VLT revenue

All posts tagged VLT revenue

The sad state of “leadership” in New York racing

Posted by noonante on June 16, 2016
Posted in: Horse Racing, Political/Social commentary, Politics, Saratoga thoughts. Tagged: , , , , , . Leave a comment

It was sad watching the Saratoga Springs local Chamber of Commerce and an offshoot, Concerned Citizens for Saratoga Racing, hold a rally to support legislation they claimed would reprivatize the New York Racing Association.  As the group twice did a chant on command of “WHOA Cuomo” for the TV cameras, the Legislature was passing the bills they supported.

Unfortunately, as one of the group’s leaders acknowledged in response to a question, the Legislature’s bill would guarantee the Governor control of 11 of the 15 members of a new Board.  So much for stopping the Governor.

The New York legislative session ends today (or whenever they decide to start the clock again after stopping it at midnight), and there is a need to do something about the governing structure of NYRA.  The current law that gives the state government control of the franchise expires in mid-October.

Four years ago when Governor Cuomo seized control of NYRA following bogus allegations of mismanagement, he promised his takeover would last only three years, because “state government has no role in running horse racing.”  His administration did not come up with a recommended plan by their deadline, so government control was extended another year.

This year, NYRA, charged with coming up with a proposal, did as little as possible to meet their legal obligation, although it was clear that the only opinion that mattered was sitting (sometimes) in the second floor of the State Capitol.  One house of the Legislature came up with a plan on May 25 that was soon adopted by the other chamber.  The Governor’s plan was revealed a week ago.  When you have four years to do something, I guess late is better than never.

There are two major differences between the bills:

  • The Governor’s plan would give him effective control of appointing 13 of the 15 members on a new Board of Directors;  the legislative bills would give him effective control of 11 of 15 members of the Board;
  • The Governor’s plan would take $11.5 million in revenues from the Video Lottery Terminals at Aqueduct and direct them to government expenditures and not to NYRA.

Understandably, the debate on the legislation has focused on the money the Governor would like to take from NYRA.  They project $57.5 million in VLT receipts this year, and the Governor proposes capping it at $46 million starting next year.  The Comptroller of New York, Thomas DiNapoli, released an audit last week in which he concluded that NYRA is not currently profitable without VLT revenues, nor has it developed a plan to attain self-sufficiency without the monies.  Charles Hayward, writing in Thoroughbred Racing Commentary, outlines the history of the VLT monies becoming a guarantee for 25 years, both contractually and by statute.

The composition of a future Board, however, is as significant an issue.  On the current Board, remarkably, the Governor has less than half of the appointees, although he and his loyalists have controlled NYRA without needing a majority.  There is perhaps a misperception that a “government-controlled” Board means it is composed primarily of state employees.  Only one such person, however, has served on the Board since its inception four years ago.

So when both bills purporting to “reprivatize” NYRA would give increased and overwhelming control to the Governor, one would be inclined to laugh if the prospects for New York’s racing and breeding industries were not so grim.  When one reads the Senate chair of the Racing and Wagering Committee challenging the Governor to veto their legislation, one does have to laugh.  Cuomo is in a no-lose situation  –  he controls NYRA under either scenario, and he gets to keep his seizure of NYRA’s money alive.  Someday, the so-called racing leaders in the Legislature will realize they are playing checkers while Cuomo plays chess.

We should also not minimize the possibility of a new NYRA Board moving ahead with an agenda that acts as though NYRA does not get VLT monies and budgets accordingly.  This was actually proposed in August 2013, by Cuomo’s hand-picked Board Chairman David Skorton.  In a rare instance of the NYRA Board actually commenting on something, it became an idea that was shelved quickly.  Significantly, the charge was led by one of the Senate’s appointees and John Hendrickson, a Cuomo-appointee who resigned recently because the Governor did not listen to him.

So if we have a new Board composed of Cuomo loyalists, who can be counted on to serve the interests of New York’s owners, breeders, trainers, backstretch employees and fans?  The state’s Gaming Commission?  Mostly Cuomo appointees.  The Franchise Oversight Board?  Mostly Cuomo appointees.  NYRA?  More Cuomo appointees.  There are groups representing owners, trainers and breeders, but they have been mostly silent on this debate, possibly because of their need to work with the Administration.

And when the Concerned Citizens and their legislative allies finish draining their champagne flutes after yesterday’s vote, perhaps they can consider how they will explain a new NYRA Board composed almost entirely of Cuomo loyalists as a result of the legislation they supported.

Audit exposes NYRA nonsense

Posted by noonante on June 13, 2016
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , , , , , , . Leave a comment

New York State’s Comptroller, Thomas DiNapoli, released an audit of the financial practices of the New York Racing Association.  He concluded that NYRA “continues to produce multi-million dollar annual deficits in its racing operations,” and that continuing this trend means that “NYRA’s long-term solvency could be a long shot.”

While this may come as a surprise to those who believed NYRA CEO Chris Kay’s constant proclamations that the organization was finally running in the black after years of deficits, it was obvious to anyone who went beyond press releases and actually looked at their financial statements.  The audit comes at a particularly resonant time since the Legislature is due to take up legislation this week concerning the future of NYRA, including a bill proposed by Governor Andrew Cuomo that would degrade significantly NYRA’s financial situation.

