racing, which is considering the bids, rejected an Australian company for not posting a required bond. There was speculation in the hours after the NYRA bankruptcy filing that the state could try to eliminate NYRA's bid."The committee is not considering disqualifying NYRA because bankruptcy law stipulates that filing for bankruptcy cannot be viewed in a negative manner,'' said Scott Reif, a spokesman for the committee.NYRA critics have long suspected NYRA was hoping to seek bankruptcy protection as a way to disrupt the franchise bidding process and to try to take the sticky racetrack land claims issue out of the state's hands and get a ruling on the matter from a bankruptcy judge. NYRA is competing against Empire Racing Associates, whose partners include Magna Entertainment and Churchill Downs, and Excelsior Racing Associates, a group led by casino developer Richard Fields and New York Yankees partner Steve Swindal.Officials with NYRA have butted heads with the state over who owns the tracks. NYRA has insisted that even if it loses the franchise it still owns the land, while state officials have pointed to provisions that show the land reverts back to the state if the franchise is lost.William Nader, a NYRA spokesman, said the land claims issue was not the driving force behind the bankruptcy filing. Still, he said, "Rather than let it be litigated in the media or even to have lawmakers and NYRA continuing to disagree at least this gets the issue before a judge.'' Nader added that NYRA would have filed for bankruptcy protection long ago if the matter was only about resolving the land claims.NYRA complains that other racetracks in New York have been operating VLTs for several years, and that the state has continually thrown up roadblocks to the deal between NYRA and MGM Mirage to open a massive casino at Aqueduct."It is unfortunate, and frankly, inexplicable why the state Lottery Division could not work out the details necessary to get the VLT construction underway at Aqueduct,'' said C. Steven Duncker, chairman of NYRA's board of trustees. "It is all the more mystifying given the fact that VLTs have been put in operation at eight non-NYRA tracks around the state.''NYRA and state lawmakers have said the state has been losing $400 million a year in revenue sharing because of the stalled casino project. NYRA has held the racetrack franchise since 1955."They've got to keep racing. That's the single most important thing, no matter what, just keep racing," said Richard Bomze, president of the horsemen's group at the NYRA tracks. He called on NYRA to cut the salaries of vice presidents at the tracks before cutting purses during the bankruptcy period."Don't use our money to clean toilets and pay the vice presidents," said Bomze, who supports the bid by the Empire Racing Associates. "This is not the horsemen's problem. This is NYRA's management problem."Bomze blamed NYRA, not the state, for failing to get the VLTs running. "The state would have been glad to have them up," he said.Empire Racing officials were sounding warning signals about the filing. "The worst thing the state can do now is overreact and potentially auction off racing assets to casino interests," said Jeff Perlee, the group's chief executive officer. "The interests of racing and grassroots New York horsemen must be protected and must come first. Empire Racing is committed to doing whatever it can to assist the state in protecting the horse racing community and this important industry."Bennett Liebman, a former racing regulator in New York who now heads a gambling and equine industry think tank at Albany Law School, said the filing could throw the debate over racetrack land claims to a federal judge. "But perhaps more significant is it has the potential to delay the overall franchise process," he said.Liebman said the major question is how does the state respond. "The question is what is the extent of the state's regulatory authority," he said. "The state could say given its financial conditions, we believe it's in the best interest to take away the NYRA franchise."Whether the state would try to do that now with a year remaining on the franchise remains uncertain. Liebman said the state has had plenty of time to try to figure out a response to a NYRA bankruptcy filing given the court threats over the past year. "It will be very interesting to see if the state over the past year developed any kind of plan to determine what it will do," he said.The court papers NYRA filed said it is facing a "liquidity crisis'' due to the business structure of racing in New York and the "abject'' failure by the state to approve the VLT contract that would have made NYRA financially healthy. It also charged "interference by the state agencies in NYRA's business activities and the thwarting of NYRA's efforts to efficiently operate.'' NYRA also said it has been unable to collect $11.5 million from New York City Off-Track Betting Corp. because of its own financial problems.NYRA listed pages of creditors, including $20 million in local real estate taxes and $12 million in pension payments. Nader said NYRA does not believe the state has the authority to remove its franchise during the bankruptcy period. He added that NYRA expects to get $9 million in funding immediately approved by the bankruptcy court as part of a $50 million borrowed from a hedge fund that NYRA has turned to.Excelsior Racing Associates said the bankruptcy filing "is the latest and perhaps final chapter in NYRA's failed management of New York racing. It is clear from this filing that new leadership and management is needed to infuse New York racing with the much needed transparency, accountability and excellence New York taxpayers and fans deserve.''