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Thursday, February 14, 2008

Tough Job

- Bill A. 9998 in the Assembly, S. 6950 in the Senate, isn't really quite as daunting as its 190 pages sounds, or looks; at least regarding the franchise agreement. Most of the bill is a reiteration of existing racing law; pretty mundane stuff, including the definition of a quinella (though strangely, no sign of an exacta). The clauses relating to the new agreement are in capital letters. And really, there's nothing too much of significance in addition to what has been reported.

One thing that stands out for me is the tremendous amount of responsibility placed upon the Franchise Oversight Board. I joked the other day about them deserving to be paid well; but in fact, they will serve without compensation for their services as members, but shall be entitled to reimbursement for actual and necessary expenses incurred in the performance of their duties. They are specifically permitted to hold real jobs, so it sounds like essentially a volunteer part-time job, which is why Charlie Hayward merely scoffed at the notion that they would take over the racing operation if racing shut down. I don't imagine that NYRA was ever too worried about that.

As it is, they have enough to do; the list starts on page 15 of the bill. And it seems to me that their responsibilities involve much more than Oversight. For example, the Franchise Oversight Board, heretofore to be known as the FOB.....er, make that, the FrOB, is to: Represent the interests of the state in all real estate development proposed for Aqueduct racetrack or real estate development at Belmont park racetrack. That in itself sounds like a six figure full-time gig to me! Here's another one:

Facilitate discussions and voluntary agreements between the franchised corporation and off-track betting corporations to streamline operations, decrease operating costs and maximize opportunities pertaining to costs and revenues, and encourage an exchange of views and experiences [sic] from the franchised corporation and the off-track betting corporations to improve the racing product in New York and to realize efficiencies.
Almost sounds like they're being put in charge of fixing the whole screwed up system. Of course, there's also all the actual overseeing, which includes all contracts, purchasing, monitoring NYRA's compliance with the law, and with all of their obligations, including their audits by the comptroller, and those benchmarks which I guess they'll also have to also specify what they are.

Reviewing and making recommendations for the budget, reviewing collective bargaining agreements and their choice of vendors, acting as the lessor of the land, the intellectual property, and the simulcast signal, suing and getting sued, responsible for paying property taxes, reporting annually to the governor, overseeing, monitoring, and reviewing "all significant transactions and operations of the Franchised Corporation authorized by this chapter!" And, of course, operating the tracks if the franchise is somehow terminated.

Finally: Do all things necessary, convenient or desirable to carry out its purposes and for the exercise of the powers granted in this article. Like what, hiring a staff of 100? Five people are going to do this in their spare time and without pay? Oh man, you gotta be kidding me? Any volunteers?

Here's an interesting old clause that I stumbled upon:
Proposition Wagers.

Every racing association or corporation licensed or franchised in accordance with article two, three four of this chapter shall have the authority to offer proposition wagering on its own races. For the purposes of this section, a proposition wager shall mean pari-mutuel wagers, approved by the racing and wagering board, that are based on the results of a live horse race or a series of horse races. Proposition wagers may include pari-mutuel wagers on the leading trainers, drivers, or jockeys during an entire race meeting and pari-mutuel wagers on the leading trainers, drivers, and jockeys competing on a single program in one or more stakes races or in races that award purses of one hundred thousand dollars or more.
For one thing, I'm surprised to actually see something creative and original contained in New York State racing law. Might be interesting to have wagering on the leading jockey at Saratoga - that often seems to turn into a ding-dong affair, and I could see how that could be cool. Don't know about trainer - it would probably be strictly a two-horse affair. Who do you think would be favored in 2008 - Mott or Pletcher?

[UPDATE: A reader makes the morning line for Friday's jockey race at the Big A.]

22 Comments:

steve in nc said...

Keeping the deals over real estate and the simulcast signal free of graft & corruption would be a challenge under any circumstances. But making the oversight positions unpaid absolutely invites payola, or at least excessive influence of outside interested parties. Even if there are no actual payoffs or informal tit-for-tat backscratching, a part-time non-professional could well come under the sway of well-heeled "professionals" who produce detailed but self-serving reports, proposals and research. NYRA, good luck, you'll need it.

