Spitzer Administration: New NYRA Best Choice To Run Racing In New York

Proposal Will Financially Benefit the State and Improve Quality of Racing

September 27, 2007 -- Senior members of the Spitzer administration today testified to the Senate Committee on Racing, Gaming and Wagering that a revamped New York Racing Association (NYRA) is the best choice the state has to run the racing franchise for New York State. They laid out why NYRA offers the best financial arrangement for the state compared to other bidders and said it would generate hundreds of millions of dollars annually for education and for improving racing. Additionally, they said NYRA presents an improved ability to run the state’s tracks, and has a strong leadership team that will be focused on improving the racing industry in New York State.

“In reviewing the competing bids, weighing all the factors and considering the importance of horse racing to New York’s economy, we believe the selection of NYRA best served the policy interests of the State,” said Patrick Foye, acting co-chairman of the Empire State Development.

Also testifying today were Paul Francis, Budget Director and Senior Advisor to the Governor, and Richard Rifkin, Special Counsel to the Governor.

The witnesses enumerated the reasons for the administration’s recommendation to the Legislature, which included:

* NYRA is not only an experienced operator of racing, but has also demonstrated a long-term commitment to and intimate understanding of the New York State racing industry.
* NYRA’s past integrity problems have led to a complete overhaul of the organization, leading to an unparalleled internal system of accountability, transparency, and internal controls.
* NYRA is now led by a retired partner of Goldman Sachs, who is serving without compensation, and has brought professional management methods to NYRA. In his short tenure, the tracks have already seen increased handle and higher attendance in the 2007 Spring Belmont and Saratoga seasons.
* A not-for-profit structure is more financially advantageous to New York State than a for-profit structure, since revenues in excess of the costs to maintain and operate the tracks would be retained by the state government.
* The Legislature must amend current law to permit the awarding of a new franchise for Saratoga, Belmont and Aqueduct racetracks to continue operating after December 31, 2007. Foye and Francis said that the Administration is looking forward to working with the Legislature to resolve issues to allow the grant of the new racing franchise before expiration of the current franchise on December 31, 2007.
* The proposed arrangement contains several provisions that are financially beneficial to the state. Video Lottery Terminal revenues are expected to generate hundreds of millions of additional dollars annually for education. Moreover, the deal would eliminate litigation over the tracks themselves – property that may be valued in excess of one billion dollars. Clear and unambiguous title would rest with New York State.

The recommendation to award two separate franchises – one for racing and one for the gaming operation – followed an extensive review of proposals from several organizations seeking to run the racing franchise at the three state-owned racing facilities and to establish video lottery facilities. The new franchises – for racing and the VLT operation at Aqueduct – are scheduled to begin on January 1, 2008. Horse racing has not been profitable in the state and around the nation recently, and legislation will allow VLT revenues to support racing in New York, a billion dollar industry that employs over a hundred thousand New Yorkers.

The Memorandum of Understanding (MOU) between the State and NYRA outlines the major terms of the 30-year agreement between NYRA and New York State, enabling the 52 year-old non-profit entity to emerge from bankruptcy and modify its governance structure.

The terms specify that:

* A portion of the funds derived from VLTs be dedicated to: improving racing facilities at Aqueduct Racetrack, Belmont Park, and Saratoga Race Course; funding deficits from ongoing track operations; increasing racing purses at the three racing facilities; and creating a fund for New York State breeders;
* The NYRA Board will be downsized from its current makeup of 28 authorized members to 19, and include the direct appointment of two members by the Governor, one by the Assembly Speaker, one by the Senate Majority Leader, and one each by organizations representing thoroughbred breeders and horsemen;
* Thoroughbred racing will continue at Aqueduct along with a VLT facility; the historic character of Saratoga Race Course will be preserved; and any future development at Belmont Park will be required to be consistent with its status as one of the premier thoroughbred racing venues in the world; and
* NYRA relinquishes any claims it may have to ownership rights of the tracks and facilities.

Source: New York Governor

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