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Monday, December 17, 2007

Will Racing Get Stoned?

- This is certainly a pivotal moment as this years-long drama nears its conclusion - perhaps. I suppose that depends in part on whether NYRA accepts or rejects the Oversight Board's extension offer. If it accepts, then we're likely looking at continued racing, and continued closed-door negotiations that could theoretically drag out for months. After all, the extension, as currently written, would not end until "the selection by Gov. Eliot Spitzer and the legislature of a new franchise operator."

But if they reject the proposal, and if the Oversight Board affirms their intention to find another operator, then we could be looking at New York racing at the brink. Indeed, Michael Gormsley reports for the AP that the Board has authorized chairwoman Carole Stone to start negotiating to continue racing at Aqueduct.

If NYRA can’t or won’t continue to run racing after its franchise expires at the end of the year, then board Chairwoman Carole Stone is authorized to negotiate with others, including NYRA’s competitors. They are Capital Play, Empire Racing, and Excelsior Racing.
Oh man. Do you really think that the state would have Ms. Stone arrange to bring one of those entities in? Can you picture the NYRA security guards at Aqueduct physically turning Jeff Perlee and Karl O'Farrell away on Jan 1?

It's not just Spitzer who has backed down from a judicial confrontation over the land issue. Pataki did so in December, 2005, coming through with a $30 million package, thereby forestalling a potential showdown in bankruptcy court. NYRA and Charles Hayward have seemed to gain confidence in their position since that time, while the state has continued to wobble. If NYRA truly believes that the issue will be decided in their favor, then why wouldn't it reject the offer outright and make it clear that they'll be in court on January 1, if they can find a judge somewhere. With all the other parties in favor of the MOU, and Bruno making demands that are unacceptable to NYRA and just plain unreasonable in my opinion, the pressure would come down squarely on the Senate Majority Leader to give in.

But if NYRA were to agree to the extension as is, without a definitive end date, I think it takes the heat off Bruno. Without any immediate threat of NYRA running to court to enforce the land claim in the face of an imminent threat (PERLEE AT FIVE O'CLOCK!), Bruno could harden his position and even put the onus on NYRA to give in on important points. So I'd be surprised if NYRA accepts the offer as is; it seems to me that it could diminish their most powerful weapon. I think they'll either insist on a hard deadline in the not too distant future, or reject the extension offer outright.

13 Comments:

jk said...

At this point, NYRA is forced to persue the land claim. Authorizing Carol Stone to negotiate with others is the last straw. Either fight in court or let some Albany hack take it from you. It is for the best, Get a definitive result one way or the other.

Bruno was never interested in a deal. He threw in a few poison pills at the end to kill any deal.

Silver barely fogged the mirror on this. He came out against slots at Belmont. We never heard what he was in favor of.

Spitzer tried but is ineffective.

Let a judge decide. I have more faith in a judge than anything Albany would cook up.

Michael said...

Wow, they went nuclear.

Teresa said...

Other than the good faith it might engender (which could be a significant factor), there's no reason for NYRA to accept an extension. Why on earth would they agree to prolong this process without any sort of guarantee of what they'll get out of it? Especially given that the land claim does appear to have legs.

I just still can't get over that, years and years into this process, it's come to this.

Anonymous said...

From The Daily News 12/18/07
by Bill Hammond

Governor Spitzer is galloping into another disaster with his ill-conceived plan for Thoroughbred racing in New York. His none-too-bright idea for Aqueduct, Belmont and Saratoga is to hand the reins to their current management, the New York Racing Association, for another 30 years.

This despite the fact that NYRA has lurched from scandal to scandal over the past decade and just declared bankruptcy earlier this year.

Under Spitzer's deal, NYRA would be rewarded for its mismanagement with a taxpayer bailout worth more than $200 million. It would also receive a generous slice of the revenues from video lottery machines to be installed at Aqueduct - money that would otherwise be earmarked for schools.

This is what gamblers call chasing a bad bet. But Spitzer is playing with our money. What makes his decision particularly incomprehensible is that private companies with deep pockets and fresh ideas are clamoring to take over the tracks. Instead of demanding public subsidies, they would put up hundreds of millions of their own dollars to improve the facilities. Spitzer is ready to walk away from all that money - not to mention those ideas.