The audit covers the three years ending in 2014, during which NYRA was largely controlled by the Reorganization Board put in place by the Governor and Legislature in mid-2012.  CEO Kay has been in charge for the second-half of that period.

DiNapoli concluded:

  • NYRA is incurring significant operating losses from racing unless it includes the revenues from Video Lottery Terminals guaranteed by law;
  • NYRA’s assertion that it is operating profitably without the VLT revenues is based on the exclusion of certain operating expenses, for which “there is no authoritative accounting or financial reporting justification,” and is “very misleading;”
  • NYRA had not developed a plan to eliminate deficits from racing operations as recommended by the Franchise Oversight Board;
  • As an example of questionable expenses, it cited the NYRA Board’s awarding a $250,000 bonus to CEO Kay even though he had not met goals of achieving profitability without the VLT revenues or developing a plan to do so.

Central to both the audit and the Governor’s legislation to again revamp NYRA is the role of VLT payments.  While there are those who question why racing needs the revenues from slot machines, it is an essential component of the agreement reached when NYRA transferred title to the state of the land on which its tracks sit.  One can question the wisdom of doing so, but it was a contract, the provisions of which are embodied in law.

The Governor is now proposing that the VLT payments for racing and capital expenditures to NYRA be reduced from $57.5 million to $46 million.  Given that there is no dispute on NYRA’s numbers, irrespective of how they are characterized, it should be obvious that this would be a devastating blow to New York racing.

NYRA finds itself in the position of possibly absorbing this hit because of its “success” in convincing the media and outside groups of a dramatic turnaround in its finances.  As the audit demonstrates, however, the supposed turnaround borders on fraud.  John Hendrickson, the Board member from Saratoga who resigned when it became clear that the Governor did not need any independent advice, dismissed the Government’s impact on restoring NYRA to profitability, saying it would occur solely because of the VLT revenues.  He put it succinctly in BloodHorse.com:

“For the Governor to say ‘I saved racing’ is like taking your friend out on a boat and throwing him over with concrete sneakers and rescuing him.”

Among DiNapoli’s criticisms of NYRA are questionable expenditures.  Because it did not occur during the period covered by the audit, we will have to wait for the next one to get his views on the Chris Kay self-tribute that is the large structure he built in Saratoga in 2015 to celebrate those who Kay thinks should be celebrated.

This year, he apparently decided to celebrate the audit findings by announcing that he had commissioned a new Triple Crown trophy.  While I am sure that this was done following a competitive bidding process, he remarkably came up with someone he worked with while at Toys ‘R Us.

NYRA does have government bodies overseeing it, including the Gaming Commission and the Franchise Oversight Board, but each entity is controlled by the Governor’s appointees.  The audit raises an issue of their effectiveness.  I have been writing about NYRA’s questionable practice of claiming profitability by moving obvious operating expenses “off the books,” but I do not recall any one in either of these groups questioning it.  (Indeed, a member of the Franchise Oversight Board questioned Kay upon hearing of his plan to expand his self-tribute at Saratoga then demurred by saying, “You don’t have to tell me if you don’t want to.”)

This all comes to the fore because the close of the legislative session is Thursday, at which NYRA’s future is to be determined.  The Governor’s bill retains his control by effectively giving him say over 13 of 15 Board members.  The legislative bills are not much better because they would give a majority of Board appointments to those decided by the Governor’s loyalists.  The Governor’s bill would also strip $11.5 million from a NYRA that an independent source has now raised questions as to its long-term viability.

I think there is an appropriate role for government involvement in a future NYRA.  I do not think the Governor should control the future Board, but rather there should be an independent and professional panel naming so-called “private” Board members.  And, if we want truly independent government oversight, put the Comptroller on the Board.

The future of New York’s racing and breeding industries is at an important crossroads.  It could all go under if responsible figures do not act responsibly.

 

 

NYRA’s summer and the future

Posted by noonante on July 6, 2014
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , , , , . Leave a comment

The New York Racing Associations has announced scheduling changes for the Saratoga meeting beginning on July 18.  Among the differences from last year:

  • A small reduction in the number of races, with only nine flat races carded for Mondays, Wednesdays and Thursdays;
  • Steeplechases on both Wednesdays and Thursdays, with the post for those events being 12:25;
  • Loading up the card for Whitney Day, August 2, by moving two Grade I races, the Test and the Alfred G. Vanderbilt, to that Saturday.

I think the first two changes are positive, although there are some who prefer longer programs.  I realize you are not being handcuffed to a seat to prevent you from leaving before the nightcap, but my personal preference is for fewer races, hopefully producing better quality racing.  Increasing the days on which there are steeplechases will appeal to fans of the jumps, and by making the post time 35 minutes before the standard 1:00, those who do not care for the events won’t be bothered (and the earlier race will not factor into the pick 5).  NYRA is to be credited with coming up with these changes that I think should only be viewed positively.

