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Tuesday, September 04, 2007

No Spectacular Bids

- In September of 1980, Spectacular Bid ran unopposed in the Woodward Stakes at Belmont, the last walkover of any significance to occur in New York State. Until now. 27 years later, in the end it was NYRA in a walkover. This was due of course in great part to the land claim that this governor didn't seem to want to bother to contest. But also because in this case, there were no other Bids that seemed the least bit Spectacular.

Empire Racing, for all their arrogance and childish vitriol directed at their rivals, proved to be far more incompetent and cynical than those they accused of being the same. They said that "New York racing should be run by New Yorkers," yet would have contracted 100% of its management services and half of its simulcast revenues to out-of-state corporations, including our benevolent friends at TrackNet Media. And the Inspector General's report offered a seedy version of how the supposedly non-partisan Friends of New York racing grew to become Empire Racing; one, I might add, that has not yet had one shred disputed or refuted by any of the parties involved as far as I've seen. The fact that they continue to issue attack press releases and carry on as if they weren't unceremoniously dumped by the NYTHA is just unbelievable to me. The mainstream press can only handle a certain amount of alleged scandals I suppose, and this story isn't nearly significant enough to gain any traction. It shows you how people can act with impunity when operating in a media vacuum, and I have to honestly say that I think they have a lot of fucking nerve.

Excelsior earned its recommendation from the Ad Hoc Committee (remember that?) with a well-crafted proposal with a lot of detail and initiative if not any particularly innovative ideas. It also had the Steinbrenner family and its media holdings behind it, and some street cred with Jerry Bailey aboard for the ride. But Excelsior's hopes essentially ended on an early February morning when er....(this guy has disappeared from the scene so quickly and completely, I had to look up his name, seriously!!)...yeah, Steve Swindal, that's it....was arrested for drunk driving in St. Petersburg, Florida. Shortly thereafter, the Boss' daughter filed for divorce, Swindal was out in the Bronx, and the Steinbrenners were gone from Excelsior. I think they lost a lot, if not all their panache at that point, and the comedic appearance by Steve Wynn before the Rifkin Committee certainly didn't help. With no racing experience to speak of on the team, they became a non-starter, at least for that side of the equation.

I don't think Capital Play, despite their enormous financial backing and a credible list of stateside investors, were ever really in the race. I can't imagine that any governor or legislature would have awarded the franchise to a foreign-held entity, even if they had the best proposal. They may have made the highest financial offer (and a large increase in takeout) as they say - I stopped paying attention to all the counter-offers long ago and just presume that they were all offering boatloads of money (don't want to curse twice in one post). I have to admit that I found their stated central goal of reviving the live sport to be appealing and that I did get a sense that there was some genuine enthusiasm to do so. But the idea of turning Aqueduct and Belmont into teeming single bars, while apparently successful in Australia, is just unlikely to fly here no matter how many giant banners they hang from buildings.

So we're left with NYRA, which hardly made a bid at all; just went through the motions, as if conserving something for the home stretch. Charlie Hayward will be criticized by some for giving up the land claim, and thereby selling out the racing franchise to the state in order to remain in place. Without knowing the details of the negotiations and legal proceedings (transparency, my ass), I can't really form an opinion on that. Who knows, maybe NYRA's lawyers believed that the state's case was rock solid and were flabbergasted when the state started to relent. Perhaps they were giddy to get anything in return, no less 30 years and a complete bailout! And besides, it's hard to criticize people for playing the game and fighting to hold on to what they have. If the state thought it had a compelling case, which Spitzer seemed to believe a few months ago, then it was up to it to pursue the land, if, in theory, it felt the industry would benefit. If the state had succeeded, they'd sure be getting a lot more in annual lease money than three bucks! Really, it would be a lot to ask of a man in Hayward's position, on the cusp of a success few could have foreseen just a year ago, to jeopardize a deal by refusing to drop the land claim for the good of the sport in New York. Perhaps at least he did us all a service by making sure that none of the other three prevailed.

- Check out this video from Common Ground (hat tip to the Albany Times Union's Capitol Confidential blog).

- From the NY Daily News, here's a statement by Bruno:

"The Senate's priority is to ensure the strongest racing industry possible," Bruno said in a press release. "That's why the Legislature and Executive put a process in place two years ago to determine who would be best suited to run a world-class horse racing industry. Unfortunately, Governor Spitzer bypassed that process and, with just four months until the current franchise expires, his announcement today still leaves more questions than answers."


Anonymous said...

Does NYRA pay Real Estate Taxes too?

IF NYRA defaults under the lease agreement, say by going bankrupt again, does the franchise end?

Is the NYRA lease assignable? Can the state turn around and sell the land tomorrow to a "friend of Elliot" at a depressed price due to the long term below market lease?

In the end, this was mostly about getting the land on the books of the state.

Wait and see how many times Spitzer brags about the budget surplus during the remainder of his term and his campaigns for higher office.

Journal Entry made upon approval of this deal;

Debit - Land and Fixtures $10 Billion or higher depending on phony appraisal??

Credit - Budget Surplus - same amount.

Eliot can now run around the country bragging about a multi billion dollar budget surplus under his watch.

Oh yeah, and all the political scandals are swept under the rug too.

And of course farming out the slots to others is a mistake. Who now monitors the profits, the state racing and wagering board filled with government hacks? If revenues fall short do NYRA or the horsemen have any recourse? Are there minimum purse guarantees?

Typical back room Albany deal.

