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Wednesday, February 28, 2007

Lien Games Leans on NYRA

- NYRA is now the subject of a separate lawsuit from Lien Games, a North Dakota betting hub, which has broken ranks with other creditors claiming relief in bankruptcy court, regarding $1.6 million that it claims it's owed from wagering pools.

And while we all know the circumstances - from the dysfunctional racing laws, to the lecherous structure of the OTB's, and the failure by the state to approve the Aqueduct racino - that have helped lead to this whole mess, this kind of news and the detailing of the list of their 700-plus creditors cannot help NYRA's chances to hang on to the franchise.

Neither, of course, does the Ad Hoc Committee's report, in which they finished a clear third of three. Sticking to their position that they owned the land, they declined to offer lease payments, instead offering a percentage of "free cash flow." Whereas Empire named Merrill Lynch as their source of financing, and Excelsior named Citigroup and Goldman Sachs, NYRA merely referred to "unidentified third-party lending sources," and said that a portion of capital improvements would be funded by the sale of certain properties at Aqueduct. Gee, that must have gone over really well, eh?

And the integrity section was an ugly black mark for the association. Whereas Empire and Excelsior listed all of their proposed integrity initiatives, however substantial the amount of BS was involved, NYRA's "General Approach to Integrity" was summed up in one line: "NYRA enclosed their Code of Ethics and Anti-Money Laundering Procedures for Committee Review." That was followed by 16 pages of their "positive responses" regarding convictions, judgments, liens, alleged violations of human rights laws, failure to file tax returns, uninsured civil litigation, and environmental violations, including charges of illegal discharging of waste water into the city sewer system. As the Committee noted with respect to Empire, many of these may be considered "normal" for an entity in business as long as NYRA. But it just doesn't look good. The list was followed by statements by NYRA addressing each category of indiscretions and declaring that it doesn't believe that they are "relevant to the granting of the franchise," and they may be right. But that's going to take a lot of explaining to a state capitol that is already largely hostile.

NYRA also initially failed to respond specifically to sections 3.5a through h of the RFP, which requested specific dollar amounts or net revenue percentages that it would devote to programs such as backstretch improvements, thoroughbred retirement, drug testing, and wagering integrity. Whereas Empire and Excelsior provided some detailed responses, some of which "pleased" the Committee, NYRA only provided a general amount to be devoted to all of those sections of the RFP. When pressed for details, they largely responded by stating what they are presently doing or spending, rather than proposing new programs. At times, I got the feeling that NYRA was almost dismissive of the whole process, knowing that to retain control, they will have to do so via court rulings on the land rather than on the substance of their proposal.

- Gov Spitzer told James Odato of the Albany Times-Union in an article published on Tuesday that he'll conduct a new "public review" of the New York franchise bids. Oh man.

"There will be a process that will be open, that will permit full public review of what has occurred, and we will get quickly to the right decision," said Spitzer. "It will be a process that will let the right questions be asked. It is a major industry that should be jump-started in this state.'
I believe those are the first words ever uttered in public by the Gov himself about the situation. Senator Bruno said that "you can mix and match the best of what people have to offer," which is fine, except who's going to run the thing? Empexcelcapitalnyra Racing?

Saratoga mayor and Ad Hoc Committee member Valerie Keehn commented that she hopes that they're "not starting the whole process over again" and that they should "build on our foundation," and, though I'm not specifically endorsing Excelsior, that seems like a wise idea. I criticized the makeup of the committee when it was formed due to its lack of industry experience, but having read the report, it's obvious that they did their work assiduously and actually listened to the experts that testified in the public hearings. They know far more about the bids and their relative strengths than any politician at this point, and to just disregard their conclusions out of hand would be counterproductive. Do you really think that Joe Bruno is going to read the thousands of pages of all four bids?

But this is New York, where the Assembly recently disregarded, for their own selfish political motives and in violation of an agreement with the governor, the recommendations of three past and present comptrollers, and selected one of their own, an accomplished businessman and well-respected legislator, but a person with no direct experience, to replace Alan Hevesi as Comptroller.

2 Comments:

Anonymous said...

I wrote here at the time that I thought the bid process and timing did not favor NYRA.

They simply do not have the resources internally and did not have the funds to hire externally, the proper help to put their proposal togethar.

That accompanied by the timing during the SPA meet, when everyone is uprooted, did not provide a level playing field.

I doubt they were dismissive of these issues as you state, but rather cut corners where they needed.

Also, they were handcuffed by the racing law, how can they provide for lease payments on land, when their very existance relies on NYRA owning said land?

There is probably a creative way to get around that, but NYRA just does not have the resources of the others to compete fairly.

That said, I am happy that it sounds like the commission was thorough, and at this point the State should just go ahead and announce Excelsior as the winner, then let the lawsuits begin flying. The longer they delay the announcement, the longer they delay the VLTs.

The horsemen seem satisfied with both Excelsior and Empire, the state should just pick one and move on.

Green Mtn Punter said...

Alan, I share your frustration with the overly politicized nature of the franchise decision making process. Seems to me that the longer this gets dragged out, and the more pols start stirring the pot, the more likely the result will be a weak hybrid unable to solve the real problems of NY racing. Everybody seems to have drunk the VLT Kool Aid and therefore believe that all of the problems of non-competitiveness, drug policy, backstretch conditions, need for innovation, and attracting new racing fans will just go away once the VLT cash starts flowing. Haven't heard any specifics about the major reform of NY State racing and wagering law required to make all of this work, or have I missed it? Anon recommends awarding the franchise to Excelsior and let the lawsuit games begin, and in an ideal world I could concur with him on that. But it is not, and that is why I think some kind of compromise is being negoiated in the formerly smoke filled back rooms of Albany. Realistically, it's Excelsior and NYRA who hold all of the high cards, Empire is really 3rd anyway you look at it as they have neither the Ad Hoc Committee nod nor do they have fee simple title to the real estate or management experience. And I can't see the rationale for Capital Play being a serious contender unless it becomes an open bidding war. Spitzer is in a tough spot and thus his "let's take a closer look" approach for political CYA. So, when will we finally have a new franchisee? Before the Spa meet begins? By the way, wonder if Joe Bruno kept his Spa box after jumping the NYRA ship?! If you want to see the NY state political pecking order in the flesh, what better place than the Spa Clubhouse on Travers Day?!