Loading up the Whitney card by moving two grade I’s from other days is an effort to repeat the increased handle that NYRA believes resulted from a similar approach on Belmont Stakes Day, when they moved Grade I’s from Memorial Day to have a card with six Grade I’s as well as four other stakes.  Martin Panza, the senior vice president for racing, was quoted by Thoroughbred Daily News as saying, “Instead of handling $40 million, we hope to be handling $80 million.  We hope … 50,000 people show up….”

This notion of creating “big” days as a way of enhancing attendance and handle, as well as attracting new fans, is one of the innovations by NYRA this year.  My view is that 100,000 showed up on Belmont Stakes Day not because there were six Grade I’s, but because California Chrome was going for the Triple Crown.  NYRA’s stated purpose in moving three Grade I’s from Memorial Day was to give Belmont Stakes Day insurance against the Crown not being at issue.  I would hazard a guess that at least half the crowd that day had no idea what a Grade I is. The increased handle, on the other hand, very likely was the result of one of this year’s most enticing race cards.  It undoubtedly came at the expense, however, of what I surmise was a seriously lower handle on Memorial Day.

So NYRA’s theory as espoused by Panza will be put to the test on this year’s Whitney day.  My prediction is that the attendance will be about what it was last year, despite what I anticipate to be a heavy marketing campaign by NYRA.

Speaking of attendance, I was at Belmont on Saturday and Sunday two weekends ago.  Both days were absolutely perfect early summer days.  On Saturday, 6,060 other fans joined me; Sunday’s crowd was 5,414.  By contrast, Monmouth Park attracted 40 percent more people over the weekend.  Even Suffolk Downs, cozily nestled between huge oil storage tanks and train tracks in East Boston, attracted a Saturday crowd that was more than half of Belmont’s.  The Monmouth cards did not come even close to approaching the quality of NYRA’s offerings  –  and we need not go into the “quality” offered by Suffolk, a track that may well be on its last legs.

Even more significantly, this weekend’s heavily touted “Stars and Stripes Day” drew a mere 11,118 for a terrific card of racing featuring two Grade I turf races and the Dwyer and Suburban.  Now I realize that Andy Serling works for NYRA, but when he mentioned the “great crowd” as I was looking at tens of thousands of empty seats, I had to wonder if working for NYRA comes at the expense of any pretense of integrity.

The Belmont numbers are not atypical.  They do, however, point to a significant issue concerning the future direction of racing in New York state.  With the exception of Saratoga and Belmont Stakes Day, attendance at New York’s tracks rarely hits five figures.  New York’s handle, from all sources, nonetheless accounts for 20 per cent of all wagers on thoroughbreds in the country.  It may not matter, then, what on-track attendance is when that amount of handle is being generated.  At the very least, however, it is a conversation worth having, particularly since the closing of NYRA’s other down-state track, Aqueduct, is frequently raised.

It is not the only subject worth discussing about New York’s future.  The Governor’s top racing figures have openly mentioned removing revenues from Video Lottery Terminals that currently go to the thoroughbred purses.  The legislation creating the current state-controlled NYRA expires a little over a year from now, and a recommendation on the future structure of NYRA must be filed in less than 10 months.

In addition, there are industry-wide issues that need to be addressed.  Tom LaMarra recently wrote in BloodHorse.com about the significant drop in both recent foal crops and the number of owners. Yet there is not even a peep from NYRA’s so-called leaders talking about these issues.  Chairman of the Board David Skorton rarely says anything about the future of the racing and breeding industries in New York.  He came to the job almost two years ago with neither a background in racing nor any knowledge of it.  I am not sure he has ever been to a horse race.  His pick for NYRA’s CEO, Chris Kay, similarly has no racing background.  At least he had been to a race, albeit 40 years before his appointment.  While his pre-Saratoga press conference demonstrated his knowledge of the eligibility for a free scoop of ice cream at the Spa’s traditional open house on July 13, the next interesting thing he says about the direction of the racing and breeding industries will be his first.

New York should be a national leader in the racing, particularly given the dramatic decline of Churchill Downs as either a racing venue or voice for the industry.  Neither Skorton nor Kay has demonstrated any aptitude  –  or interest  –  in assuming that role.  The NYRA Board that has 11 government-appointed members out of 16, is as useless an entity as exists in racing.  Its last meeting  –  the only one it will have over a six-month period  –  lasted all of 56 minutes, except for an executive session, even though it is facing these significant issues.

According to The Saratogian, Board member Charles Wait said that the preliminary report on returning NYRA to a non-government controlled entity is expected in August.  It is a report that should be made public in order to encourage a much-needed discussion about the future of NYRA.

If past performances are any indication, however, NYRA will refuse to release it.  It’s not as though a Board consisting entirely of older white men could not use some input that the 30,000 people dependent on the racing and breeding industries might have.  Last time I looked, “older white men” is the only demographic amply represented by racing patrons, a concern that should be paramount to an organization that is purportedly interested in expanding its fan base.

NYRA Board continues to spin its wheels

Posted by noonante on March 10, 2014
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , , , , . 2 Comments

If you were hoping for a vision of the future for New York’s racing  from last week’s NYRA Board meeting, it was just more deja vu all over again.

