- Yesterday, I was standing at Aqueduct in shorts. Today, it's freezing, and I'm at work anyway. Yes, the life of a freelancer is no holiday on the holidays. Need to earn some money to churn through those windows.
Thursday's daily update from the Albany Law School's Racing and Gaming Today contained an attachment regarding NYRA; specifically, the gruesome financial details of the association's 12 Months of Bankruptcy. This ain't pretty. According to the report, over the period from November of last year through this past October, NYRA has lost $29,298,000.
During the six months that NYRA raced principally at Aqueduct, (November – April) NYRA lost approximately $32 million. When NYRA raced principally at Belmont (May – July and September – October), NYRA lost nearly $12 million.(Please email me privately if you are interested in seeing the entire document.) No matter how you spin it, and whether you blame NYRA, OTB, Albany, or Dick Cheney, this is just grim. And the most depressing part of it, to me, is this: Even if tomorrow, Eliot Spitzer and Joe Bruno appear together (!) to make a triumphant announcement of a franchise deal, complete with smiles and back slaps, with Bruno going "Yeah, Eliot's not such a bad guy" and Spitzer declaring that he was just kidding about the f------ steamroller stuff and promising that he'll be on hand this Wednesday for a ceremonial ribbon-cutting for the inner track season, without any changes to the state's business model for racing, what is possibly going to change? Slots are still at least a year away - and, by the way, Spitzer hasn't even named a slots operator yet, as he was supposed to do a month ago - on-track attendance and wagering will still be dismal, and NYRA will probably lose another $30 million in 2008. Will the state's bailout be able to pay for that, in addition to covering all of the existing debts? The question of consolidating OTB with the track operator has still only been addressed peripherally, mostly due to Mayor Bloomberg's statements about NYCOTB last week.
Yet, during the month of August when NYRA raced at Saratoga, NYRA’s earnings were $14.659 million.....In short and oversimplifying somewhat, Saratoga makes $20 million, and the rest of the operation loses $50 million.
......
Now as bad as the financial picture looks, there should be little doubt that it has been made worse by the existing bankruptcy litigation. The costs of the bankruptcy litigation and the associated costs of reorganization have to be increasing NYRA’s loss by at least several million dollars. (This would likely mean that the Saratoga season makes in excess of $20 million.) This, of course, places the State of New York, in an especially awkward position. It is making up the costs of NYRA’s losses, it is NYRA’s largest creditor, and it is the defendant in NYRA’s litigation in bankruptcy against Governor Pataki. So the State is financing all sides in NYRA’s bankruptcy litigation.
If one of the other, for-profit bidders were to be awarded the franchise, then the state would be off the hook as far as covering losses - in theory anyway. However, the fact is that the operator would still be losing money on racing, and, for-profit companies focused strictly on the bottom line as they are, we'll end up paying for that eventually anyway, whether in the form of increased takeout, or appeals for regulatory relief in the form of less slots money being earmarked for purses, infrastructure, or taxes meant for education. The fact is that none of the bidders have ever really suggested any sensible ideas as to how to improve the racing business, Capital Play's silly concepts of giant signs, beautiful fences, and on-track singles bars notwithstanding. The only real help will come from Albany in the form of allowing the operator to retain more of the vast sums that are wagered in the state off track. Unfortunately, our elected officials, particularly the Republicans, are currently engaged in petty politics and retribution and too busy to attend to important issues, of which racing is of course only one.
7 Comments:
Alan wrote: "... NYRA will probably lose another $30 million in 2008. Will the state's bailout be able to pay for that, in addition to covering all of the existing debts?"
According to the Spitzer Memorandum of Understanding, the State is liable for NYRA operating costs until the video lottery gaming commences. Thus, the taxpayers will be picking up the tab for at least another $30 million. It's important to recall that pari-mutuel wagering on horse racing was constitutionalized in 1939 for the purpose of raising reasonable revenue for the support of government. At over $120 billion, racing's contribution is de minimus. Recently racing has been a corporate welfare recipient surviving on the largesse of government bailouts.
Alan wrote: "Without any changes to the state's business model for
racing, what is possibly going to change?"
Changing on-track distributions won't help. Using the New York State Racing and Wagering Board's 2006 Annual Report, the State tax
retention for on-track handle was $5,828,474, State regulatory fee was $2,089,877 and the State breakage retention was $604,308. Rationally, state taxpayers should not be required to pay for the cost of racing regulation, like the insurance, banking and Indian gaming industries, thus the fee should remain. NYRA's takeout retention was $78,169,221,
their breakage retention was $1,990,946, for a cumulative $80,160,167. Thus, the effective state taxation for on-track handle was 7.45 percent.
