(Originally published in the July 17, 2010 issue of The
Blood-Horse magazine. Feel free to share your own thoughts and
the bottom of the column.)
A three-legged stool will tip over if one of the legs isn’t solid, but what happens if all three legs are cut off? In a nutshell, you have the funding, operation, and governance of racing at New York’s three historic tracks.
In mid-May the New York Racing Association said it was broke, sent out a closure-warning notice to its employees, and asked state government for $25 million to keep operating. This happened only 20 months after NYRA emerged from Chapter 11 bankruptcy. So not only was NYRA broke, it was broke again.
At the time of its emergence from Chapter 11 in September 2008, here’s what the head of the NYRA board, C. Steven Duncker, said: “It’s a historic occasion. Our debts are gone, our management team is stronger, and we have a clean run at running racing, which is a big deal, in a managerial sense.”
One part of the plan that was approved by the bankruptcy court settled a dispute about ownership of the NYRA tracks. The State of New York emerged as the owner of the properties where Belmont Park, Aqueduct, and Saratoga sit.
In exchange, a 25-year lease to operate them was granted to NYRA, the state gave up about $200 million in debts and liens it held against NYRA, and it gave NYRA $105 million to pay off other creditors and cover operating expenses pending the arrival of video lottery terminals at Aqueduct. The award of a VLT franchise, which had been pending since 2001, was an integral part of the survival plan.
In other words, a solution was designed for the tracks to operate on the come. Duncker himself estimated that NYRA had two years to subsist without VLT revenue—which would get it past the 2010 Saratoga meeting—before its finances would once again be in trouble.
To complete this recipe for disaster, three months before NYRA emerged from bankruptcy, ownership of the financially-strapped New York City Off-Track Betting Corp. was transferred from New York City to, guess who, the State of New York.
Last December, with nothing done by the state to install VLTs, other dominoes began to fall. NYCOTB filed for Chapter 9 bankruptcy protection and quit paying NYRA its cut of the handle. NYCOTB listed $83 million in debt, including a $17-million tab to NYRA that remains unpaid.
There’s a lot of blame to go around, but it’s obvious that three things are significant parts of the problem. There are rotten politics in New York; there is a nepotistic and bankrupt NYCOTB; and poor management, as evidenced by its bankruptcy case filed when economic times were still good, is part of NYRA’s recent history. The three-legged stool has no legs.
As a result, the people of New York are left holding the bag, and “saving NYRA and NYCOTB” is not high on their list of priorities. As of this writing, the state still has a multi-billion-dollar budget shortfall, it doesn’t have legal authority to print money, and it has a ridiculed governor.
It’s time to throw out this old, broken stool. It’s time for well-run, publicly-listed businesses to be allowed the opportunity to buy these tracks. There have been several racetrack acquisitions made in the last few years, some of them after the economy began backtracking in 2008. But first, the State of New York has to allow NYRA to default on its 25-year lease, which would free up the state to sell the track properties.
Even if doing that means state government would again delay millions in prospective VLT tax revenue, it’s revenue that its politicians have done almost nothing to generate for nine years now. I’d give odds that a private enterprise, particularly a company with gaming operations experience, would make up the difference for the extra time lost.
As for NYCOTB, the new man in its top spot is embroiled in controversy over his hiring and his salary. What a joke. Put NYCOTB up for sale, too, and get the government of New York, which has no clue about fiscal responsibility—not to mention ethical conduct—out of the racing business.
Dick Downey publishes The Downey Profile and is an attorney based in Bowling Green, Ky.