The Wednesday meeting was the 11th of Governor Andrew Cuomo’s “Reorganization Board” and comes a little over a year before the Board must recommend legislation to remove state government from running New York’s racing.  Given an abbreviated meeting that focused on the filthy conditions at Aqueduct Racetrack, however, you would not know what potentially significant changes may be on the horizon, let alone just off shore.

I am beginning to appreciate what it must be like to teach a junior high school class.  I am not sure any Board member takes notes or can recollect what occurred at a prior meeting.  The main topic for any meeting tends to be what a member just says off the top of his head.  (I use the male pronoun consciously.  Of the 21 Board members, 20 are white men.)  This month the topic du jour was the conditions at Aqueduct.

One would think the conditions have to be deplorable since the Board member who raised the issue  –  Len Riggio  – saw his undefeated colt Samraat prevail in a stirring stretch duel over two others, putting him squarely in the Kentucky Derby picture.  Yet his experience, and that of his guests, was diminished because of an Aqueduct he described as “dirty” and “dangerous.”

I must say I was surprised that the cleanliness of Aqueduct is still an issue since it was also the main topic of conversation at the Board’s initial meeting in December, 2012.  A month later, then-CEO Ellen McClain announced that NYRA had taken over cleaning the facility from Genting, the racino operator that co-locates its Video Lottery Terminals at the Aqueduct facility.

It turns out that NYRA is not yet responsible for the food service and cleaning of the areas where food is served  –  which is where Riggio had his Gotham Stakes experience.  The portion of the facility that NYRA is responsible for?  Check out the photographs from Alan Mann’s blog Left at the Gate.  It may not be the box seats at Saratoga, but it rather obviously is not dirty or shabby.

Yet no one disputed Riggio’s assertion that Aqueduct is “dirty” and “dangerous.”  No one  –  neither another Board member nor any member of the NYRA staff.  And this from a group that never shrinks from proclaiming its commitment to bringing new fans to the sport.  Predictably, the news coverage of the meeting was dominated by the conditions at the track as reported by a single Board member.

This discussion did, however, highlight two major shortcomings of the Board under the leadership of David Skorton, the President of Cornell University.  The first is the lack of a meaningful or useful agenda.  Unless there is a truly insignificant issue  –  for this meeting it was the election of two Board members to a committee  –  each agenda looks like every other one:  CEO’s report, CFO’s report, Chairman’s report, etc., etc.  There is never a specific topic on the agenda that would warrant a Board consisting of successful businessmen and professionals to actually put some thought into an issue prior to discussing it.  Accordingly, the meeting then revolves around whatever random thought a particular Board member may utter, provided he gets it out before any other member raises his pet peeve.

The second problem is the lack of any sense there is a long-term vision, and a total lack of follow-up on any matters that require planning and execution.  The condition of the food services at Aqueduct is a perfect example.  At his first meeting in December, 2012, Skorton directed McClain to prepare a report on the contract with Genting because it was responsible for food services and cleaning the facility.   At Wednesday’s meeting  –  15 months later  –  that same contract was cited as an impediment from NYRA being able to improve the conditions in the dining area of which Riggio complained.

Another example stems from the bizarre reality that you can bet on a horse race in Hauppauge, Hoosick Falls or New Lebanon, but not in Manhattan.  McClain identified the locating of betting terminals in New York City restaurants as a major priority.  Two of current CEO Chris Kay’s top priorities are improving customer service and bringing financial stability to NYRA.  Yet the proposal to expand wagering in New York City  –  an important way to both increase customer service and assist NYRA financially  –  has gone nowhere.

Chairman Skorton does, however, persistently insert, in an almost subliminal way, certain themes.  For this meeting there is his view of the necessity of NYRA operating without the revenues from the VLT terminals.  This has been a constant refrain over recent months.  Then there was the spectre of NYRA having to soon make some “really hard decisions.”  He did not identify what any of those hard decisions might be.  And no one asked him.

Because of the immediacy of making those decisions, Skorton raised the possibility of having more frequent Board meetings  –  the next scheduled one is after Memorial Day  –  and said it should be discussed at the end of the meeting.  There was certainly a sufficient amount of time  –  the scheduled two-hour meeting adjourned in 80 minutes  –  but the subject apparently slipped his mind and no one else raised it

NYRA is facing major issues  –  continuing Aqueduct as a race track, operating without VLT revenues, and the structuring of the next new NYRA which has an expiration date of October, 2015.  When Chairman Skorton raised the possibility of more frequent meetings, it was with the notion of discussing these matters in a public forum.  While open discussions are the way to go for a government agency that controls an industry employing tens of thousands and has such an impact on New York’s economy, I doubt that there really is a desire to have those talks in public.  The deafening silence to his proposal  –  as well as his forgetting about it  –  is sufficient testament to that.  Or perhaps it is another example of the short attention span of the Board.

Skorton did let slip a very revealing comment during the meeting.  In stressing the importance of balancing NYRA’s budget, he said it was to aid those people coming next to run NYRA.  Then he said the next people are “hopefully us.”

That may be his hope, but there are many who think New York has already had enough of Andrew Cuomo’s control of New York racing.  And what can you say about a group that spends fifteen months talking about  –  but not fixing  –  the problem of a dirty restaurant?

