To paraphrase: No one is wearing a white hat in this scenario.
At the fourth and final Senate hearing this week before the entire Legislature reconvenes Oct. 22, officials of the New York Racing Association warned that unless both houses approve Gov. Eliot Spitzer’s recommendation to extend NYRA’s franchise for 30 years in exchange for ceding the title of its racetrack properties to the state, thoroughbred racing in New York would shut down upon expiration of the current franchise at midnight, Jan. 1.
At the heart of all this is, of course, is the future installation of Video Lottery Terminals and Aqueduct and possibly Belmont Park. Under the auspices of the New York State Lottery, VLTs at Aqueduct are expected to raise $600 million in revenue in the first year, a projection most experts believe is not too overzealous.
The association believes that a bankruptcy judge would not allow the claims of NYRA’s creditors to be placed in jeopardy due to a loss of control over its revenues and assets. The Republican controlled Senate believes that a state oversight board created two years ago could step in and run the tracks by installing an interim management company.
As far as racing is concerned, such an occurrence would be an unmitigated disaster. It would not only place New York racing in serious jeopardy but has the potential to interrupt a major flow of revenue to New York State.
The logistical problems created by such a temporary solution would be nightmarish, involving all manner of goods and services. Both the front-side and back-side of the racetrack would be effected. So would thousands of people who work in the industry throughout the state, not to mention the economic hardship visited upon owners, trainers and backstretch workers.
While the downstate tracks operate seasonally, Aqueduct and Belmont’s horse population and workforce act interdependently. A smooth transition between the tracks is required for racing to be conducted at all, much less at the level associated with New York’s industry leading status.
The NYRA is absolutely within its rights to shut down racing in the face of what would amount to as a state takeover. The NYRA went into the franchise process ready and willing to play the land-ownership card. It can’t now back away from that tack by allowing interim management overseen by politicians who can’t get out of their own way in Albany, much less pull the strings of a business it clearly doesn’t understand nor has the inclination to learn.
There are no white hats in this process, and that includes NYRA. Remember, we are talking about a company that didn’t pay its taxes and received deferred prosecution after pleading guilty to criminal charges. Those charges were sealed in the report of the state appointed monitor. That monitor, the law firm of Getnick and Getnick, received a no-bid contract, paid for--then and now--by the NYRA.
Of this entire smoking gun scenario and inherent conflict of interest, said Liebman last month, “if you believe NYRA is transparent, you have blinkers on.”
Gov. Spitzer clearly wanted the state to gain secure title to the three tracks without having to suffer through a lengthy and costly litigation process, an argument the state could lose. New York’s leading Democrat said as much in a visit to the Saratoga press box last August.
Resultantly, the terms of the Memorandum of Understanding between the state and NYRA amounted to a windfall for the racing association. The percentages of VLT revenues afforded NYRA are high, especially considering the state is forgiving $130 million in existing debt and fronting them another $75 million for operational costs until the VLTs are up and running. The Senate has proposed to lower NYRA's percentage share of VLT revenues and pass the difference on to the casino operator.
But while New York racing fiddles, Albany burns.
As expected, House Majority Leader Sheldon Silver, a Democrat, backed Spitzer’s plan that included VLTs for Aqueduct but not Nassau County’s Belmont Park, a financial good thing for New York City’s Queens County.
When Spitzer learned that interest in attracting a casino operator would all but evaporate without Belmont Park in the VLT mix, he shifted gears. But not Silver, who said he would oppose “any further extension of gambling in the state.” Belmont Park is located approximately seven miles east of Aqueduct Racetrack.
Meanwhile, the Republican Senate Majority Leader, Joseph Bruno, embroiled in a feud with the Governor whose staffers allegedly assigned state troopers to monitor Bruno’s activities, said that he opposes the Spitzer plan and wanted the organizations involved in the original Request for Proposals process to run the tracks.
It has been well documented that Bruno has close ties to the Empire Racing group that last year lost the franchise bid to Excelsior Racing. Federal authorities currently are investigating pre-existing relationships between Bruno; Tim Smith, Empire investor and former head of Friends of New York Racing, said to be a stalking horse for Empire, and Jeff Perlee, Empire CEO and former Director of the New York Lottery. VLTs operate under auspices of the Lottery commission, whose delaying tactics during the Pataki administration stalled VLT construction at Aqueduct.
The awarding of the franchise to Excelsior Racing last year was considered a major upset. Empire Racing, which had the support of New York horsemen, several Bruno associates, and the financial backing of a consortium of major industry organizations were considered the odds-on favorites.
Empire suffered a major blow when it lost the support of the New York horsemen, followed this week by the withdrawal of Churchill Downs Inc., Magna Entertainment, as well as the financial support of its honorary chairwoman, New York socialite and horse owner Marylou Whitney.
Delaware North, which operates casinos at New York’s Finger Lakes Racetrack and Saratoga Gaming and Raceway, is expected to follow suit. Empire is said to be in negotiations on a merger with rival Capital Play, according to a post on the Bloodhorse web-site.
If VLTs are approved at Belmont Park, Excelsior is the leading candidate to run the casino--fitting since they made the most comprehensive and generous proposal to win the original RFP process (see HRI column archive dated 09.13.07 for details). Without Belmont Park in the mix, Excelsior is out.
Upon being awarded the franchise last year, soon thereafter it was learned that Richard Fields, a major Democratic booster, had extended the use of his private jet to Spitzer for a political fundraiser in Kentucky. Spitzer later paid for the trip but the political harm had been done.
Fields, developer of the highly successful Hard Rock Casino in South Florida, recently purchased a majority interest in Suffolk Downs. Suffolk is considered a likely future site for one of three casino operations in Massachusetts. This week Fields dropped out of the Excelsior group. A political obstacle having been cleared, Excelsior’s chances of again being awarded New York’s VLT franchise improved dramatically despite Bruno’s expected protestations.
But unless Spitzer’s plan, or a facsimile, is approved by year’s end, it won’t be a Happy New Year for New York horseplayers. Worse, it could prove an industry disaster of seismic proportions.