But it's not too late. Although NYRA's franchise officially expires on Dec. 31, a state oversight board announced yesterday that it's ready to assume control on Jan. 1 and work with the current management to keep the ponies running on schedule.

That, in effect, gives Spitzer and legislative leaders a deadline extension. They should use that time to step back, take a deep breath and reread the proposals from Capital Play, Empire Racing and Excelsior Racing.

NYRA has replaced many of its top managers since barely escaping a federal indictment a few years ago. But its plan for managing the tracks amounts to a continuation of the same-old, same-old practices that have led to shrinking attendance and stagnant wagering.

The private bidders, by contrast, have big plans to draw the crowds back. At Aqueduct, they would build not just a "racino" to house the video slots, but also restaurants, hotels, concert venues and retail shops, transforming a grossly underdeveloped property into a destination resort a stone's throw from JFK Airport. Best of all, it's private developers, and not taxpayers, who would shoulder most of the risk.

Spitzer has two rationales for placing his bet on NYRA instead: It does a decent job with the nuts and bolts of putting on races, and, he says, it has a legal claim to ownership of the three tracks.

The first argument holds water. For all its flaws, the association still attracts some of the best horseflesh to its tracks. It runs a fabulous summer meet at Saratoga and puts on a good show every spring at the Belmont Stakes, the third leg of the Triple Crown.

But NYRA's dubious ownership claim is no reason for Spitzer to hand it the keys for another three decades. How about giving it a short-term extension of a year or two while that dispute is settled, once and for all, in the courts?

Another viable way of threading the needle comes from Senate Majority Leader Joe Bruno - himself a horse breeder - who suggests divvying up management of the tracks. Give NYRA domain "between the rails" while turning over management of the business side - including video slots and real estate development - to private companies.

At least two of the would-be operators - Capital Play and Empire - say they can make that work. Capital Play - a partnership that includes the sponsors ofAustralia's Melbourne Cup, one of the world's most successful horse races - is offering $125million to jointly manage Aqueduct with NYRA. And Empire is willing to put up $100 million for a similar plan.

That's real money and a promise of a brighter future for New York racing. If Spitzer has any horse sense, he'll take one of those offers.

glimmerglass said...

So this goes to court to settle ownership of the land.

Anyone want to venture a guess as to how long that would be drawn out? I cannot imagine that presentation of the evidence by either side to a judge would be all said and done in a mere two weeks.

Of course there is always the matter of appeals should the results not satisfy either party.

steve in nc said...

What is NYRA's actual mandate according to law? It's mission isn't a return to shareholders. It isn't just an ordinary non-profit, is it? I always presumed it has some quasi-governmental status, and if it does, shouldn't a court battle with the state be simply out of the question?

It seems more than a little like one of those dumb commercials with diet Coke suing the Real Thing. Sometimes I'm smart enough to book my own pick 6 bets, but I don't have to pay lawyers and accountants millions to do it.

And if NYRA does fight in court, then what?

If NYRA wins the first round, then I guess the pressure will mount on Bruno to cave, but he sure might not. NYRA would still need help from Albany to avoid selling racetracks to avoid bankrupcy. And if a deal can't be struck, isn't a cessation of racing in NY during a lengthy appeals process the only possible outcome?

If NYRA loses the first round, it will have to appeal because without the franchise or the land, it is nothing but a stack of debts (I've taken all but a token amount out of my account there, just in case.) It would have no cards left to leverege a decent deal from Albany.

I suspect NYRA is hoping to avoid court, and is talking with Spritzer's folks right now, trying to see what position the Gov would hold fast to in talks with Bruno if NYRA agrees to run racing on New Year's day.

But I could see Spritzer down the road finding a rationale to renege on whatever private assurances he might give NYRA right now. There would be no political price to pay for doing so. Hell, Spritzer might be straight enough not to give NYRA any assurances. Racing isn't his or Silver's big priority and he could get things he wants on other issues from Bruno in exchange for control over racing.

So NYRA has only bad choices now -- "all or nothing" in the courts (but even if it wins, it still has to make a deal with Albany or go broke), or come to grips now with a much smaller role. I guess if the court battle lasts long enough for Bruno to be voted out of office, NYRA could come out better, but who wants to wait that long?