NYRA Board facing challenges

Posted by noonante on December 13, 2013
Posted in: Horse Racing, Political/Social commentary, Politics, Uncategorized. Tagged: , , , , , . 2 Comments

The NYRA Reorganization Board started to deal with some of the significant challenges facing it at its Board meeting on December 4.  Almost all the coverage of the meeting focused on the proposal to increase admission charges to Belmont and Saratoga.  General admission would go from $3 to $5 and the clubhouse would be bumped from $5 to $8.  Charges for parking would also go up.  No change was proposed for Aqueduct where admission is free.

While the increases affecting patrons understandably drew the most comment, the overall fiscal situation of NYRA is one that can hardly be described as rosy.  At the August Board meeting, the continuing use of revenues from the Aqueduct Video Lottery Terminals was the financial issue attracting the most attention.  It was clear from Governor Andrew Cuomo’s top appointees to the Board  –  Chairman David Skorton, President of Cornell, and Robert Megna, also Cuomo’s Budget Director  –   that NYRA had to start operating as if the VLT revenues were no longer available.  It is a significant issue.  Without the VLT revenues, NYRA’s racing operation realizes a loss;  with the revenues, NYRA sees a profit.  Incidentally, the loss of VLT revenues is only an immediate concern if you are the Governor  –  and we do not know what his thinking is on this matter, as with so many other issues affecting the state.  The revenues are guaranteed to NYRA by statute.

The main purpose of last week’s Board meeting was to approve the NYRA budget for 2014.  The proposal put forth by NYRA management would have the racing operation realize a $250,000 profit without factoring in the VLT revenues.  That would be accomplished by cuts in spending and increases in revenue.  The VLT revenues were not going away, however.  The estimated $23.7 million for operating expenses from the VLT’s was to address retiree obligations of $12.5 million and an unanticipated obligation to the Internal Revenue Service of $13 million.  Suddenly, the $250,000 surplus becomes a deficit of $1.5 million.

If we set aside for the moment the receipt and use of the VLT revenues, NYRA is proposing to turn a 2013 deficit in the racing operation of $10.5 million to that $250,000 surplus, from cutting costs by $3.9 million and increasing revenue by $6.9 million.  The cost cutting is achieved primarily through a one-time payment of $3 million to the OTB network in 2013.  The other big-ticket cuts are $400,000 in utility savings by closing the Aqueduct training track when there is not racing at the track, and $576,000 in outside legal fees.  On the revenue side, fully one-third of the budgeted increase results from on-site track customers in the form of increased admissions, parking, programs and the food and beverage concessions.   The increased costs to patrons are one of the only revenue increases over which NYRA has complete control.  While the budget contemplates increased simulcasting fees of $1.6 million and additional sponsorship payments of $1.3 million, these are aspirational projections contingent upon successful negotiations.

The Board debate on increasing customer charges is one of the few issues on which this Board has seen a spirited debate in its year of existence.  (I can only think of two other cases in which there was significant dissent.)  It is clear NYRA needs additional revenue, even if you assume the VLT revenues are here to stay.  What is less clear, however, is whether increasing admission and parking charges  –  estimated to be worth about $2 million  –  would be offset by a decline in attendance (and handle), resulting in either no net benefit or a financial loss.

I have had a mixed feeling about admission prices at race tracks ever since I started going.  On the one hand, I did not understand why tracks did not let people in for free.  While there may be folks who go to a track and don’t spend a penny, most are going to wager at least something.  I don’t think I have ever brought anyone to the track for the first time who did not bet on every race.  On the other hand, it is one of the cheapest entertainment expenses imaginable.  For $3 (or $5), you get to go to a beautiful facility, watch magnificent animals up close, engage in the excitement, and wager.  Kids get in for free.  That’s why I do not think the small increase in prices will deter many, if any, people.  (I do not know what the parking increases will be.  That is something, I think, that could irritate enough people to cause folks to go elsewhere.)

That’s not to say, however, that NYRA was particularly brilliant in how it handled this issue.  It is the kind of matter that is going to bring out the naysayers always on guard for any affront  –  just read some of the comments in the on-line media.  (I think I have seen a single comment defending the decision.)  While the 2014 budget had to be approved this  month, it did not mean that the price increase could not have been floated in advance.  NYRA may think it has a deep well of goodwill, but they have done little as the “new NYRA” (which is how they have started to refer to themselves), and what they have done is invisible to much of the public.

Then there are components of the budget that raise eyebrows. CEO Chris Kay is hiring additional executive-level staff, including something called a “Chief Experience Officer.”  That would be in addition to the existing Chief Marketing Officer and a Vice President for Hospitality and Guest Services.  There is also $800,000 set aside for a “long term planning consultant.”  This is a Board that was appointed 14 months ago, named a “long-term planning committee” 10 months ago, and is down to its last 16 months before it must produce a recommendation for turning the “new NYRA” back to an “improved new NYRA” that will eliminate state government control.  After apparently doing no long-term planning, they are down to paying top dollar for someone to tell them what to do.  Then there is an item notable for its omission from the budget document.  Prior CEO Ellen McClain proposed an effort to bring betting terminals into restaurants in New York City.  Not only would this be a major benefit for racing fans in the largest United States market, but would greatly enhance revenues to NYRA.  It’s hard to believe that you can go to Manhattan and not be able to place a legal bet, but nothing has apparently been done on this proposal since McClain left.

