Tom Noonan

It’s been a year since Governor Andrew Cuomo made his move to take control of New York’s thoroughbred racing.  It’s a good time to step back and see where we have gone.

While one might think that a state government’s seizure of a significant industry would only happen after considerable public debate, the Cuomo effort  –  at least the public part of it  –  moved from an initial assault to enacted legislation in a mere eight weeks, with but a single dissenting vote in the Legislature and no serious discussion in the media.  It began with an “Interim Report” by the State Racing and Wagering Board about an incorrect takeout percentage on certain wagers made on New York’s races over 15 months.  When the error was identified during an audit by the state’s Comptroller, the New York Racing Association corrected the percentage and repaid more than half of the $1.1 million over payment it had received to those bettors it could identify from its records.

Even though the Report was “interim” and had significant shortcomings  –  it does not appear the Racing Board interviewed anyone –  NYRA’s Board fired CEO Charles Hayward and General Counsel Patrick Kehoe a week later on May 3 without conducting their own review of the circumstances.

When the NYRA Board sought to replace the terminated executives, the head of the Racing Board and the chair of the Franchise Oversight Board  –  two of the four state agencies with oversight responsibility for NYRA  –  sent a letter on May 15 purporting outrage at what they described as illegal appointments.  Without citing any authority to support their claim of illegality, the two Cuomo officials also directed that revenues from Video Lottery Terminals  –  essential to NYRA’s finances  –  instead be held by the state, again without any reference to their legal authority for such an action.  In case members of the NYRA Board were still missing the message, the Cuomo Administration’s two top officials on racing proceeded to question the integrity of members of the Board, saying they may have had a “conflict” if they had “financial interests in horse racing.”  (This could mean, for example, the financial interest held by Board members Stuart Janney and Ogden Phipps in their two-year old colt named Orb.)  The letter additionally threatened an investigation into members “character and fitness” to determine whether racing licenses should be revoked.  This letter was sent just four days after The Saratogian reported that a “high-ranking source” said the Governor was considering making more appointees to the Board in addition to the state appointees already on the body in order to take control of it.

Having “prepared the battlefield” as they say in military campaigns, on May 22 the Governor quickly secured the “agreement” of an embarrassingly complicit NYRA Board to surrender control over racing and to amend the law so that 12 of the 17 Board members would be appointed by the Governor and legislative leaders, with Cuomo having eight of the appointments including the Chair.  He waited another 3 1/2 weeks to file the actual legislative language, doing so on the Saturday before the Legislature’s Thursday adjournment for the year.  While enacted in June, he did not sign it until October 1, and then made his appointments to the NYRA “Reorganization Board” on October 18.

Despite the bluster about the problems with the prior Board, five of the 12 state government appointees were on the former Board or had served previously.  (The “old” NYRA had the remaining five appointees;  its picks served on the prior Board.)  The Governor’s signature appointments were chef Bobby Flay and Jane Rosenthal, a founder of the Tribeca Film Festival who had no prior experience with racing.  The remaining 15 members were older white men with backgrounds in real estate, finance or the law.  Many of the new Board (including Flay) owned horses, which supposedly was a matter of great concern when Cuomo began his attack on the “old” NYRA.  The new Board has met five times, including its last meeting on April 29 which lasted 30 minutes, half of which was spent in a closed-door Executive Session.

So what has the “new” NYRA accomplished?

Equine health and safety has been the major priority of Chairman David Skorton, a policy for which he is to be commended.  Last year witnessed a significant number of fatalities at Aqueduct that in March led to the appointment of a Task Force to analyze the causes and make recommendations.  The Task Force consisting of widely-respected industry figures completed its report in August, but Cuomo did not permit its release until September 28.  If the number of fatalities is the sole measure of progress, Skorton has thus far succeeded.  In 2012, there were 22 racing fatalities at Aqueduct on both racing surfaces;  this year there were 9.  Through May 27 of each year, Belmont had two.

The Task Force recommended changes in the administration of legal medications by increasing the time between a race and the last administration of two particular drugs.  New York adopted the changes, and it is anticipated that other states in the mid-Atlantic will follow suit.

One of the most significant recommendations of the Task Force was to overhaul the management of race track veterinarians and the protocols under which they operate, and to hire an Equine Medical Director who would report to the oversight state regulatory body.  Chairman Skorton, however, decided that the position should be at NYRA, resulting in a dispute with the regulatory body (now the State Gaming Commission), that Skorton lost.  The result was an unnecessary delay, meaning that more than nine months after the Task Force concluded its work, there is still not an Equine Medical Director.

