Updated on 01/12/2012 9:30PM

Aqueduct plan: Where does racing fit in?

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New York Gov. Andrew Cuomo has proposed a multibillion-dollar convention center at Aqueduct racetrack in Queens, but he and his staff have yet to discuss the impact that such a project would have on the track’s racing operations and the New York racing circuit, according to officials who have discussed the proposal with its supporters.

The proposal was outlined during Cuomo’s “State of the State” speech Jan. 4 following closed-door discussions between Cuomo’s staff and officials of Genting. Racing officials said it was never discussed with any representatives of New York racing, including officials at the New York Racing Association, Aqueduct’s operator, or with the state’s horsemen’s group.

The plan for the convention center poses some troubling questions for New York racing, especially considering that it comes only two months after a casino at Aqueduct began generating tens of millions of dollars a month for the state and the casino’s operator, the Malaysia-based company Genting.

The plan hinges on legislative approval of an expansion of the number of gambling machines at the Aqueduct casino and could lead to the possibility that Aqueduct would be closed for racing operations. If that were the case, Belmont Park on Long Island would become the state’s sole downstate facility for racing, requiring a renovation of the historic track so that it could accommodate winter racing.

It is not entirely surprising that the plan’s impact on racing has not been a pressing topic for the governor. Racing generates paltry sums for the state in comparison to casinos and real-estate development, and the plan under discussion could reward the state with a $4 billion convention center and generate hundreds of millions of dollars annually in new gambling revenue. In addition, the construction of a new convention center in Queens – adjacent to JFK airport, but miles and miles from the center of Manhattan – could free up the state to redevelop the existing Jacob Javits convention center on Manhattan’s west side, a property that sits on some of the most valuable real estate in the world.

Officials said that the plan still faces several hurdles and that the process to negotiate the details could take years. Most significantly, Genting has agreed to fund construction of the convention center as long as the state allows the company to add thousands of machines to its existing casino at Aqueduct and tax the revenues from the new machines at a lower rate than the existing machines. Politically, that presents the possibility that other casinos in the state will clamor for the same consideration, a prospect that could complicate the political process.

Genting and Cuomo have also said they want to add table games to the Aqueduct casino, a measure that would require approval of a constitutional amendment. In New York, constitutional amendments must pass in two consecutive legislatures and then be ratified by voters. The earliest such a referendum could appear on a ballot, then, is November 2013.

Genting has said it needs the additional machines and table games in order to fund construction of the convention center, a project its supporters contend will cost an estimated $4 billion. Coupled with the billions of dollars that would be associated with the redevelopment of the Javits Center, the two projects would create a web of opportunity for New York politicians to strengthen their ties to constituents, the business community, and union leaders, all sources of votes and campaign contributions.

The plan is in part a validation of the enormous success of the Aqueduct casino, which in just over two months of operation generated $89.2 million in total revenue to the state, its lottery, Genting, and the state’s racing industry, according to figures published by the New York Lottery. The casino opened Oct. 28 with approximately 2,500 slot machines and video table games; it has since expanded to 5,000 gambling machines and is generating approximately $350 in revenue per machine each day.

Cuomo said in a letter to the state’s legislative leaders this week that Genting would need a new “revenue-sharing” agreement with the state for the additional machines, and that the new agreement “would be binding only upon the new [gambling machine] revenue.” In other words, the state would leave intact the legislation setting forth revenue distributions from the existing machines while seeking to negotiate a deal that applies only to the new machines.

That new agreement, according to an official with knowledge of the talks, would probably not include distributions to the racing industry, so that the state can sweeten the deal for Genting without cutting too far into the share distributed to the state. The New York Racing Association and its horsemen currently share approximately 15 percent of the gross revenue from the casino, money that has promised to put NYRA in the black for the first time in a decade and boost purses at the three tracks operated by NYRA to levels far higher than any other racing circuit.

“The talk right now is that there would probably be a floor in the new agreement,” the official said. The floor would protect the horse racing industry’s share of the total gambling revenue if revenue from the existing machines falls because of the expansion, the official said. Typically, when a casino adds machines, the operation’s overall revenue rises, even though the amount of revenue generated by each machine falls.

Charles Hayward, the chief executive officer of NYRA, said he would not comment on the plan until the association had received more details about the proposal.

Rick Violette, the president of the New York Thoroughbred Horsemen’s Association, said if the expansion goes forward, the days of racing at Aqueduct may be numbered. In addition to the convention center, Genting has said it plans to build a 1,000-room hotel at the property to accommodate visitors, along with other amenities, making racing even more of a sideshow than it is right now.

Still, Violette said if racing remains at Aqueduct, that might not be such a bad thing.

“If racing continues to exist at Aqueduct, it will be racing at the new Times Square of New York, where we could showcase racing at its best to a whole new captive audience,” Violette said.

If Aqueduct’s racing operation is squeezed out, that would require nearly year-round racing at Belmont Park, the cavernous racetrack in Elmont, N.Y., that has no heating or subway link to the five boroughs. Officials have said they are unsure what would be required to convert the track into a winter-racing facility, but that the cost would certainly run well beyond what the racing industry could bear.

So who would pay for such a project? Violette said it would be incumbent on Genting and the state to fund the renovation. “We’re partners in this whole thing,” he said.

Should the renovation of Belmont become necessary, the state could look to an easy source of revenue – another casino, located at Belmont, convenient to the population of mid-Long Island and eastward. The state is currently in negotiations with the Shinnecock Indian tribe to settle a land claim, and Belmont has been mentioned as a site for the casino the tribe wants to build.

A number of other possibilities are plausible, but it’s hard to forecast the future for a racing industry that is so far relegated to the sidelines.

“There’s a lot of potential impacts on racing, but none have been discussed yet,” said the official with knowledge of the talks. “This deal has a lot of moving parts, and I don’t see this as being a quick process.”