Anonymous said...

Facilitate discussions and voluntary agreements between the franchised corporation and off-track betting corporations?

Unfortunately, that provision is meaningless. The Franchise Oversight Board is basically limited to asking NYRA and the OTB's to talk. Gee, maybe they'll even provide the conference room.

Feel good provisions that accomplish nothing.

Typical Albany.

Anonymous said...

Sounds like a similar compensation package as NYRA. However NYRA does actually pay you something. The $50k positions for 7 day a week management roles in organizations such as NYRA Marketing, ext. Very comparable to Corporate America. (sarcasm) Its plain awful. They wonder why they can't recruit talent. As I know they have turned some away.

Curious to see how the FOB plans on getting the right people in place for this. Who am I kidding, those roles are already filled with the same people since the 40's.

Anonymous said...

Alan, now what is needed is a summation of the bill: Which long standing, business model issues have been addressed, or partially addressed, and which issues such as OTB have been left out or punted down the field to another day. Finally, does the new or revised business model now in place have a chance to succeed and allow NY racing to remain at the top of the heap? Will NY racing now be able to actually improve the product and attract more fans to racing thereby? /S/Green Mtn Punter

Anonymous said...

I assume we'll get a cogent summation by Bennett Liebman of Albany Law School.

alan said...

Well, I'm heading to FLA for a few days R&R, so maybe it will make for some good beach reading, y'think? :) But I think that the fact that most of the bill is merely existing law doesn't bode well for the idea of it containing much in the way of fundamental change other than those concerning the franchise deal.

Anonymous said...

The only change in business model is the funds collected by NYRA from the VLT's which should allow for some marketing and hiring of talented people.

Then again, in my last back of the envelope attempt at this it appeared the revenue increase would barely cover the existing deficit if the $300 per machine target is actually attained.

As for prop bets, I love them but always assumed they were illegal under existing law. The fact that NYRA has not implemented them is another example of piss poor management (and I was a defender of their retaining the franchise).

These bets will not do much handle, but serve as free publicity, the same roll the Derby prop bets play for Kentucky's big day.

A daily jockey pool should be a no brainer. Requires a bit of handicapping and bit of luck. Full field of 12 every day at zero cost.

Perfect, why have they not done this?

For todays Friday the 15th card my ML is as follows;

1. Dominguez 4-5
2. Elliot 7-5
3. Garcia 5-2
4. CC Lopez 5-1
5. Maragh 8-1
6. Cedeno 10-1
7. Arboleda 10-1
8. Espinosa 50-1
9. N Arroyo 20-1
10.Hill 99-1
11. Luzzi 99-1
12. Field 99-1

WPS, EX, QU, TRI wagering.

Points awarded on a 5-3-1 basis for WPS.

Today, I will box the 2-4-7

alan said...

Nice job there on the jockey morning line!! You make a good case for having that as a daily feature.

One thing to keep in mind is that the law requires the board to consider whether "the rules governing the proposition wager are comprehensible to bettors." But I think a 5-3-1 pts system as you suggest is simple enough, and it sounds like fun. Can I get a bet in today?

Anonymous said...

The FOB is just a typical creation of the pols to be able to say to the sheeple, in effect: "See, we are keeping a close eye on these less than reputable racetrack types". Moreover, it's their classic CYA move, so the finger is never pointed at them. Regular audits, ok, that's fine, but the micromanagment layer imposed by the FOB is unnecessary and in the end counter-productive. Management, of course, must be held accountable, but management cannot manage effectively when every move it makes is subject to prior approval and then second guessing. /S/Green Mtn Punter

ljk said...

It looks to me like the franchise fee is based on NYRA's NET income. Does that seem like a change from the past? Will NYRA be allowed to reinvest more of it's gross income in the franchise?

