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Friday, September 28, 2007

NYRA Selection Defended

- New post up over at Breederscup.com

- Aides to Governor Spitzer vigorously defended the decision to award the franchise to NYRA in the second hearing conducted by the Senate's Racing, Gaming and Wagering committee.

Paul Francis, the director of the Division of the Budget, told the committee that the franchise extension and the administration's plan to contract out the license to operate a 4,500-slot machine casino at Aqueduct made the most fiscal sense to New York when compared to competing proposals put forward by other bidders.

"In the end, the choice was clear," Francis said.
.....
Both Francis and [Downstate Empire State Development Corporation chairman Patrick] Foye said that NYRA's structure as a non-profit would create the most benefit to New York racing. Foye also said that the prospect of fighting NYRA in court over who owns the racetracks could have led to a "catastrophic" result for horse racing if the litigation resulted in a temporary shutdown of racing in the state. [Daily Racing Form]
NYRA's land claim was, of course, also cited as a reason.

The officials also discussed the shortcomings of the other bidders - the lack of U.S. racing experience of Capital Play - who, in reality, never really had a shot in my thinking - and the fact that Excelsior seemed more interested in slots. The latter's continued interest is now unclear, though it's been unclear to this observer for some time. An Excelsior spokesperson said that it did not intend to pursue the franchise further unless slot machines were legalized at [Belmont]. Slots at Belmont are opposed by Sheldon Silver, which, unless he changes his mind, is a death knell as Mayor Bloomberg well knows. Silver has not been clear as to his reasoning, but he doesn't have to be.

And as far as Empire goes:
[Foyt and Francis] raised questions about the financial projections of the VLT casino by Empire Racing, whose partners include Magna Entertainment Corp., Churchill Downs Inc., and Woodbine Entertainment Group. Foye said there were concerns about the financial health of MEC, which has been selling tracks, along with antitrust concerns about giving a franchise to a company so heavily involved in the simulcast business. [Bloodhorse]
Jeff Perlee responded:
“They criticized Empire because one of our partner’s stock price is down, and yet they went on to recommend an entity that itself is bankrupt.....So, I think there are a lot of holes in the logic.’’
I would think that Perlee might be tired of repeating the same old 'NYRA is bankrupt' rhetoric at this late stage. And besides, the biggest holes were in the logic that led Empire to take on Magna despite its shaky track record and the nearly unanimous sentiment against them having a role in NY racing. It serves them right if that decision is ultimately the one that doomed their bid.

4 Comments:

Anonymous said...

The Executive Chamber issued a press release after the hearing that detailed the reasoning behind the NYRA selection (http://www.ny.gov/governor/press/0927075.html ). Specifically, they stated:

1. 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.

Comment: A significant narrowing of the field. If the condition book allowed only New York State thoroughbred experience, only two starters would be in the field, NYRA and Delaware North.

2. 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.

Comment: Unparalleled because they were so bad they got criminally indicted. Any step forward is better than where they've been.

3. 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.

Comment: Duncker has been a member of the Board of Trustees since January 2000. Hmmm, they've been indicted and filed for bankruptcy since then.

4. 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.

Comment: Illusory, given that as a non-profit racing association NYRA has been required to return excess revenues to the State since 1955. Nine out of the last ten years they had nothing left to return.

5. 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.

Comment: Nothing like waiting till the last minute to ensure clear and consise policy determinations are made.

6. 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.

Comment: Both Patrick Foye and Richard Rifkin repeatedly stated yesterday that they believed the State would have prevailed with the litigation. The video lottery revenues would flow to state coffers regardless who is operating the three racetracks.

Additional thoughts -

Perlee's a dope, but he is right. The stated logic behind the decision is lacking. I wish the Governor was more honest: no bidders made a great case and he was afraid NYRA would not act in the best interests of racing and allow the tracks to become dark on January 1, 2008. To say NYRA is newly wonderful is simply intellectually dishonest.

I found it curious that Paul Francis described all the projections and analyses undertaken in the review yet nothing has been publicly released. Patrick Foye stated that discussions were held with stakeholders, legislative staff and legislative leaders and with each bidder.

No report, no study, no nothing.

Statements about transparency are just lip-service. Patrick Foye closed the hearing by asking for a dialogue to commence between the Senate, Assembly and Governor over what should be included in a new and improved MOU.

They will probably be held behind closed doors.

Again.

alan said...

Thanks for the analysis. Comments on your comments:

1. I suppose that Empire might have qualified under these conditions when they had the support of the NYTHA.

3. Yeah, this one is a stretch to be sure. "already seen increased handle and higher attendance at the 2007 Spring Belmont.."?? Gimme a break.

4. That's not going to change exclusive of slots money under the current structure of the industry in the state.

5. That's for sure.

6. Interesting, but not particularly surprising, that those guys said that the state would have won the case.

>>I wish the Governor was more honest: no bidders made a great case and he was afraid NYRA would not act in the best interests of racing and allow the tracks to become dark on January 1, 2008.

I think that's basically it, though I don't know that he specifically thought that the tracks would go dark as opposed to further delays in the VLT money.

Anonymous said...

Amen- and Empire/Magna/Churchill bid R.I.P. NY racing for NY horsemen/women and the NY racing industry including the fans. Now, let's see the new NYRA become much more aggressive in promoting NYRA tracks and Grade I stakes races; their new business plan must emphasize the need to re-assume NY racing's rightful place as primus inter pares in the racing universe, i.e., no more bridesmaid role, we want the top spot, and that includes the Ky Derby and Breeders Cup. /S/ Green Mtn Punter

Anonymous said...

What do the taxpayers get for the 125k per month G&G contract?

Any mention of that?

As for the overall decision, the process is faulty but the decision is correct.

However, there needs to be significant oversight of spending by NYRA which is hopefully the purpose of G&G.

Non-profit model is better than for profit in theory, but only if the non-profit runs the operation as efficiently as the for profit entity.

Most non-profits administration costs far exceed those of for profit entities in the same industry.

If NYRA ends up wasting all the profits that would have been distributed to investors of the for profit entity, there is zero benefit to racing.

Besides the G&G contract, was wondering if the political appointments to the newly restructured NYRA board are paid positions?

If so, there goes some of the benefits of the non profit model.

In any case, I hope they bring in a fresh marketing team with new ideas and include racetrack veterans on that team.

Most of us with "on the ground" experience have a top ten list of ideas for NY Racing. Those ideas must be tapped. Voucers and giveaways get people in the door, but once they are there you must provide a reason to come back, and not just the beautiful backyard park. Parks are everywhere.

One way to start would be an old fashioned suggestion box. Make customer service personnel actually do something.

Another would be to create a customer liason position, I hereby volunteer for that position.

Mr. Ed