In my morning line, it is odds-on for a reduced role for NYRA, clear title of the land/assets for the state, and Bruno's pals running the lucrative ends of the operation (yech). I never bet odds-on horses, but I would single this one in multis if I had a good longshot key in the other legs.

The only real question is whether this will be a sprint or a marathon. And this is where my strongest rooting interest lies (I've given up on rooting for a visionary entity putting the health of racing ahead of patronage and other parochial issues).

It would be lovely if all parties involved could be saddled, stuffed into the starting gate at Los Alamitos with little men on their backs, and be whipped into producing an outcome in the political equivalent of 19 seconds.

Throughout this eternal post parade, I've wished that we horseplayers had the clout to threaten these fractious, studdish politicos who won't keep their minds on the game with the political equivalent of the ultimate equipment change!

Anonymous said...

And around and around we go....

This is an utter joke, but unfortunately a completely predictable utter joke.

If I were NYRA (and everyone forgets that for all the legalese NYRA's Board contributed these Billion Dollar properties for the benefit of racing a long long time ago, yes they were/are mortgaged but at nowhere near the debt ration prevalent in today's commercial real estate marketplace) I would be so insulted that I would go nuclear.

Pull everything off the table and go to court, including the reinstitatement of the original lawsuit against the Pataki adminstration.

DEPOSE EVERYONE!! Expose Albany for what it is.

Charlie is in a unique position, has an Ace in the hole, and others are betting into his Ace.

Call their bluffs Charlie.

Shock the world.

For those defending Albany on this issue I pity you. I know there is plenty of distaste for NYRA as certainly their magagement has been questionable and arrogant in the past, but to defend Albany here is a joke.

For their own political game, they have been playing with the lives of 1300 NYRA employees and plenty more around the state for five years now.

It sucks that racing must be shut down, but the blame lies solely at the feet of Albany and should be directly placed there by NYRA.

Call the bluff.

jk said...

"So NYRA has only bad choices now -- "all or nothing" in the courts (but even if it wins, it still has to make a deal with Albany or go broke)"

If NYRA wins, they are not broke. They will have clear title to $1 billion in real eastste. At that point, NYRA will have no use for the Brunos of the world.

Anonymous said...

Bring it on NYRA. Once a loser always a loser. The NYRA doesn't have a chance to win any land claim. That's why it's all just rhetoric and puffed up chests. The alleged land claim is the only card the NYRA has to play, so I agree if the NYRA chooses, let's have the courts decide. Why people continue to side with this corrupt and derelict organization is beyond comprehension.

drib said...

Let's assume that a valid legal argument could be made on either side of the land ownership issue. Put yourself in the bankruptcy court judge's position. Should he rule for NYRA, the many creditors will get paid (as soon as NYRA gets a loan on the land's value), and the only unhappy party would be Bruno and company. If he rules that the land does not belong to NYRA, chaos ensues. NYRA would be without assets, so all the creditors get nothing, and someone has to pick up the significant pension obligations. Given that, so far, the judge has made rulings favorable to NYRA, which way do you think he would rule????

Anonymous said...

I would hope the judge would rule according to the law.

alan said...

>>I would hope the judge would rule according to the law.

Does a bankruptcy judge have an interest and/or duty to satisfy the creditors, not in violation of the law, but perhaps interpreting it in a way in order to do so?

Anonymous said...

The bankruptcy judge would not be concerned with how the creditors are affected in an adversary proceeding, he would only be concerned with the proper application of law - deciding the land on the merits of the argument and facts. Regardless of outcome, creditors will be paid.

If he ruled for NYRA, then NYRA could mortgage the lands and pay creditors. If he ruled for the State, the lands transfer part of the Racing Law requires assumption of NYRA’s liabilities, thus the creditors are owed by the State.

Either way, the creditors get paid.

The only chaos would be on the future racing operations. I simply cannot imagine if NYRA fails to settle, the land claims lawsuit proceeds and NYRA loses, the State would reward NYRA with the franchise. I think the Oversight Board takes over and the franchise process starts anew.

From my perspective, the judge hasn’t made any rulings inconsistent with bankruptcy practice. I see no favor to NYRA; I see no favor to the State. Reality is, everything has been postponed time and time again. He’s had little of substance to rule on at all.