A deal to extend the New York Racing Association's franchise to run three tracks in the state was approved May 16 by the Senate and Assembly as part of a state budget package. NYRA must have VLTs in operation at Aqueduct by April 1, 2003.
NYRA chairman Barry Schwartz, who was involved in the negotiations over the past two days, said the push was not directed at getting the franchise extended just to keep NYRA in control of Aqueduct, Belmont Park, and Saratoga until 2012. Rather, he said NYRA's status as a non-profit entity, and with its franchise scheduled to be up for renewal after 2007, made it impossible for NYRA to get affordable loans needed to construct a facility to house the 2,500 video lottery terminals slated for Aqueduct.
He said original estimates for a full-blown, Las Vegas-style casino hit $120 million for capital costs at Aqueduct. He has since ordered a revision of those plans, and has gotten back estimates in the $70-million range, he said.
Schwartz said the whole mission of the franchise extension was directed at making the VLT program break even. Under the existing VLT law, NYRA and the other tracks said they would lose money given the revenue splits offered by the state.
"We're not trying to gouge the state or anybody," Schwartz said.
The morning of May 16, Schwartz said he was "cautiously pleased'' but would hold back until the legislation was approved this afternoon. "We've made an awful lot of progress," he said.
State Senate Majority Leader Joseph Bruno, a Republican whose district includes Saratoga Springs, called the NYRA franchise extension "critically important'' for both the racing group and the state, which is relying on VLT revenue to help balance future budgets.
"They are like an economic engine," Bruno said of NYRA. "They produce jobs. "It's a win-win for everybody."
The agreement, negotiated in secret the past few days in Albany, has major implications for racing industry. It is considered a major gift for NYRA, which was expecting to face fierce competition for its lucrative franchise to operate the three tracks.
Magna Entertainment's Frank Stronach, racing insiders have said, was expected to make a serious run for the NYRA franchise to expand his empire into New York state.
The franchise issue came on the table as racetracks in New York have engaged in a furious lobbying battle to get the state to sweeten its revenue-sharing arrangement for the VLT program, which is slated to begin sometime early next year.
NYRA had also been pushing for a special financing deal to use a state authority from which to borrow money for a VLT facility. The deal crafted May 15 would "subordinate'' debt NYRA now owes to the Thoroughbred Capital Investment Fund and the state Urban Development Corp. By doing so, the debt owed by NYRA to those two entities would fall behind other new debt NYRA will incur. NYRA now has $64.5 million in debt to the CIF and $8.5 million to the UDC.
Negotiators on May 16 have worked out a deal that would, if horsemen at the various tracks agree, pump more money to track operators from VLT operations.
Under the current law, tracks are to receive 25% of VLT proceeds of the 10% left after payouts to bettors. In the first year, tracks would get 60% of that one-fourth split, and share the rest with horsemen and breed associations. In the remaining years, it would go to a 50-50 split.
Under the deal, sources said tracks can enter into agreements with horsemen's groups to sharply lower the amount paid for purses.
Along with Aqueduct, Finger Lakes is in line for VLTs. All of the state's Standardbred tracks -- Batavia Downs, Buffalo Raceway, Monticello Raceway, Saratoga Equine Sports Center, Vernon Downs, and Yonkers Raceway -- will have machines.
NYRA-operated Belmont and Saratoga are banned from having VLTs, according to the 2001 law.