Report: New York Must Overhaul Racing Laws

New York officials need to act quickly to launch a major overhaul of racing laws to help jumpstart the state's $1.4-billion Thoroughbred racing industry, Friends of New York Racing concluded in its year-end report on the status of pari-mutuel horse racing in the state.

"If New York racing is curtailed in any way or reduced in quality, it will have ripple effects nationally," said Tim Smith, FNYR president and former commissioner of the National Thoroughbred Racing Association. "I think the national industry is aware and concerned about that."

Smith said the state's racing industry, with the expiration of the New York Racing Association franchise at the end of 2007, is at its most significant crossroads in years. "If this opportunity is not taken to modernize the status and structure in New York, racing in New York will continue in some fashion, but it will miss the opportunity to have its business model and structure match its history."

The Dec. 13 report, entitled "The Way Forward," called on state officials to take a number of major steps to ensure the industry's viability. In the short term, the report said the state and NYRA must "redouble" efforts to solve the NYRA fiscal crisis. It said the state needs to be prepared to step in if NYRA becomes insolvent to ensure racing continues in the state, and it called on the state to step up efforts to the bidding process for a new racing franchise to operate Aqueduct, Belmont Park, and Saratoga.

In what will be a major lift for the industry given 2006 is an election year for governor and all state legislators, FNYR wants the state to completely rewrite its racing law to not only make it less complex and burdensome, but also to permit any entity -- for profit, not-for-profit, and joint ventures that could include off-track betting corporations -- to bid on the franchise. Smith said the law should make the bidding "permissive and wide open."

The group said the 2006 changes in the law should also expand account wagering to include Internet wagering; some sort of customer loyalty programs, such as rebates; and to cut the pari-mutuel industry's tax burden. Additionally, the group said the state should legalize video lottery terminals at Belmont. (A 2001 law forbids VLTs at Belmont and Saratoga.) The report also calls for consolidation into a single state agency to do the work of several agencies that now oversee lotteries, casinos, and racing.

In the longer term, which the group defines as much as two years out, Smith said the competing parties must come to a resolution after several decades of the "OTB situation" --the OTB parlors and racetracks are separate entities. The state, FNYR concluded, needs to restructure the current law that has led to fierce infighting between the tracks and OTB corporations.

Smith said OTB operations, if they choose, should be allowed to enter into joint-venture deals or mergers with racetracks to deal with the "disconnected" ways of the current relationships between OTB parlors and racetracks.

Smith said the NYRA franchise situation, coupled with the association's current fiscal problems, presents the perfect time for the state to change the status quo when it comes to racing laws. "We're saying that a new racing law should happen in 2006, and that the (racing franchise) request for proposal, which will be developed in 2006, needs to balance the interests of racing with the economic interests of the state," Smith said. "And the industry needs to do a much better job pursuing its legislative interests and probably needs to reorganize, too."

Smith said the structural health of the industry is in place, but that there needs to be major changes in law to end roadblocks his group said have been erected over the years. "The fundamentals in New York would be the envy of any other racing jurisdiction," Smith said of the markets, the quality of the horses and trainers, resources of the owners, and bipartisan support for expansion of gambling at racetracks. "There's this clear turnaround potential to put New York racing on a much sounder financial footing for the future."

Smith said the state could, with the changes, easily attract in excess of $500 million in new capital investment for the Thoroughbred industry.

Soon after the release of the FNYR report, the state legislature's top Republican repeated his call for the state's racing laws to be reworked in the next four to five months.

"My motivation is we have the best racing in the whole world here in New York state sooner rather than later," Senate Majority Leader Joseph Bruno said. "If you know something's not working, why do you want to wait two or two-and-a-half years to fix it? Why do you want to wait one year to fix it? Fix it!"

Bruno criticized a plan being negotiated between NYRA and the Port Authority of New York and New Jersey that would transfer land at Aqueduct to the authority for up to $5 million for future economic development uses. "A $5-million fix doesn't fix anything," Bruno said. "What's going to fix something is to accelerate the process to change the (franchise) model."

Bruno said "putting on band-aids doesn't fix a wound. (NYRA) has a serious wound and it has to have, I believe, major surgery."

Bruno, who called NYRA "cash poor" and a "troubled company," said racing laws needs to be addressed soon in the upcoming legislative session. "The model doesn't work and they know it doesn't work," he said. "They're going to run out of cash."

Full Report from Friends of New York Racing (PDF document, size: 574 KB)