While important matters concerning equine safety have been raised, the NYRA Board and Gaming Commission continue to engage in the public relations foolishness of special security procedures for races, but only Grade I races around two turns for three-year olds, continuing their Travers and Wood Memorial protocols for the upcoming Belmont Stakes.  One would think that if these are meaningful and necessary precautions, they would have figured out a way to make them more universal since last August.

While this focus on equine safety is welcome, we should not lose sight of the fact that many of the steps that have been implemented were begun before the new NYRA Board took control.  Unfortunately, when we look beyond these measures, it is hard to identify any significant changes this Board has accomplished in what is now the eighth month of its tenure.

The most conspicuous shortcoming so far is the failure to appoint a successor to Hayward, who was fired more than a year ago.  Ellen McClain had the job three days short of a year, but press leaks back in August from those “high-ranking Cuomo Administration sources” indicated that she would be fired.  If that was the decision, fine, but why is NYRA  —  heading into the Belmont Stakes and the Saratoga meet  –  now being run by a three-person committee while the search process for a permanent replacement goes on?  Incidentally, I never saw any reason why McClain would not have been an excellent choice to lead NYRA.  If you see any improvements in the NYRA experience over the next several months, it is the result of changes begun by Hayward and continued by McClain  –  some of the more visible examples being a much-improved web site, possibly a viewing stand for the public at the Oklahoma training track and a new wagering platform by the Belmont fall meet.  (One change not begun under the old NYRA will be the plaque hung at Saratoga commemorating the 150th anniversary of the track’s first race.  The new Board may not have done anything yet, but their names will be on the plaque.)

While going over a year without leadership for what is the nation’s premier racing is bad enough, it will pale in comparison if significant long-term questions are not addressed.  Here are four:

• Will NYRA continue to receive the VLT revenues that are so instrumental to its financial viability?  It’s not only the “high-ranking officials,” but the Governor himself who have floated the possibility of redirecting racino revenue that now goes to NYRA to other purposes.  Both Robert Megna, Cuomo’s Budget Director and appointee to the new Board, and Rob Williams, Acting Director of the State Gaming Commission, said last summer that NYRA must “end its reliance on VLT subsidies.”
• Is management of the race tracks going to be outsourced to a private for-profit entity?  This is another concept raised by that recurrent anonymous source, this time about bringing in a Churchill Downs, Frank Stronach’s Magna Entertainment, or another for-profit business from the “entertainment” industry to actually manage the tracks.
• What form will “NYRA” take once the current legislation expires?  The NYRA “Reorganization Board” is an entity that is supposed to expire three years after it was appointed on October 18, 2012, and has 30 months from then to recommend legislation for the form NYRA is to then take.  Having frittered away a good portion of the first year, the new Board now only has 22 months to come up with the new approach.
• What will be done to grow the fan base?  If there is a universal question confronting the entire racing industry, this is it.

Now, I would not expect an organization that has immediate, pressing needs  –  such as hiring a CEO  –  to spend much time on long-term planning.   But the reality is that if you do not focus on it, it will always be pushed into the background by that day’s crisis.  Chairman Skorton has appointed a committee to do some of that planning, with a deadline to report by July 1.

It is also important to bear in mind that NYRA, albeit without leadership, has been functioning.  A good reason for that is what appears to be a contingent of dedicated and capable staff, as well as a group of outside advisors who have been contributing their time and expertise to improving New York’s racing.  One of the changes from the old NYRA is that its Board meetings, and some committee meetings, have been open to the public and are broadcast (and saved) on the NYRA web site.  This allows anyone to observe some of the workings of an entity that has all too often been the subject of  undeserved and baseless criticism.  It has also been an opportunity to observe the Board and high level staff in action  –  at least in the context of a public meeting.  I have not only been impressed by much of the NYRA staff, who are holdovers from the Hayward/McClain administrations, but people such as Alan Foreman, head of the national Thoroughbred Horsemen’s Association, Dr. Scott Palmer, a nationally-recognized veterinarian, and Michael Peterson, Ph.D.,  the country’s leading expert on racing surfaces, each of whom has contributed valuable  –  and fact-based  –  information at the public Board meetings.  There are also Board members with important perspectives and institutional knowledge that is sometimes added to the discussion.  While the full Board meetings tend to be desultory affairs, the Committee on Equine Health and Safety has demonstrated that a public meeting can have robust and informative discussions on significant issues.

