The New York Racing Association will get its $19-million bailout from state government provided it gives assurances that it "does not anticipate" filing for bankruptcy protection in the next six months.
But NYRA officials immediately condemned the deal because it offers the money with a new set of conditions and does not provide all the money up front--a plan that undercuts what state officials were offering NYRA just two days earlier.
"It's another in a long line of promises that have been made but not fulfilled by the state," said William Cunningham, a former top adviser to New York Mayor Michael Bloomberg who is now serving as a spokesman for NYRA.
A state panel overseeing NYRA's finances agreed to provide the funds in three payments over the next two months. The money will help with NYRA's cash-flow problems, and came as NYRA officials were threatening to seek bankruptcy protection any day to avoid insolvency.
The New York State Non-Profit Racing Association Oversight Board had earlier insisted it would not provide NYRA the money--already approved by the state legislature--until a final contract between NYRA and MGM Mirage was approved by the state to begin construction of a video lottery terminal casino at Aqueduct. MGM Mirage is NYRA's VLT partner in the long-stalled project.
But the board relaxed its stance Oct. 30 by inserting a repayment plan that requires the $19 million to be reimbursed from future VLT proceeds over a 36-month period and at 4% interest.
One board member expressed concern the bailout will not be enough. "We'll be back here in 30 days," said Joseph Torani, an oversight board member.
The state loan to NYRA, part of a $30-million bailout package, will cover $10 million worth of payroll until the end of the year, as well as $5 million for health-care costs and $1.5 million for utility expenses. Another $1 million will go to another state agency for a scuttled real estate deal. The money, however, is not nearly enough to cover several other major financial obligations by NYRA, including about $12 million in pension payments already due, and $10 million in real estate taxes owed to Nassau County.
NYRA had been seeking the full $19-million payment. Instead, the board voted to break up the payments into three separate transactions, beginning with the first payment of $7 million on Nov. 1 and the final $6 million on Jan. 1.
The deal does not ban NYRA from seeking bankruptcy protection in order to get the $19 million--state officials said they could not legally do that. Carole Stone, the oversight board's chairwoman, said NYRA must, in writing, state that it has "no current intent" to seek bankruptcy in the next 180 days.
"NYRA needs this money for basic operational purposes in order to ensure uninterrupted racing" for the rest of the year, Stone said at the oversight meeting. She said the six-month window gives time for all sides to continue to work to improve NYRA's finances.
Another state panel is weighing three bids--from NYRA, Empire Racing Associates, and Excelsior Racing Associates--for the franchise to operate Aqueduct, Belmont Park, and Saratoga. The NYRA franchise expires Dec. 31, 2007.
"I just feel this is a very, very small band-aid," Torani said.
"This is what we have to work with," Stone told Torani. She said the $19 million is what the state can to do help NYRA deal with the "immediate fiscal distress" facing the racing entity.
Cunningham said NYRA's lawyers had not yet seen the resolution passed by the oversight board. But he said it differed from what state officials two days earlier were pledging they would approve--the full $19 million in a single payment made this week.
"This is a pull back" from what state officials offered Oct. 27, he said. "It's inexplicable why on Friday, the state understood there were some serious repercussions if NYRA didn't get access to the money that they had been promised and that had been passed and budgeted for this purpose," Cunningham said.
When asked if NYRA was contemplating bankruptcy protection, he said: "NYRA and their lawyers are going to discuss all of these developments, and they will make the determination as to what they are going to do to protect the Thoroughbred industry in the state of New York. But what happened (Oct. 30) does not give them any great satisfaction the state understands how bad the situation is.
"There seems to be some constant effort to delay and drag things out, and the state cannot explain why this is the case."
One of NYRA's competitors wasted no time jumping on the situation.
"New York needs to bring stability, accountability, and promise back to racing. New York needs an experienced operator that knows how to run a track and knows how to use racing as an engine for economic development throughout the state," said Jeff Perlee, chief executive officer of Empire Racing. His group includes horsemen, Churchill Downs Inc., and Magna Entertainment Corp.