Two new financial reviews by New York's chief fiscal watchdog suggest the New York Racing Association continues to overstate the financial health of its racing operations by using proceeds from video lottery terminals from the casino at Aqueduct Racetrack to make its racing business look rosier than it is. That assessment is sharply disputed by NYRA.
NYRA said it has been using its VLT revenues as outlined by state law and, contrary to the comptroller's claims, supplied documentation requested by auditors. NYRA also questioned the manner in which the follow-up audits were performed.
The comptroller also said NYRA has failed to implement a number of key recommendations relating to financial operations and its capital construction planning that his office made to the not-for-profit racing corporation in 2015 and 2016. According to a report sent to NYRA by state comptroller Thomas DiNapoli, with NYRA back in private hands after a four-year state government control period, there is "no longer any impediment" for NYRA to fully detail a long-term capital plan for Belmont Park and Aqueduct Racetrack.
NYRA, which emerged from its state control period in June 2017, gets a share of VLT revenues from the Aqueduct casino that opened in late 2011 and is operated by Genting New York. In an 18-month period ending June 30, 2017, NYRA received $177 million from the Resorts World Casino. Of that amount, statutory distributions were made to operations ($37 million), purses ($91 million) and NYRA's capital programs ($49 million).
DiNapoli in 2015 noted that NYRA officials told auditors that the corporation had a long-term capital plan for its Saratoga Race Course, but that at the time—while NYRA was operating under a state oversight period—NYRA said it wasn't appropriate for it to advance such a long-term capital program for Aqueduct and Belmont. The new audit follow-up recommends NYRA now develop such a plan for the two tracks, which have ranged from the status quo to closing one track or the other.
DiNapoli said NYRA had partially implemented two of the prior audit's recommendations regarding capital plans, such as detailing specific construction projects planned, but he said NYRA still is failing to fully justify those projects or to itemize costs for each project.
The comptroller's report sent to NYRA also raised transparency concerns. The document notes that an audit three years ago cautioned NYRA against using capital revenues to pay its operational costs, as he said the racing corporation did in 2012 through 2013. NYRA told DiNapoli's auditors that the practice has ended, the report said, but state auditors said NYRA did not provide adequate documentation to verify that.
In a separate report labeled "Financial Condition and Selected Expenses," DiNapoli's office recently wrote NYRA president Chris Kay of its concerns over NYRA using VLT revenues to show a surplus in its operations.
NYRA officials reject the new follow-up reports nearly point by point. NYRA spokesman Patrick McKenna said the racing corporation has been "precisely" following the terms of a 2008 state law that set out how VLT revenues were to be distributed. "Any suggestion to the contrary is factually inaccurate and legally unsupportable," the spokesman said.
McKenna called it "a mystery" why the state comptroller's office "continues to ignore relevant statutes and contracts and appears unwilling to recognize the facts."
McKenna added that NYRA also supplied DiNapoli's auditors with "ample documentation throughout this process to support our positions. Unfortunately, the OSC (Office of the State Comptroller) has chosen to ignore these supporting documents."
DiNapoli and NYRA have long sparred over this issue, with NYRA insisting it uses sound, acceptable accounting principles. Also, the VLT revenue sharing from the Aqueduct casino, is guaranteed under current law through 2033.
The comptroller's "Financial Condition and Selected Expenses," report states that NYRA can use the system as an internal way to "evaluate the performance of its executive management."
But when publicly reporting fiscal results of its racing-only operations, the report states, NYRA "has an obligation to ensure that such spending fully discloses the methodology used to allow for the public to make an informed opinion on such. At this point, such disclosure is not made," the comptroller's report to NYRA states.
The comptroller expressed concerns about NYRA, for instance, making public claims in 2016 that it had just completed a third straight year of racing surpluses. Such an announcement, the watchdog said, failed to disclose more than $10 million in employment-related costs.
The comptroller also said NYRA has failed to eliminate actual deficits from racing operations with "specific actions to enhance racing and track-related revenues and diminish unnecessary and unsupported expenses."
DiNapoli said NYRA racing operations—when all expenses are accounted for—continue to have "significant losses." Racing losses in 2016, the report says, stood at $18 million, up 46% from the prior year.
The audit follow-up did state that NYRA provided the state with a number of steps to boost racing revenue, including increases in parking fees and upgrades to its tracks.
"However, these efforts have not yet been successful, as the gap between NYRA's racing-related expenses and revenues continued for the first six months of 2017. For this period, racing-related expenses grew by $5.3 million, while revenues from racing grew by only $2.2 million, resulting in a loss of $16.3 million for the six months ended June 30, 2017. We believe that NYRA needs to work toward reducing its racing-related operating deficits and reaching the goal of generating a profit without VLT funds," the report concludes.
In response to the new audit documents, NYRA said the findings are incorrect that it uses VLT funds to pay for routine maintenance, isn't properly planning short- and long-term capital programs and that it's not using a formalized system to track costs of the capital projects. NYRA has numerous project-tracking systems in place and noted that its capital plans have gone through a state government review panel called the Franchise Oversight Board.
"Nevertheless, NYRA looks forward to building on recent successes and continuing to serve as the cornerstone of an industry responsible for 17,000 jobs and more than $2 billion in annual economic impact for our state," the NYRA spokesman said.
NYRA said it has made a small profit each year since 2012.