Also I noticed the new NYRA will be a not-for-profit corporation while the old was a not-for-profit entity. Does anyone know if there's a meaningful difference?

ljk said...

Alan;
I'm sure all your travel plans are made and I think I remember you saying you'd be at Gulfstream. In the future I recommend the west coast, where the beaches are white sand and the race track (Tampa Bay Downs) is a pleasant experience for horseplayers. Great card tomorrow as Lear's Princess tries Dreaming of Anna on the grass and Mott gets Z Humor started on the Derby trail.

Anonymous said...

Will look forward to your further comments on the bill to be posted from under the FL sun; you didn't think you were headed down there to just sit on the beach, did you?! Or, make your contribution to the MEC coffers at GP? /S/Green Mtn Punter

alan said...

Nah, it's a non-racetrack trip, and I will indeed be on the Gulf coast ljk. Not too far from Tampa Bay Downs, but little chance of me making it there.

alan said...

>>Also I noticed the new NYRA will be a not-for-profit corporation while the old was a not-for-profit entity. Does anyone know if there's a meaningful difference?

From Bloodhorse:

"The agreement turns NYRA into a not-for-profit corporation, ending its days as a non-profit entity, but includes a provision authorizing the state comptroller with power to audit its books. As a not-for-profit, NYRA will also come more directly under the oversight of the state attorney general’s office."

Anonymous said...

Charlie Hayward may have
scoffed" at the idea that anyone took over racing, but he also blinked because technically the current racing oversight board is in control, and will be until 30 days after the new franchise is in place. At that time the current oversight board becomes the FrOB (nice one).

The sale of land is one thing, but do not miss the relinquishment of ALL intellectual property including the simulcast signal. The intent may be that nyra will lease is back, but in NY State intent changes quickly. All intellectual property could mean stakes races, imagine the "Travers Stakes Presented by KFC".

Celebrate after the gov. signs it into law.

-a.i

Anonymous said...

NYRA was a stock corporation created under the Business Corporation Law and organized as a non-profit racing association; they will be a not-for-profit corporation organized under the Not-For-Profit Corporation Law.

It is a meaningful corporate change, but might not mean too much from an operational standpoint.


As a Not-For-Profit Corporation, the State Attorney General has certain powers. Most importantly, the Attorney General is authorized both by common law and by the Not-For-Profit Corporation Law to bring actions against directors or officers of a not-for-profit corporation (See, Not-For-Profit Corporation Law §§112 and 720). Not-For-Profit Corporation Law §112 contains a list of specific actions that the Attorney General may bring including actions “to enforce any right given under this chapter to members, a director or an officer of a Type B or Type C corporation. The attorney-general shall have the same status as such members, director or officer.” Not-For-Profit Corporation Law §112(a)(7).

The Not-For-Profit Corporation Law §720 authorizes the Attorney General to bring a direct action against directors or officers of a not-for-profit corporation for various violations e.g., if a director or officer has neglected, failed to perform, or otherwise mismanaged corporate assets, or has wrongfully acquired, transferred or wasted corporate assets. It includes different remedies: accounting, rescission, and injunction.

The increased auditing is simply a myth. Under the old Racing Law, The Office of the State Comptroller was required to audit NYRA not less than once a year. In reality, the Comptroller audited about once a decade.

Under the new law, the OSC is permitted to audit 'from time to time", but only upon the request of the Franchise Oversight Board. Thus, the auditing function vastly decreased rather than increased.

Anonymous said...

I believe the new agreement requires an annual audit by an independent accounting firm, which was not required under the old law.

Also, NY State not for profit law requires and independent firm to certify the annual not for profit financial that is filed with the state.

Does the simulcast provision mean the state has rights to negotiate distribution?

Anonymous said...

Well, day one of the mythical jockey wager was exciting.

3-5 Dominguez speed popped the field winning the first three races and appeared home free, but failed to hit the board in the next three contests, allowing impressive apprentice Cendeno to collar him by race six. Unfortunately for her backers she had no live remaining mounts so Dominquez appeared home free.

Maragh failed to win a race on the card but stalked all day by picking up minor prizes.

