NYRA Chief: VLT Revenue for Racing Poised to Grow

New York is poised to give a greater share of video lottery terminal revenue to racetracks and at the same time add more to education, New York Racing Association chairman Barry Schwartz said April 18.

The confidence by Schwartz came a day after NYRA selected MGM MIRAGE to run its proposed VLT operation at Aqueduct, which would become the nation's largest racino. Though some tracks are looking to run their operations in-house, Schwartz said MGM's expertise is needed to create an upscale racetrack gaming parlor that will cost about $120 million.

As payment, MGM, which operates 14 casino resorts in the United States and Canada, will get an undisclosed percentage of Aqueduct's VLT revenue. The casino company's chairman is Terry Lanni, who has ties to the Thoroughbred racing industry.

Schwartz said he came away from a recent meeting with Gov. George Pataki convinced the governor is ready to back a plan to raise the VLT revenue share to the racing industry from 25% to 28%. He said the governor is also interested in boosting from 60% to 62% the VLT share destined for education funding.

To make up for the increases in those areas, the portion earmarked for the state Lottery Division for administrative costs related to the VLT program would slide from 15% to 12%.

Schwartz said he also pitched to Pataki a recommendation to stretch out the three-year sunset provision in the VLT law, extend the hours the machines can operate, and extend NYRA's franchise to operate Aqueduct, Belmont Park, and Saratoga until 2012. The VLT law set the 2012 date, but only if NYRA had VLTs operating by this spring.

Schwartz said he wants to be given until next April to get the devices online, though he believes the sprawling, 200,000-square-foot gaming facility at Aqueduct could open seven months after Pataki and the legislature resolve the ongoing VLT revenue dispute.

Pataki in January offered a new plan to get the long-stalled VLT program under way, but his proposal included taking revenue from purse and breed development funds.

MGM was selected after a dozen casino companies were considered. Details of the financial arrangement were not released. In the end, it came down to MGM or the casino company run by Donald Trump.

The selection was not competitively bid. A section of the state's racing law states all contracts entered into by NYRA for "goods or services" in excess of $250,000 must be competitively bid. Schwartz said the law doesn't cover selection of a vendor to run the VLT program, but all future construction work on the facility would be competitively bid.

The Aqueduct VLT facility is expected to bring in between $300 million and $500 million a year in revenue, NYRA officials said. Located on the border of Queens and Nassau County, the track would be the only VLT facility in the country with its own subway stop.

Last year, NYRA scaled back its ambitious plans for the VLT operation. But, with MGM able to obtain the capital to finance the construction costs, the glitzy plans are back on, Schwartz said.

When asked if NYRA would have to give up millions of dollars by taking the project out of house, Schwartz said: "Sure we are, but expertise is a very wide-ranging word. Just putting in the machines in a proper manner can have a difference in the bottom-line drop of the machines. And the more we spoke to operators, the more we realized how much is involved in doing this right."

Schwartz said the NYRA board of directors was unanimous in its desire to "bring in the best professionals to run this."

Over time, Schwartz said, it became clear no one was willing to loan NYRA money for the VLT operation. MGM, though, can arrange financing, he said.

"Now we don't have to spare any expense," Schwartz said. "We can build a first-class facility."

The Aqueduct plan calls for 4,500 VLTs on the second floor of the grandstand and clubhouse. Originally, 2,500 devices were planned, but Schwartz said state lottery officials asked NYRA to up that amount.