In his remarks supporting the increased charges on customers (or, as he likes to call them, “guests”), Kay acknowledged the importance of bringing “significant value” to justify the increased costs.  In a speech this week, he referred to the “countless e-mails and letters telling us the wonderful things we’ve done,”  according to Tom LaMarra in BloodHorse.com.  Kay was not more specific, although I must say I did have several NYRA employees greet me in a friendly manner this year at Saratoga.  The one specific I have heard from Kay is that increased satisfaction from patrons should not be measured by the decline this year in Saratoga’s attendance, but rather in the fact that those who did come spent more money on concessions and souvenirs.  He attributed this to his increased focus on the “guest experience,” which would make him somewhat of a miracle worker since he started in the job just before the Spa opened.  For 2014, the only “significant value” he has identified is High Definition TV’s.  At this point, I think most people would take that as a given, rather than something warranting increased prices.

When NYRA Board Chairman David Skorton pushed for the authorization to increase prices on its customers, he repeatedly referred to the Board’s “fiduciary” duty.  The Board undeniably has that responsibility, but it doesn’t end with jacking up prices.  It means you also question the wisdom of $800,000 to do the long-term planning many people think was a primary duty of this Board, or the necessity of a “Chief Experience Officer,” when, again, many think that’s why this Board was appointed.  Or it means you do something about placing betting terminals in New York City’s restaurants, a revenue enhancer that would lessen the pressure to increase costs for the customers who go to the track.  Finally, exercising one’s fiduciary responsibilities means you push back on a Governor who is hell-bent on eliminating the VLT revenues  –  monies realized not from the state’s coffers but from the profits of a casino operator  –  if that is necessary to ensure a viable racing and breeding operation in New York State.

As I said earlier, I have mixed feelings about increasing admission prices.  I would feel a lot better about it if I thought the Cuomo Administration and his top appointees were showing any interest in actually making it better for the racing and breeding businesses in the state.

New NYRA – where’s it at?

Posted by noonante on November 4, 2013
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , , , , , , . 1 Comment

It’s been more than a year since the NYRA Reorganization Board was established.  Since the law written by Governor Andrew Cuomo calls for it to disappear three years after its creation, this is a time to look at what difference it has made to New York’s racing.

The “new” NYRA was deemed necessary by the Governor, who browbeat the former NYRA Board and a somnolent Legislature in May of 2012 to give him control of New York’s racing, despite the Governor’s admission that he did “not know this industry especially well.”  He waited four months before signing the law, and did not appoint his Board members until October 18.  The purported reason for the dramatic step of state government taking over the industry was a supposedly “scandalous” prior NYRA that had failed to make a one percent reduction in takeout in some exotic wagers.  (Never mind that the promised review by the Inspector General has never materialized, nor that Cuomo’s new Board concluded there was no intentional misconduct by the prior NYRA’s leadership.)

Cuomo named David Skorton, President of Cornell University, as Chairman of the new Board and made seven additional appointments to go along with four appointments by the legislative leadership and five appointments by the old NYRA.  Skorton, who has no experience with horse racing, was praised at the time because he once stayed in a Cornell dorm room.  Skorton viewed the problem with the prior NYRA as resulting from a lack of “leadership and management,” and promised to run a transparent and accountable organization.

So, what has he accomplished?  Answering that question is somewhat difficult since, despite the promise of transparency, the “new” NYRA has been anything but.  We are left with what has been discussed at the public meetings of the Reorganization Board.

Chairman Skorton’s first priority was to focus on the safety of the participants in New York’s races.  A Task Force that was appointed and made a comprehensive report prior to Skorton’s arrival on the scene, had recommended a number of changes to how NYRA and the state conduct racing.  Some of the significant changes proposed in the Report were made by a separate state agency, the Gaming Commission that has the authority to issue regulations.  They made changes in rules governing the administration of some medications, as well as modifications to claiming rules.  For its part, NYRA appointed a committee to review safety policies, another committee to investigate racing fatalities, and have started conducting necropsies of catastrophically injured horses.

Of the Task Force’s 39 main recommendations and 93 subordinate proposals  –  a number of which required action by the Gaming Commission  –  how many did NYRA implement?  We do not know because NYRA has refused to provide any information regarding their action or inaction.

At one point this year, it appeared that the Gaming Commission regulations and NYRA’s focus on safety may have produced results.  Following some earlier fatalities at Aqueduct, there was a marked decrease in catastrophic breakdowns at the spring meetings.  Unfortunately, that trend stopped during the Saratoga meet, and while Belmont fall meeting fatalities are down from six in 2012 to four this year, it has not mirrored what appeared to be a significant success.  The cause of fatal breakdown is a complex one with many contributing factors, but NYRA’s failure to divulge information as to what they have done does not benefit horses, riders or the industry.