The live product is dead, or at least dying. According to Bennett
Liebman of Albany Law School, since "legislation was passed in 2001 to decrease takeout at NYRA (and hopefully increase handle at NYRA), live handle on NYRA races is down by 22.7%. Taking into account cost of living increases, the "real" decrease in live NYRA handle since 2000 is 34%. Perhaps the decreased takeout reduced the losses of handle at NYRA; it certainly did not grow the handle. See, Liebman, New York
Racing By the Numbers in 2006.
Alan wrote: "The only real help will come from Albany in the form of allowing the operator to retain more of the vast sums that are wagered in the state off track. Unfortunately, our elected officials, particularly the Republicans, are currently engaged in petty politics and retribution and too busy to attend to important issues, of which
racing is of course only one.
According to the Office of the State Comptroller, between 1994 and
2003, the State amended the Racing Law fourteen times providing tax
cuts, expanded betting opportunities, franchise extensions and take-out adjustments. In fact, tax rates were reduced for NYRA tracks, for both live and simulcast betting, in 1995, 1998, 1999 and 2001. Hevesi, The New York Racing Association: The Case for Reform,
September 2003. In case people forget, George E. Pataki, a
Republican, took office January 1, 1995.
NYRA's export to New York State Off-Track Betting Corporations,
according to the New York State Racing and Wagering Board's 2006
Annual Report, was $624,684,547. That same report illustrates NYRA's
export to out-of-state was $1,612,443,187. The benefit of NYRA's out-of-state signal sale is the product of negotiation between NYRA and the receiving racetrack, with fifty percent of the revenue
required to be split with the New York horsemen on purses.
Are the in-state off-track betting corporations paying too little?
Perhaps. Mayor Bloomberg's death knell for his entity illustrates
they are not flush with excess that could be returned. Perhaps NYRA sells their signal out-of-state too low. That's one element that is wholly in their control and not subjected to legislative approval beyond the requirement to split with their horsemen.
The greater question is what has changed over the last five years that caused NYRA's death spiral? They weren't hemorrhaging money until recently; why now?
Cosmonaut beaten by a length. No Biancone "officially."
Pletcher's uncoupled threesome sees the highest priced horse win the Clark.
What happened to Rusty Arnold? He hardly wins anymore.
Howard rarely wins, Stewart wins mostly in Louisiana, and Amoss willwin in bunches down in Bayou country.
Is the handicap division depleted for 2008 already?
Betting the higher priced Pletcher horse in an uncoupled group is ALWAYS a money maker.
Too bad I liked another...
This was an incredibly depressing, realistic, stop-me-in-my-tracks post. I keep thinking that there will be reason for hope once this mess get settled, once NY racing gets a new lease on life, so to speak, but everything you wrote indicates otherwise.
Thanks, I guess, for the wake-up call.
It's George Bush fault!
Alan Moonbat
Message to Several Commenters: Stop shooting the messenger, in this case, NYRA, and aim your fire where it belongs: The NY state legislature which has always held NY racing's fate in it's hands. The numerous "concessions" mentioned by one commenter were just band-aids and did nothing to deal with the major overhaul needed on the business model. Alan gets it- so, why are we still wringing our hands about it? We know what has to be done, i.e., change the business model to reflect the realities of first 2 or 3 decades of the 21st C and only the legislature can do that. It takes lots of constituent heat, together with pressure from the various NY racing interests, to get these guys off the dime. That's politics. /S/Green Mtn Punter
Green Mountain:
Who's shooting the messenger? The first posting supports Alan, other than questioning his gratuitous shot at the Republican Party - Mario Cuomo didn't do much for racing as I recall. The complaint about NYRA giving away their signal has been raised by none other than NYRA President Charlie Hayward. NYRA hasn't, however, done anything to alter their own practice. Why?
It's easy to say 'change the business model', but that's rather amorphous. How about some practical examples? What exactly does that mean? Why can't NYRA help themselves by charging more for their out-of-state sale of their signal rather than blame the State and ask for yet another handout?
I've reviewed the coverage and transcripts, where available, of the various franchise hearings. I have yet to see NYRA's Charlie Hayward or Steve Duncker give specifics of resetting the business model. It all seems rather analogous to the old legal aphorism that goes, "If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the table." NYRA's response to the ad hoc committee RFP was devoid of proposed change. Perhaps it's just easier to blame others.
I'm getting a bit tired of pundits simply regurgitating the NYRA line of 'reset the business model' without critical thinking. Sure, the best reset of the business model would be to roll back the clock to 1965 when Indian gaming, off-track betting and the State lottery didn't exist. That's not going to happen. The ability to transform while working within the system is necessary for meaningful change.
Unfortunately, nothing set forth by the various bidders or within the Spitzer or Bruno proposals illustrates a likelihood for future success of racing.
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