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Thursday, December 14, 2006

NYRA Strikes Back

We all knew that the NYRA shoe, in the form of their land claim, would drop on the franchise process at some point. But the shoe turns out to be a heavy boot coming down as hard as a thoroughbred's foot on the tracks that they may or may not own. NYRA's lawsuit filed on Wednesday is an all-out attack on the state's blatant and outrageous stalling on the Aqueduct racino project, and, by virtue of its land claim, on the entire franchising process.

NYRA accuses all parties of engaging "in a deliberate pattern and practice intended to ultimately destroy NYRA and to seize all of its assets."

NYRA contends that the state has "unlawfully and discriminatorily refused to grant final approval" to construct a casino at Aqueduct that would consist of 4,500 video lottery terminals, or slot machines. Those machines are projected to bring in $657 million annually, $45 million of which would go to NYRA. Without that revenue - and without $19 million in previously agreed-upon loans from the state - NYRA filed for Chapter 11 bankruptcy protection on Nov. 2.

NYRA contends that it was treated differently from seven other racetracks in the state that were also granted approval to run casinos, and thus was denied equal protection under the law. [Daily Racing Form]
The suit contends that the state has "used that refusal as a pretext to deny NYRA access to critically needed funding." [Bloodhorse] NYRA's lawyers will no doubt contrast the rejection of the racino with the rush to get the one at Yonkers up and running despite the fact it had not conducted live racing in 17 months and was assessed heavy fines for dumping human waste into the Bronx River.

A spokespeson for Gov Pataki, who was named in the suit along with several other state officials including Carole Stone, the chairperson of the state's oversight board, issued the usual "this suit has no merit" statement, calling it "just the latest sad chapter for an organization that is mired in scandal and out of options and that continues to blame others for the problems they have created." As usual, the governor ignores the fact that NYRA has a completely new management team whose integrity was praised by the federal monitor assigned to oversee the organization while an indictment was pending. Blaming the present NYRA for the scandals of past management would be like blaming the sitting governor of NY for the insanity of the Rockefeller-era drug laws. And while it will be the courts, not the governor, who will decide on the legal merits of the case, the common sense observation is that the state's stonewalling of the project has been all too obvious and that they will have much explaining to do.

NYRA is pressing the land claim by applying to the bankruptcy court for a $50 million loan for which the land would be put up as collateral. "Condition for the loan itself is in fact that the court makes a determination that we own the land," said Brian Rosen, NYRA's bankruptcy attorney. The bankruptcy court will make that ruling on Jan 9. A ruling in favor of NYRA will ensure its solvency through the end of 2007 when its franchise expires, but would not necessarily mean that the association would own the land after that time. A ruling against NYRA? Word is that they have enough money to operate the tracks through mid-January.

NYRA presented the deeds to the land as evidence of their ownership.
"NYRA purchased the racetracks from third parties . . . more than fifty years ago for approximately $20 million, pursuant to an express legislative enactment empowering NYRA to acquire racing facilities, including real estate," the suit says. [DRF]
But the state will argue that legislation passed in 1983 that extended NYRA's franchise at the time stipulated that the state owned the land and that the association would cease to exist once its franchise expires. NYRA's argument that the statute "violates some fundamental constitutional rights" that prohibit the state from seizing land is one that the courts have not looked kindly upon of late.

- The special session of the NY legislature ended after one day, and with none of the major issues agreed upon. Any hope by Excelsior that their bid would be quickly approved proved to be a pipe dream.

- Tom Precious, writing on, reports that Capital Play Ltd, the mysterious bidder from Australia which was disqualified for technical reasons, is making an appeal to get back into the game. The firm, sources said, is telling officials it will provide $1.8 billion to the state, including $50 million a year, for the franchise--about $1 billion more than the next-highest bidder. Well, if Empire can change their bid, then why can't other parties join in the fun?

- NYRA also claims that there's a provision of state law that requires the tracks to be run by a non-profit association, and that Excelsior, though their bid states that the racing would be conducted on a non-profit basis, is a for-profit racing and gaming consortium. At least they didn't call them a dog track operator.


Anonymous said...

First let me say that you do a great job of synthesizing all the racing news. This latest post is a prime example. That last piece about Excelsior being a for profit consortium is baffling. I thought that one of the biggest deciding factors for the Ad Hoc Committee was Excelsior's not-for-profit status. At least that's what the mayor of Saratoga said.

And, oh by the way, if you look into the the Johnston family's previous holdings you may find some involvement with Florida (gulp!) puppy racing.

Anonymous said...

Ditto on the fantastic job covering racing news.

Excelsior is a for-profit limited liability corporation, but stated they would operate the racing component of their operation on a non-profit basis. The laws governing the state racing franchise presumably can be altered to accept any new reality; it were these laws that allowed NYRA to operate in the first place.

If I remember her interview on Channel 9 News correctly, Mayor Keehn stated the non-profit component was helpful, but did not indicate it was a deciding factor. I believe she stated that Excelsior's overall capital investment, programs and address of the pension liability were the important factors in her decision.

Everyone mentions Wheeling Island as Delaware North's dog track. Don't they own Southland Park in Arkansas, Phoenix Greyhound Park in Arizona, Daytona Beach Kennel Club in Florida and used to race dogs at Arizona's Apache Greyhound Park?

Come to think of it, didn't Magna operate Multnomah Greyhound Park in Oregon until they closed it?