The New York Racing Association started turning a profit when it finally began to realize long-overdue revenues from the Video Lottery Terminals at Aqueduct’s racino. Now Governor Andrew Cuomo’s top appointees in New York’s racing structure are saying that NYRA should begin to operate without the VLT revenue. To put it another way, after 10 years of struggling to stay in business, the Cuomo Administration wants NYRA to go back to those days.
The notion that a portion of racino profits should go to tracks at which the racinos operate was part of a law enacted in 2001 establishing the gambling parlors. Because the state government was not able to get its act together – the epitome of which was a scandalous procurement in 2010 – NYRA did not receive the millions the law entitled them to until ten years later in 2011.
The Aqueduct VLT racino has evolved into the most successful one in the country. Because payments to NYRA are based on net revenue earned from the VLT’s, NYRA has benefited accordingly. For the first six months of the calendar year, NYRA received VLT revenues of $54 million, sufficient to turn a $10 million loss from the racing operation into net income of $8 million. The VLT payments, incidentally, are from the racino’s profits – otherwise known as losing wagers – and not from any type of taxpayer subsidy.
I guess it should not be surprising that a Governor who wants to deliver tax relief to voters in time for his 2014 election campaign has turned to the VLT payments as a possible source. He started talking about it over a year ago, and it has been enthusiastically embraced by theActing Director of the Gaming Commission as well as his Budget Director, who is also one of his appointees to the NYRA Board. At the last meeting of the Board, the charge was picked up by David Skorton, Cuomo’s hand-picked Chairman. Skorton, who did not have much to say during the meeting, nonetheless repeatedly interjected that NYRA had to start functioning as if the VLT revenue was not there. He went so far as to try to sneak that position through the Board in the last minutes of a two-hour meeting. While the Board has been remarkably complicit with almost everything proposed by Skorton during his tenure, it refused to go along with this idea.
While the concept that an entity should be able to function without revenue from external sources is one that has a certain surface appeal, it does not appear to be a bedrock principle of Chairman Skorton. Recently it was announced that Cornell University, where Skorton is President, has begun a capital improvement project of $63 million at its School of Veterinary Medicine. According to the campus newspaper, the project will demolish one building, build a new one and significantly renovate another. It is to be “predominantly funded by New York state.”
And it’s not just Ivy League colleges that are supported by New York’s taxpayers. Earlier this year the Governor boasted of a $420 million annual tax credit program designed to attract the film and television industry to New York – most recently this took the form of encouraging The Tonight Show and Jimmy Fallon to return to New York. Then there is Global Foundries in Malta, owned by the government of Abu Dhabi. According to the Albany Business Review, it has received $2.42 billion in state grants and tax credits to build and expand its computer chip fabrication plant.
This government largesse is in keeping with one of the Governor’s major proposals to, as he put it, “transform SUNY campuses and university communities across the state into tax-free communities.” This innovative concept of taxpayer support would exempt participating businesses from paying business, corporate, sales or property taxes for 10 years. Remarkably, even the employees of the companies would be excused from paying state income taxes.
Also, let’s not forget another taxpayer-supported industry that has been in the news recently because of the Moreland Commission, the body appointed by the Governor to root out corruption in state government. While Cuomo assured us that the Commission would be free to go wherever it wanted, that commitment disappeared like the leaves on a tree in late October when the Commission expressed an interest in subpoenaing records related to tax breaks given Manhattan real estate developers. According to reports in the Daily News, the Governor’s staff put the kibosh on that idea because some of those developers were major contributors to one Andrew Cuomo.
So it’s OK to use tax dollars to support Cornell University, the entertainment industry, Manhattan real estate developers, a chip fabrication plant owned by an overseas company, and the countless businesses and their employees who will be attracted to Cuomo’s numerous “tax-free communities.” But when it comes to using a portion of the profits from a gambling company located at a state race track to support the horse racing industry, Cuomo and his appointees to the New York racing industry act as if they have been asked to give up one of their children. We are not talking about a tax break here – indeed, NYRA not only pays taxes but also provides financial support to the Gaming Commission. If those payments from the first six months of the year are annualized, it works out to over $10 million per year.
I understand why a state’s tax policy may be used to attract businesses and create jobs. But there are two things I do not understand. One is why a Governor, who says he is intent on reducing taxes and has appointed yet another commission to give him ideas on this, nonetheless supports costly schemes to benefit businesses that do not exactly need it?
The other big question is why is horse racing the only industry not deserving of this Governor’s support? New York racing is one of the state’s signature industries. In addition to race tracks, there are dozens of farms where New York horses are bred, raised and cared for. The tracks and the farms employ tens of thousands of people. Many of those people are not ones who can afford a trip to The City to catch Jimmy Fallon or take up residence in one of those high-rise condo towers for which developers seem to need tax subsidies. Instead, they show up for work before the sun rises seven days a week. They are the trainers, grooms, hot walkers, jockeys, exercise riders, farm workers, and struggling owners who love horses and the sport. They are not looking for a hand-out, just a fair break. They simply have the misfortune of not having the money to make large political contributions, the engine that drives much of New York’s government and its policies.
Instead, they must rely on the 17-member NYRA Board to protect their interests. Stripping the VLT revenue from NYRA is clearly a priority of the Governor and Chairman Skorton. Individual Board members have a responsibility, and it is not fealty to the Governor. Rather, they have a fiduciary – if not moral – obligation to act in the best interests of New York racing and the many livelihoods dependent on it. This is, needless to say, an important issue with significant ramifications, and one that must be discussed in the light of day. Regrettably, Chairman Skorton has already stated his desire to have those discussions in secret. We can hope that the other members of the Board – twelve of whom are government appointees – will step up and insist on a process that is open and accountable.