Tom Noonan

The NYRA Reorganization Board got down to business at its Wednesday meeting as they began to discuss the future of the racing franchise.  There were some interesting announcements, but the most significant part of the meeting had to do with their ideas for a new governing structure.

First the announcements.  NYRA’s CEO Chris Kay said that the re-privatization plan would not recommend changes affecting the continuing existence of Aqueduct or Belmont.  He observed that the NYRA Board was established as an interim Board until a new structure could be put in place and thought it inappropriate for a temporary group to recommend such significant long-term changes.

Kay further stated that the Saratoga meet would remain at 40 days, running six days per week and ending on the traditional Labor Day.  There had been reports that NYRA wished to go to a schedule of five days per week beginning in early July.

There was also an announcement that NYRA’s operating costs would finish 2014 in the black without reliance on VLT revenues, marking the first time in 13 years it could say that.  This was accomplished by not considering pension and tax liabilities as “operating costs” and using the VLT revenues to pay them.  By law, however, the VLT revenues are designated for the purpose of “general thoroughbred racing operations.”  While it is not clear why NYRA is resorting to this bit of legerdemain, it appears it is for the purpose of giving the Governor the chance to say his involvement in running NYRA resulted in it turning a profit.

From my perspective, the most significant matter raised at the meeting  –  and the one with the longest-term consequences  –  had to do with NYRA’s future governing structure.  I realize that this is the sort of arcane matter that causes many eyes to glaze over, but nothing will be as determinative of the future for New York’s racing as this one.

The current NYRA Board, created by Governor and the Legislature in 2012 when Cuomo seized control of NYRA, has 17 members.  Eight are appointees of the Governor, two of the Senate and two of the Assembly.  The remaining five were appointed by the prior NYRA Board which, while it had a significant number of government appointees, had a majority of non-government members. The legislation creating that Board also directed it to propose a  “statutory plan for the prospective not-for-profit governing structure” for the next NYRA.

Joseph Lambert, NYRA’s General Counsel, reads the statute as requiring that the next NYRA be under “private control,” not government control as the current Board is.  While there had been speculation that there would be a bidding process to determine the franchise holder, Lambert is proposing that the next NYRA Board consist of some government appointees with the majority selected by the current Board.

Let’s unpack that one.  The “privately controlled” next NYRA would have a Board composed of some government appointees with the rest being appointed by the current “government-controlled” Board.  How is that not perpetuating government control?

Lambert offered additional ideas for the new structure.  (It should be emphasized that Board Chairman David Skorton said at the outset that he would not be seeking Board approval for any of these concepts, but rather just wanted to get the ideas out in the open.)  Under Lambert’s approach, the number of Board members would be reduced from the current 17, and the terms of office would be between two and four years with staggered terms.  He said that he developed these ideas based on “best practices” in the corporate world.  We do not know if these are the practices utilized by the boards of such responsible corporations as General Motors and JP Morgan.

But NYRA should not be viewed as a corporation.  The prime obligation of any corporation is to maximize profits for its shareholders.  NYRA’s “shareholders,” however do not hold stock.  It is owners, trainers, jockeys, exercise riders, backstretch workers and  –  let’s not forget  –  fans.  The new Board, therefore, should be protective of those interests and not just the bottom line.

There was some discussion of the importance of the next NYRA Board being “independent.”  Board member Robert Megna, who serves as Cuomo’s Budget Director, emphasized that “up here”  – presumably meaning the Governor’s office  –  the “question of independence is pretty critical.” Now, “independence” is an interesting word and concept.  I doubt there are many who would dispute the notion that the next Board should be “independent.”  I am guessing, however, that the Governor’s idea of “independent” means someone who is independent of any thoughts or views that do not emanate from the Executive Chamber.  That’s not, however, what most people are hoping for.

The notion of independence is also tied to how the Board is appointed, and how long the terms of office will be.  The Governor’s recent appointee to the Board suggested that the term of office should be ten years.  As noted earlier, the original idea by Lambert for a Board appointed by the current one would then mean that the existing government-controlled Board would retain its influence for ten years.  To put that in context, it would take us to the end of President Cuomo’s second term in 2025.

There has to be a better way.  Here is one modest proposal:  There should be a number of state government appointees.  One member suggested six, with nine more being non-government appointees.  Instead of having the current Board select those nine, they should nominate the nine. Then, there should be an external panel of knowledgeable industry professionals who would approve or disapprove each of the nine.  It is akin to the mechanism for external bodies (such as the American Bar Association) reviewing the judicial nominees of governors or the President.

There would be standards for reviewing the nominees  –  true independence being foremost  –  as well as goals such as diversity.  If the corporate world is the mindset for the current Board  –  which consists of 17 older, white men  –  we know that a Board appointed by them is likely to be made up of older, white men.  It’s not as if it would be difficult to find prominent and respected people within the industry who could serve on a panel to review their selections.  Dr. Mary Scollay from Kentucky already served on the Governor’s Task Force on Race Horse Safety.  Dr. Jennifer Durenberger from Massachusetts overhauled that state’s approach to racing safety and integrity.

Then I would turn to a long-time and respected member of racing in New York to chair the panel  – Tom Durkin.  Such an approach would give the next NYRA heightened credibility and help ensure that the resulting organization would truly be viewed as independent.

David Skorton and Chris Kay should be commended for their approach thus far on the re-privatization initiative.  The Board meeting, while brief, was substantive.  More importantly, they are making public their thinking on the direction going forward for NYRA, and doing so five months ahead of the deadline for submitting a final plan.  It gives stakeholders something to think about and debate.  It may even be an opportunity for the main stream media to deliver some insightful coverage.