Sorry, have to disagree with the above commenter, the legislature will sign off on this deal with no questions raised.

Bruno is crying for public political consumption, but we all know he is beholden to his local SPA interests and will sign off once the uproar subsides.

They have met in the back room, shaken hands, with all agreeing this mess must go away for the good of everyone involved.

In truth, if there are protections in place for the purses, this is not the worst deal for the horsmen and us horseplayers.

But if you plan to be around in 30 years you may have nowhere to play.

I just hope to be here commenting.

ljk said...

"transparency, my ass" Indeed!

My gut says this is the best outcome for the Spa, though I guess it means there may not be a new "beautiful fence".

The Saratogian reports today that NYRA continuing to pay property taxes to the City and County (and on the downstate properties as well) is part of the deal. I'm not sure I read that anywhere in the MOU.

Anonymous said...

While I'm not an expert in gaming law per se, it was my understanding that after the MOU of the last extension, the NYRA land claim was dead in the water. I doubt the land was the big bargaining chip, but not fighting it out could have been.

Anonymous said...

A long term lease, depending on the terms, of course, can be nearly as good as owning a large commercial property (ies). The only thing NYRA cares about at this point is the ability to pledge the real estate leasehold as collateral for long term financing. The devil is always in the details so let's see what finally comes down in the final documents. Then we can all argue about the merits of the deal: Will it help or hinder the near and long term prospects of the NY racing industry? I think most racing fans are just plain fed up with it at this point. I will look forward to more of Alan's well informed reporting on this in the days and weeks to come.

Alan Mann said...

Good questions posed by Anon#1...and my limited knowledge of real estate prevent me from answering them in an informed manner. But if the OTB's are not folded into the franchise, and the VLT take proves to be as disappointing as it has elsewhere, who knows, maybe they could go bankrupt again, and that's a valid question as to what would happen!

Not only will Spitzer run around braggin about a surplus, but he'll also talk about how he himself helped clean up the association with his threatened prosecution.

Anon#2 spoke about NYRA having the ability to pledge the land as collateral for financing...but the last line of the MOU says that the "new NYRA shall not be permitted to mortgage or otherwise encumber the leases for the premises." So doesn't that mean that they can't use the land as collateral?

My opinion is that the Bruno and the legislature may moan and posture, and perhaps force some changes in the MOU....but there's no doubt in my mind that NYRA will be running things come Jan 1, 2008 (or Jan 1, 2009 if this drags out another year).

And I forgot about that "beautiful fence!" Damn! :-)

Anonymous said...

Sure sounds like NYRA can't encumber the lease for mortgage purposes. So, how do they finance? Will the state subordinate to the senior lenders? Or, does the state become the mortgagor and then turn around and "lend" the funds to NYRA? Must be some arrangement there in the fine print because I don't see NYRA/State of NY getting any financing without somehow using the real estate as collateral. Maybe they arranged a sub-prime bond deal with Bear Stearns, haha?! One of the NYRA directors, as I recall, is/was a Goldman Sachs exec/partner, or one of those investment banks, so I'm sure they will have some kind of sexy financing package put together."Show us the money"! /S/Green Mtn Punter

Anonymous said...

This is a horrible deal for the state and for racing. NYRA gets a $200 million bailout, as a couple have pointed out have the use of the land, with the exception of the set-aside for NYS Lottery (the political hacks who now monitor the profits) and Delaware North, who represented by Patricia Lynch get the VLT consession to buy the support of Shelly Silver. NYRA won't use the land for collateral because the state will mortgage it for them which is why we have 30 years instead of 20 (to amortize those hotel deals!)
There was no public input on Spitzer's process -- it was a straight back room deal just like the Getnick & Getnick Integrity Counsel sham. The first thing an "integrity counsel" should have done was to to tell NYRA tp follow the racing law and bid the contract. Getnick has a clear conflict of interest and can in no way be objective when being paid millions of dollars on top of the $5million he got as Monitor.
So for a deal that will probably cost the state billions of dollars we get mediocrity and decline in racing. Don't be fooled by the Saratoga Meet -- we all paid for the improvements, and the bigger purses and new high priced staff and consultants with tax dollars. NYRA paid for nothing and that's what makes them the "NEW" NYRA -- there is no expectation that they pay their way any more. The people living downstate must be sratching their heads wondering what they get out of the deal. I'm sure they're satisfied the Flea Markets will go on. But all that VLT money is going to be going into the black hole that is NYRA old or new. Empire for all their faults offered $200 million to the state, instead we are paying $200 million in ransom now and God knows how much more in future to the group with "absolute integrity."
How long until the first bail-out of NYRA II? What will Spitzer call them then? The Renewed and Improved NYRA v2.01?
Spitzer is making George Pataki look Mother Theresa these days.

Anonymous said...

Just perused the MOU and it confirms what I had thought, the key phrase is left for last on page 6 under "Real Estate Structure": "The State shall retain title to the real estate and all improvements thereon. Without the approval of the State, the New NYRA shall not be permitted to mortgage or otherwise encumber the leases for the premises." The key term is "without the approval of the State", so that to me means the State will, in the end, agree that NYRA can assign the leases as collateral as well as the State becoming the mortgagor with the real estate as the collateral. I don't see how NYRA could raise the necessary capital without such arrangements, or something on this order. /S/ Green Mtn Punter

Anonymous said...

The present law doesn't allow NYRA to mortgage the properties without State approval. Hasn't since 1983. That's why NYRA needed Lottery approval to permit the MGM mortgage.

Nothing changes.