New York State of Mind - by Dan Liebman

After many years in the same profession, it is not uncommon to feel the need for a new and greater challenge. Charlie Hayward fit that bill, so in November 2004, following a lengthy career in publishing, Hayward was named the president and CEO of the New York Racing Association.

If it was a challenge he wanted, Hayward was in the right spot.

In fact, he was brought in, Hayward said Sept. 13, “to fix things.” And there was much to fix.

At the time of his appointment, NYRA was operating under a court-appointed monitor overseeing its operations after the organization was being indicted and fined $3 million for its role in a tax-fraud scheme by employees. Investigators had uncovered widespread abuses; NYRA was bleeding millions month after month; the battle for a new franchise agreement was looming.

A challenge? You might say that.

In November 2006, a non-binding decision by the Ad Hoc Committee on the Future of Racing recommended that Excelsior Racing Associates be awarded the franchise to run racing at Aqueduct, Belmont, and Saratoga racetracks.

At about the same time, NYRA filed for Chapter 11 bankruptcy protection, claiming the state’s failure to approve a long-stalled casino project for Aqueduct had pushed it toward insolvency.

The committee was formed under the administration of Gov. George Pataki. Following the election of Gov. Eliot Spitzer, a full review was made and final bids for the franchise were accepted last year from four groups—Excelsior, NYRA, Capital Play, and Empire Racing Associates.

In the end, after much negotiation and political give-and-take, Spitzer formally recommended that NYRA receive a new 25-year franchise agreement. A key was NYRA’s release of a claim that it owns the land upon which the three tracks sit, acreage presently valued at $1 billion.

On Sept. 10, signatures were placed on 17 different documents, and the following day the bankruptcy court signed off on things. On Sept. 12, it was announced NYRA had emerged from bankruptcy and was officially the new franchise holder.

The state is also giving NYRA $105 million to help it emerge from its Chapter 11 bankruptcy protection.

A key question remains: Who will operate the video lottery terminals at Aqueduct? Three entities are bidding for the right to install the 4,500 machines.

Asked his three priorities for the new NYRA, now incorporated as a not-for-profit company, Hayward said the first will happen by the time this column is read by most.

“On Wednesday (Sept. 17), we are meeting with our employees to thank them for their hard work, their good frame of mind through everything, and to talk about the future,” Hayward said.

Second…“We won’t have any revenue from VLTs for at least 15-18 months, so we need to do priority planning. We are working on a long-term plan for our facilities.”

Third…“From a business perspective, we need to work with the OTB network. We need to consider rationalization and consolidation. It is a broken system.”

There are those on both sides of the argument as to whether or not NYRA should have received the new franchise agreement. Certainly the state gaining title to the land was a huge bargaining chip.

The state also has more oversight, the new board consisting of members chosen both by the state and the racing association.

New York is the most important racing circuit in North America, and its survival is critical to the entire industry. At the three tracks operated by NYRA, 23% of all graded stakes are run (110 of 481), and 35% of grade I contests (38 of 110).

The handle by New York citizens, and the total handle on New York races, is second to none, and the purses paid to horsemen, partly due to a strong state-bred program, are also significant.

NYRA has a new life, but many challenges lay ahead. The entire Thoroughbred industry needs to help the new holder of the franchise more than it helped the former franchise holders.

7 Comments

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longtimegone

lets go lets get that casino up and running !!!!!

17 Sep 2008 10:58 AM
Bernie

15 - 18 more months and no VLT revenue ? How many more years is this gonna go on ? It's been 5 years allready .

17 Sep 2008 6:48 PM
Todd B

Looks like soon Frank Stronach's Magna Entertainment will be bankrupt as well...The business of racetrack operations has been so mismanaged in this country I'm amazed we still have any around...

18 Sep 2008 1:14 PM
STEVE STONE

Hello Dan....Now that NYRA has been granted an new lease on life for the next quarter of an century..hopefully w/this new stewardship in place they will address not only NYRA'S ills but should become racings indisputable bellwhether insofar as leading the charge on its myriad of callenging issues...The entire racing industry..both domestically and internationally continually turn to them for their confirmation ...Insofar as the VLTS are concerned.. and as we all know..they are not the panacea to racings falling..no growth attendance at tracks across the land... and there are no

studies denoting that VLTs will augment soft attendance..the other vital/essential component.. increasing purses to reach new highs where tracks can now become more competitive..apparently has been overwhelmingly successful...however.. regarding the all vital attendance...generating new and younger fans...there is virtually no crossover between racegoers vis-a-vis slots players...never the road shall meet..Perhaps NYRA can now alter this interesting landscape w/its new family and insight in place...Thank you always Dan for the window...Best regards...Steve Stone..East Hanover..New Jersey...........

18 Sep 2008 2:26 PM
Belmont Imperio

You will not see casinos at NYRA!.. The state in in debt for billions and yet wont allow NYRA the slots?..Sounds to me like somebody is getting a huge payoff NOT to let track have slots? After all why does NY state need $1,400,000 a day in Tax revenue coming in from the Slots at NYRA?

19 Sep 2008 11:32 AM
Vita

NY was the first state to have off track wagering and it was not overseen by NYRA. That caused major problems because of less on track wagering and NYRA not getting it's fair share of revenue.  NY's OTB showed all other racing juristicions how NOT to do it. Hopefully NY will learn from this lesson and let NYRA run the VLT's and OTB to insure it is allocated it's rightfull % of revenue from these two entities.

Though I don't like the gov'ts hand in everything, I guess there needs to be some kind of state ruling body to watch over NYRA to make sure all of the illegal shenanigans happen again.

I'm glad they got the franchise back, now let's hope they will take the bull by the horn and do what is right not only for NY racing but also for racing as a whole.

19 Sep 2008 3:59 PM
Mel

One of Steve Stone's comments rang very true -- the need to connect to a younger generation of race fans.  Growing up in the northeast, far from tracks, it was absolutely foreign to relate to anyone  my age (20-25) who knew a thing about racing.  Coming down to NY, I'm meeting more people which is a pleasant surprise.  However clearly there are significant inroads to be made.  I spent a wonderful afternoon at Belmont last weekend with three friends, picnicking and lounging around.  Two had never been to the track before and loved it.   What didn't they know?  A) Admission is next to nothing.  B) Alcohol is permissible (everyone just knows Belmont day rules) as long as it isn't in glass C) You can bring in all the food you can carry.  D) How to wager E) How big the back lawn was, how much space is available both trackside and lawnside.   I'm no marketing maven, but with concerted publicity through the right venues, we could get a lot of young adults out at the track.  Bring in music acts on the back lawn, do promotions with alcohol companies, etc etc or just simply create baseline awareness (For $2 you get 6+ hours of fun that's byob/w!).

I am not familiar with the organization of NYRA, certainly not in its current state, but a few good heads and a few dollars devoted to this could generate a meaningful return.  And once you have a young race fan, you have a race fan for many decades.  

24 Sep 2008 7:49 AM

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