by Paul Post
At long last, New York’s Thoroughbred racing franchise proposal has reached the finish line.
The state Legislature on Wednesday approved a 190-page racing bill that gives New York Racing Association a 25-year contract and the state ownership of NYRA’s tracks—Saratoga Race Course, Belmont Park, and Aqueduct.
The deal averts a track shutdown that loomed Thursday if an agreement had not been reached, which could have thrown hundreds of people out of work.
“This is a great day for Thoroughbred racing in New York and for all the people involved with the state’s vital Thoroughbred industry,” NYRA President Charles Hayward said.
The Republican-controlled state Senate passed the legislation at about 3 p.m. EST, leaving Governor Eliot Spitzer’s signature the last formality needed to make the proposal law.
“Today we have reached an agreement that represents the best vision for the future of the horse racing industry, and will ensure that operations at these tracks will continue uninterrupted and have the financial resources they need to thrive in the future,” Spitzer said.
The state will give NYRA $75-million to pay off creditors and get out of bankruptcy and another $30-million to cover 2008 operating costs. NYRA says it can get out of the red within two years, once video lottery terminals at Aqueduct get up and running.
“I don’t think this is a bailout,” said Senator John Sabini (D-Queens). “I think this is an attempt to make racing good again. You won’t recognize NYRA the way it was.”
Senate Majority Leader Joseph L. Bruno (R-Brunswick) said that the state will name a gaming operator within 30 days and that an Aqueduct racino will take 12-14 months to construct, meaning it should come on line by spring or early summer 2009. Horsemen and breeders are slated to get 7.5% and 1.5% of VLT revenues, respectively.
Not all downstate legislators are happy with the plan, though. Some Republicans broke ranks with Bruno and voted against the plan because it does not include gaming at Belmont.
“The most difficult part of the process was trying to resolve the varying interests who were advocating for their particular positions,” said Richard Rifkin, Spitzer’s special counsel and one of the governor’s lead negotiators.
The NYRA board will have 25 members –14 of its own current people and 11 political appointees, including representatives of horsemen’s, breeders, labor groups and New York City Off-Track Betting. Appointments will be made soon, Bruno said. NYRA will decide which of its own members stay on board.
The deal settles once and for all the highly contentious issue of who owns Saratoga Race Course, Belmont Park, and Aqueduct whose combined value exceeds $1-billion. NYRA will continue to pay property taxes to local municipalities at current levels.
But the new legislation deals with just one aspect of the overall franchise – the on-track product. The state must still decide who runs gaming at Aqueduct, and possibly Belmont, and how those tracks will be developed.
“It’s not over; it’s just one step,” Bruno said. “What is truly critical to their (NYRA’s) success is to get Aqueduct (VLTs) up and running as soon as we can.”
NYRA Chairman C. Steven Duncker expressed pleasure with the deal because it will allow NYRA to get out of bankruptcy.
“This legislation contains the key components for us to emerge from bankruptcy and to improve upon what is already the best racing in the world,” he said.
A confirmation hearing on NYRA’s reorganization plan is slated for March 5. In the near term, NYRA will conduct racing with another temporary extension through March 6, giving it time to emerge from Chapter 11 protection.
In the end, NYRA’s land claim proved to be its ace in the hole as it carried out a high-stakes legal battle to keep the franchise that it has held since 1955. State leaders, citing 1983 legislation, said the state owned the racetracks.
In late 2006, then-Attorney General Spitzer, while campaigning for governor, declared emphatically that the tracks were the state’s. After taking office, however, he backed off that stance, realizing that a lengthy and expensive court battle loomed.
Right down to the wire, the land claim gave NYRA valuable negotiating leverage as it threatened to stop racing if a deal was not reached by Wednesday’s deadline. The firm had been operating with a temporary extension since its franchise ran out on December 31.
NYRA said it would not continue with another extender and threatened to stop racing Thursday. State officials said federal labor law prohibited them from doing so, but Wednesday’s agreement averted that showdown, too.
Interestingly, winter weather forced the cancellation of Aqueduct’s Wednesday program but the track will resume operations Thursday.
Some legislators, who voted against the deal, said NYRA is simply getting another bailout.
“While we talk about a bailout, what we’re really doing is putting New York in a position so that we can be the premier racing state in the whole world,” Bruno said from the Senate floor. “This bill is a great step in that direction. It creates transparency, it creates accountability that we haven’t had in years and years.”
The state Oversight Board will continue to monitor NYRA’s business operations and NYRA must submit to reviews at four-year intervals. Failure to comply with franchise terms may result in termination of the contract.
The next big hurdle is the fate of gaming at Aqueduct and Belmont. Bruno said that two firms – Australia’s Capital Play Inc. and New York-based SL Green Realty Trust – are the leading contenders to develop Aqueduct.
But Bruno and Assembly Speaker Sheldon Silver (D-Manhattan) are at odds over Belmont. Silver says that Belmont and Aqueduct are too close together and that gaming both places would oversaturate the market.
Bruno countered that argument by pointing to other gaming destinations such as Las Vegas and Atlantic City that have a plethora of highly profitable casinos.
“What could be closer than Foxwoods and Mohegan Sun in Connecticut?” he said. “They are the two most successful casinos in the world and they’re walking distance apart.”
The state still has to decide how Off-Track Betting fits into the racing franchise. Bruno said the state will evaluate that situation and make recommendations by May 2009.
Bruno and Silver, however, both expressed satisfaction with the franchise agreement. Asked to rate it on a scale from one to ten, Bruno said, “I’m an eight or a nine. This is a great step forward.”
“I’m delighted that it’s done,” Silver said. “It gives certainty to the workers who work at the tracks. It gives certainty that there’ll be a source of revenue in the state in terms of building the Aqueduct facility. It also provides, once and for all clearly, the state of New York owns the tracks that are assigned to NYRA by franchise. It is undisputable.
“I think overall this is a great deal.”
Paul Post is a New York correspondent of Thoroughbred Times
Click here to read the 190-page racing bill in its entirety.