It is not the level of talent and knowledge that has me concerned;  rather, it is the leadership of Chairman Skorton and the man who appointed him, Andrew Cuomo.  Skorton, President of Cornell University and a cardiologist, is obviously a very talented and skilled person.  That does not mean, however, that he should be the leading figure in New York’s thoroughbred racing as he has been since his appointment in October.  He readily admitted having no knowledge of racing when he was appointed.  “Having no knowledge of racing” is something that applies, of course, to each of us at some point in our life.  And I do not think it is a prerequisite that the chairman of the Board  –  or, for that matter, NYRA’s CEO  –  has a racing background, since there is any number of capable individuals who could prove to be excellent racing executives.  That assumes, however, that they surround themselves with knowledgeable people and, just as important, have the independence to function.

It is that independence that is the biggest question mark for me, as it would be for any top administrator serving in any capacity in the Cuomo Administration.  Skorton and one other Board member are the ones clearly calling the shots on the Reorganization Board.  Skorton sets the agenda, and only those matters acceptable to him are put to a vote.  In the four months of Board meetings, there has yet to be a dissenting or abstaining vote.  This is so even though there are matters on which individual members have strong views  –  one example being Skorton’s decision to have the Equine Medical Director report to NYRA, and the other being the continuing failure to make a decision on the Global Betting Exchange contract.  It is this latter issue on which the other prominent Board member has been in the fore.  Robert Megna has been prominent throughout the past year on NYRA matters.  As chairman (at the time) of the Franchise Oversight Board, he was a co-author of the threatening letter to NYRA’s Board members last May;  he has advocated ending the VLT subsidies to NYRA;  and, he has single-handedly put the hold on the GBE contract for reasons that, at least on the surface, appear to be flimsy.  But as the Cuomo’s Budget Director, he is clearly doing the Governor’s bidding on the Board.

For his part, Chairman Skorton has yet to articulate anything approaching a vision for the new NYRA, save for his focus on equine health and safety issues.  Even on this issue, however, he has yet to express any views on issues such as the use of race-day Lasix or, for that matter, the role of permissible drugs in racing.  On another significant issue  –  that of casinos  –  he has essentially said it’s a decision for Albany.  In an interview with Tom Precious published in Blood Horse, he said, “‘I have to be a little vague on this,’ citing the still-emerging casino expansion plans in Albany.”  When you consider that one of the purported reasons for the state’s takeover of NYRA was the changing gaming environment, including “first passage of a constitutional amendment on commercial casinos,” it is not unreasonable to think the head of NYRA or its Board would have had some discussion of the issue.

Unfortunately, open and candid discussion of important policy issues is not the way this Governor likes to operate.  In the year I have been following the NYRA story closely, not only have I not seen any evidence that the Governor allows his managers to function independently but rather have witnessed numerous examples of the opposite.  This is an Administration, after all, that fired a low-level bureaucrat working in the Adirondacks who had the temerity to speak to the local newspaper without authorization from Albany  –  and his comments were praising the Governor.  We have seen a Governor who announces major initiatives  –  gun control, casinos and, most recently, tax-free zones  –  but refuses to release details, let alone actual legislation, for fear it would derail what he believes to be important initiatives.  As we witnessed with the gun control law, his ramming a bill through the Legislature without legislative or public input results in significant screw-ups.  He is now seeking a repeat of that process with his casino and tax-free zone proposals.  Each has significant complexity and implications, yet we sit days from the Legislature’s adjournment on June 20 without legislative language being available.  Of course, the Legislature is as much to blame for this as the Governor if it allows him to consistently get away with these tactics  –  just as it did a year ago with the NYRA takeover.

On the subject of the Governor’s tactics, nothing has come of the personal assaults made on the character of NYRA’s officers and Board leading up to Cuomo’s takeover of racing.  The “interim” report of the State Racing Board on the improper takeout percentage was referred to the state’s Inspector General who has not published a report more than a year later.  The Audit Committee of the NYRA Reorganization Board, chaired by a former Inspector General, concluded, however, that the improper takeout rate that was the ostensible reason for the state’s precipitous action was “unintentional.”  Nor has anything materialized from the allegation against the character and fitness of prior Board members other than that nine of them were appointed to the new Board, and two of them with a “financial interest” in racing won the Kentucky Derby.

So here we are, a year into the Cuomo experiment with taking control of one of New York’s signature industries and no one can say with any level of confidence that things are better, or that improvement is even on the near horizon.  It is an industry that has been buffeted by the economic downturn that I hope is over, and continues to struggle at growing its fan base.  It is an industry desperately in need of stability and leadership, but we have yet to see either.