Another priority became the hiring of a new Chief Executive Officer.  While Administration sources reportedly said there would be a “nationwide search” commencing in October and that there had already been considerable interest expressed by experienced racing executives, the new Board did not begin the search until the end of February.  They ended up hiring unemployed business executive Christopher Kay who, unlike his boss, had actually been to a horse race  –  albeit 40 years ago.  As an indication of the Governor’s interest in the industry he now controls, as well as the juice Kay will possess when it comes to making decisions affecting New York racing, Cuomo did not even meet with Kay prior to his being hired.  Although Kay signed a $550,000 contract, apparently it did not call for him to be ready as CEO on day 1.  The Times Union has reported that NYRA also paid a consultant $75,000 to “mentor” him.

The issue that prompted the most discussion at the Board was a proposed contract for an Advance Deposit Wagering platform.  The Gaming Commission’s Acting Director Rob Williams, supported by Cuomo’s Budget Director and Board member Robert Megna, had expressed reservations about the process used to select the winning bidder.  Since the contract was expected to bring in between $3 and $5 million each quarter (starting with the one we are in), it was not an insignificant matter for NYRA to get right.  This is particularly important because of the insistence by Williams and Megna of NYRA becoming self-sufficient without relying on  the VLT revenues from the racino at Aqueduct.  While I agree that the procurement process was fatally flawed, neither Williams nor Megna did much to bring the matter to resolution, even though it could have been resolved with a phone call to Skorton.  Despite the hectoring on VLT revenues, the two Cuomo employees allowed the process to drag on for months.  While Chairman Skorton  –  the “leadership and management” advocate  –  said he would work the matter out in April, he did nothing and the full Board ended up withdrawing the procurement at its June 18 meeting.  So in the six months after then-CEO Ellen McClain identified this as a problem, the Board sat on its hands, and a technology that was expected to start a month ago has been delayed while a new procurement is conducted. 

So that is one person’s assessment of what the new NYRA has “accomplished” in its first year of operation.  Although it is a 17-member Board with several “Special Advisors,”  David Skorton is clearly in charge.  If you follow the activities of the Cuomo Administration, you are not going to see much independent behavior, and this Board does not disappoint in that regard.  In all of the Board meetings, there has only been one vote that has not been unanimous  –  the decision to withdraw the ADW contract.  The “discussion” at the meeting to select the CEO lasted all of eight minutes.

In addition, Skorton’s promise of transparency has been as hollow as that of the Governor’s frequent invocation of that phrase while doing the exact opposite.  (The law establishing the new NYRA was laughingly entitled “New York state racing franchise accountability and transparency act of 2012.”)  NYRA consistently refuses to release documents that are clearly public ones  –  a prime example being Kay’s $550,000 contract and performance goals.  Skorton said all decision-making meetings of NYRA would be public, but only one committee  –  Equine Safety  – has regularly conducted its business in the open.

These are not esoteric matters.  NYRA has three significant decisions on its plate that could have a profound and long-lasting impact on New York racing and the tens of thousands of jobs dependent on it.

The first is whether NYRA should start to operate as if there are no VLT revenues.  Skorton tried to sneak this through in the last minutes of the August meeting of the Board.  In a rare show of independence, there was sufficient backlash for the Chairman to back down.  The VLT revenue is important because a racing operation that has operated at a loss without the revenue operates profitably with them.  The VLT revenues, incidentally, come from the profits of the casino operator, not “state subsidies” as Cuomo Administration figures continually say.

The Board must also come up with a plan to “reprivatize” NYRA.  The law creating the new Board calls for a report on this to be made by April 2015  –  less than 18 months from now.  There have been leaked stories from Cuomo’s Administration raising possibilities ranging from Santa Anita (sic) to Madison Square Garden (double sic) as potential franchise holders.

The third big issue comes to us courtesy of The New York Daily News.  The Governor has apparently decided that Aqueduct is a “waste”  –  which to the Governor’s mind means property that could be transferred to real estate developers.  Robert Megna, who attended the meeting with the editorial board, stated that Skorton and Kay are studying the possibility of closing Aqueduct “very closely.”

So, there you have it.  As a frequent examiner of past performances, when the Governor says something, the only response one can expect from his appointees is “Yes, Sir!”  We thus have the uncomfortable scenario in which three people who know nothing about racing or the breeding industry are on a path to make decisions profoundly affecting both.  And, it is clear they intend to make those decisions in secret to the extent they can get away with it.  Skorton already said as much at the August Board meeting on the subject of the VLT revenues.

It is not as though there are not plenty of talented people with a wealth of knowledge and experience who deserve to be part of these discussions.  They can be found on back stretches, farms, industry organizations or working for NYRA.  Each of these issues is significant and complex and would benefit for a full and open airing.  They don’t lend themselves to the sound bites of a Governor’s reelection campaign.

NYRA and VLT’s

Posted by noonante on October 16, 2013
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , . 2 Comments

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 the Acting 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.

Fix is in for New York to cut purses

Posted by noonante on August 22, 2012
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , . 3 Comments

As a firm believer that past performances are indicative of future behavior, it looks like the fix is in to take VLT payments that have been going to horse racing to use them for whatever Governor Andrew Cuomo thinks is a more deserving option.  As we learned from the state takeover of New York’s horse racing, when Cuomo speaks, his minions listen.