Dominguez again failed to fire on a pair of 7-2 shots in the 7th and 8th leaving the possibility of a dead heat in the equation for the Cedeno backers, but came through to score in the ninth on 6-1 Munro Bank to salvage a victory at 4-5.

Cedeno was held the place at 10-1.

Stuart Elliot(7/5) rallied late to dead heat for the show with Maragh who took some late money at 5-1.

Of course I lost my first wager while foolishly trying to beat Dominguez, with official results;

1-6-2/5.

Being lazy as ever, I will leave the PP's and ML the same for Day Two with the exception of numbers 10 and 11, where Fragoso and the live shipper Pino will be substituted for Hill and Luzzi who are riding out of town.

Alan, feel free to get a bet down if you have the wireless on the beach.

I Will try to beat Dominguez again, boxing Elliot, Lopez and Maragh, 2-4-5.

Anonymous said...

Commentator at 8:44 a.m. was mistaken. NYRA always had a very substantial requirement for an independent audit. The provisions, found in present law Section 231-a. In addition to the general financial auditing required, the old section also required a report on material weaknesses in accounting, internal controls and business and management. This is now gone, replaced with a provision that the independent accountant report on such only if they uncover something in their ordinary course of business - big difference between uncovering it and looking for it.

The New York Not-For-Profit Corporation Law does not contain any requirement for auditing. The closest you get is a requirement for an annual report :

519. Annual report of directors

(a) The board shall present at the annual meeting of members a report, verified by the president and treasurer or by a majority of the directors, or certified by an independent public or certified public accountant or a firm of such accountants selected by the board, showing in appropriate detail the following:

(1) The assets and liabilities, including the trust funds, of the corporation as of the end of a twelve month fiscal period terminating not more than six months prior to said meeting.

(2) The principal changes in assets and liabilities, including trust funds, during said fiscal period.

(3) The revenue or receipts of the corporation, both unrestricted and restricted to particular purposes during said fiscal period.

(4) The expenses or disbursements of the corporation, for both general and restricted purposes, during said fiscal period.

Spin it any way you like, the auditing function is significantly reduced in the franchise bill.

Finally, no. The state does not have any control over the simulcasting. The Franchise Oversight Board is required to “Enter into on behalf of the state as licensor, a long term license agreement with the franchised corporation for the use of the simulcast signal and associated intellectual property rights, for consideration of one dollar annually and for a term that will extend until the racing franchise expires, is revoked, terminated or ends by any other means provided by law”.

The Franchise Oversight Board has review authority, but not approval. Without approval, the review is meaningless.

Anonymous said...

I do not claim to know the law, but if an annual independent audit was performed would we not have read about it somewhere?

Who was their audit firm?

I remember reading about a specific audit of internal controls performed once by an outside firm, but thought it was ordered in conjunction with the Getnick deal.

Perhaps my memory is incorrect.

Anonymous said...

Your memory is correct. You should have heard about the audit, but didn't because NYRA never released any of their papers.

The more important point is that the State Comptroller has had the statutory requirement to audit NYRA not less than once a year. Other than the one Hevesi audit during the 'troubles', do you ever recollect seeing one?

Anonymous said...

Dominguez crushed the field on Day Two of the mythical jockey wager, scoring 21 points with three wins and two places.

The Field ran second with 11 pts, baring holding off CC and Maragh who dead heated for third, the second consecutive dead heat for the show.

After a small sample, a little tweaking is in order.

We can not offer place or show wagering or NYRC will go broke before the VLTs are ever installed due to bridgejumpers on Dominguez.

And awarding points for show has resulted in two consecutive dead heats for third, so it must be eliminated.


NYRC should offer Win, EX, QU and TRI wagering only, no place or show.

3 points awarded for a win, 1 point for a place.

The tweaked order of finish in this structure was;

1. Dominquez, Cedeno, Elliot
2. Dominquez, Field, Lopez

Note that despite Dominguez winning both days, the exotics payouts would have been ok.