NEWS
NYRA’s accounting practices called into question
Posted: Wednesday, December 05, 2007 11:38 AM
CHARLES HAYWARD
Adam Coglianese/NYRA photo
by Paul Post
A state audit of the New York Racing Association could reveal more financial shortcomings for the bankrupt Thoroughbred track operator while state officials continue their debate over whether to keep the beleaguered organization in place for another 30 years.
NYRA’s current franchise expires on December 31. Legislators have been asked to report to Albany, the state capital, next week to try to hammer out a final agreement.
Senate and executive branch staff members are expected to meet on Thursday to work on the franchise deal.
According to past audits, NYRA has underestimated franchise fees by up to $40-million for the years 2000-’03, and the state comptroller’s office is currently working on an audit for ‘04-‘05.
NYRA President Charles Hayward said the case is nothing more than a dispute over accounting practices.
“This has been an issue for almost ten years,” he said.
He compared the situation to NYRA’s recent dispute with the Internal Revenue Service, which said NYRA owed the government $1.6-billion. In that case, the IRS used all handle, on- and off-track, before winnings are paid out to calculate NYRA’s income.
NYRA successfully argued that it should only be taxed on net income. The IRS has set a cap on its NYRA claim at no more than $25-million, and the final settlement could be $15-million or less.
Likewise, the state has recommended that NYRA change its accounting practices but has not demanded that it do so, Hayward said. He said he believes NYRA would prevail if the case ever went to court.
“We’ve had a fundamental disagreement over how the calculation’s arrived at,” he said. “We’ve gotten legal support from counsel, we’ve gotten accounting firm support. We just think that’s the way to do it. So do our lawyers. So do our accountants.”
Critics, however, point to the dispute as another example of NYRA’s financial failures, undermining support for New York Governor Eliot Spitzer’s franchise proposal.
NYRA, which declared bankruptcy on November 2, 2006, is more than $300-million in debt and owes the state more than $125-million. Spitzer wants taxpayers to absorb this expense and give NYRA another $75-million to pay off creditors.
“Whatever the final deal is, it has to be a better deal for taxpayers," said Scott Reif, a spokesman for Senate Majority Leader Joseph Bruno (R-Saratoga Springs).
If an agreement is not reached by December 31, NYRA could be granted a temporary extension or a state oversight board that monitors NYRA’s business practices could take control until a plan is finalized.
Oversight board chairman Carole Stone said on Monday that she will start making such plans if an agreement is not reached soon.
Senate Republicans have called for a new public authority to run racing, with gaming at Belmont Park and Aqueduct. Current legislation allows only for an Aqueduct racino.
Gary Pretlow (D-Yonkers) chairs the state Assembly’s Racing and Wagering Committee. He supports the Belmont concept but dislikes the GOP’s proposed racing structure.
“We’re trying to get away from authorities,” he said. “They become horrendous monsters. They just have tentacles.”
The state has passed new reform legislation to deal with public authorities, which gives the comptroller’s office expanded auditing powers.
“There’s greater oversight,” Reif said.
As Hayward himself said, however, comptroller’s audits have only made recommendations. No enforcement action has been imposed, prompting some to question the significance of the new legislation.
Paul Post is a New York-based Thoroughbred Times correspondent