When Video Lottery Terminals were first authorized by a law passed in 2001, that law directed that a portion of net revenues go to education programs in New York, and that a smaller percentage go to the tracks hosting the VLT’s, or “racinos.”  While the Saratoga Harness Track was up-and-running by January, 2004, it took almost an additional eight years for Aqueduct to go live.  In less than a year after its October opening, however, Aqueduct has been remarkably successful, drawing a million customers who wagered over a billion dollars in July alone.  The VLT revenue has long been viewed as a necessary supplement to the New York Racing Association in its struggle to attain financial solvency.  Because of this revenue stream, NYRA is projecting a surplus in 2012.

Enter Governor Cuomo, whose first demonstrable interest in horse racing was his realization that he should run it.  After cowing an impotent NYRA Board of Trustees and a somnolent Legislature, he achieved his goal with a law passed in June, less than six weeks after first floating the idea he should be in charge.  Now the revenues produced by the Aqueduct casino that have been going to NYRA are in his sights.  In a press conference on June 4 to address questions resulting from the collapse of negotiations to award a multi-billion, no-bid contract to the operator of the Aqueduct racino, Cuomo raised the possibility of eliminating the payments by the racino to NYRA.  Among his remarks, he called payments by VLT operators to tracks a “scandal,” without either explaining why or recognizing that such payments were required by law.  As the great philosopher once said, “It’s deja vu all over again.”

In early July, the Franchise Oversight Board, chaired by Cuomo’s Budget Director, and on which his Lottery Director also serves, decided that “NYRA must establish a long-term financial goal to end its reliance on VLT subsidies and immediately develop plans on how it will meet this goal.”  Later in the month, the State Comptroller issued a report questioning whether the VLT revenues going to racetracks “are having their intended effect.”  The Lottery Director, who is responsible for administering the VLT payments, “shared” the Comptroller’s concerns and then added his own anecdotal perspective supporting the Comptroller’s conclusions about the “effectiveness of the horse racing subsidies.”

The conclusions of the reports by both the Franchise Oversight Board and the Comptroller are based on premises that are supported by neither the law nor the purposes of the VLT revenues.  The Board acknowledges that one purpose of VLT revenues, as stated in the law, is “ensuring the continuation of high quality thoroughbred racing.”  Their report then posits that if NYRA does not better control its expenditures, even the VLT revenues will not keep it solvent.  They then jump from that patently obvious statement to the conclusion that “NYRA must establish a long-term financial goal to end its reliance on VLT subsidies.”  What???  Keep in mind that when the Governor gets around to signing a bill that has been on his desk for two months  –  and that he wrote  –  these same state officials will be controlling NYRA and its expenditures.  So why is cutting off a necessary revenue stream from the VLT’s even being contemplated?

Lest you think I am being unduly paranoid, let’s move onto the report produced by the State Comptroller.  While the Comptroller is an elected official not subject to the Governor’s control, do not lose sight of the fact that the Governor’s Budget Director enthusiastically supported the Comptroller’s conclusions, specifically referencing the “ineffectiveness” of VLT revenues.  The Comptroller acknowledges that “the VLT revenues are to provide much needed financial assistance to the racetracks.”  He goes on, however, and makes the following statement:

“Pursuant to the Tax law, the commissions paid by VLT facilities to enhance racetrack purses are expected to result in an eventual increase in the number of horses entered in each race, an increase in the quality of the horses racing, and ultimately in increased wagering and more financially-stable racetracks.”  (Emphasis is mine.)

While I think that enhanced purses may well lead to the outcomes identified in this quote, the Comptroller is saying those are the results expected “pursuant to the Tax law.”  The report did not identify which portion of the Tax Law called for those outcomes, and I did not read the entire Tax Law to find them, but I did read Section 1612 which is devoted to distribution of lottery and VLT revenues.  That section describes the purpose of the VLT payments to NYRA as being for “enhancing purses.”  Period.  Also, the payments are made “as consideration for the operation of the video lottery gaming facility at Aqueduct racetrack.”  In other words, the State of New York is agreeing to a contractual arrangement with the NYRA tracks that it can have money for enhanced purses because it agreed to have one of its tracks host a VLT facility.  By law, NYRA is entitled to the VLT revenues with no strings attached.

That, however, is not the way the Cuomo Administration likes to operate.  As with the takeover of NYRA, the Governor puts forth a faulty premise and then crafts a solution that does nothing to address the purported problem inherent in the premise.  He succeeds, however, in getting others to play the game on his terms.  The media dutifully reports the headline conclusions of the government reports without assessing whether the conclusions are based on facts or even simple logic.  We even have leading  New York horsemen now arguing that attendance and handle are up, instead of making the case that NYRA has a legal right to this money by statute.

Worse of all, however, is that there is no discussion of what cutting revenue to NYRA will mean for the thoroughbred industry in New York.  We can hope that the Cuomo takeover of racing will result in improvements for the sport, but the next person I talk with who thinks that is likely will be the first one.