04/09/2007 11:00PM

Empire, NYRA make their bids – again


ALBANY, N.Y. - For the second time in a year, a process to evaluate bidders for the right to run racing at New York's three largest racetracks got under way Tuesday with the first of two days of hearings before a state panel.

Two bidders - Empire Racing Associates, a partnership of New York businessmen and North American racing companies, and the New York Racing Association, the current franchise holder - appeared before an eight-member panel to provide details and answer questions in five hours of testimony.

The panel was put together by Gov. Eliot Spitzer earlier this year just weeks after a committee formed by former Gov. George Pataki released a final report ranking three bidders based on proposals submitted last year. In ranked order, those three bidders were Excelsior Racing Associates, Empire, and NYRA. Excelsior, a rapidly changing partnership, was scheduled to give its presentation to the Spitzer panel on Wednesday along with Capital Play, an Australian bookmaking company.

Much of the testimony Tuesday was raised last year before the Pataki panel - the Ad Hoc Committee on the Future of Racing. However, both NYRA and Empire have made several small changes to their proposals, in part to reflect the change in administration in Albany and in part to respond to any shortcomings in their proposals based on the ad hoc committee's recommendations.

Empire, for example, modified its business model to include profit-sharing with the state should revenues from slot machines in a yet-to-be-opened casino at Aqueduct exceed the group's estimates. NYRA officials said that they were optimistic they could strike deals with several of the state's offtrack betting corporations to improve the state's racing economics.

The panel was chaired by Richard Rifkin, Spitzer's lead counsel, and for the most part sought clarifications from NYRA and Empire. Indeed, Rifkin, in his opening remarks, pointed out that the hearings were "not intended to be the place to debate the issues that may be raised."

The panel members had not previously been announced, and their identities reflected Spitzer's desire to involve four branches of government in the process - the budget office, the state's economic development corporation, the racing and wagering board, and the legislature - according to a spokesman for Spitzer, Paul Larabee.

The panel is expected to issue a report to the governor and legislature within 30 days on its recommendations in awarding the franchise, which expires on Dec. 31. The franchise includes the right to run Aqueduct, Belmont, Saratoga, and a casino at Aqueduct.

The panel includes four people affiliated with the legislature: Assemblyman Gary Pretlow, a Democrat and chairman of the House's racing and wagering committee; Assemblyman Jim Tedisco, a Republican; Senator John Sabini, a Democrat; and Jon McCloskey, a legislative staff member representing the Republican leadership of the Senate. The other panel members are Patrick Foye of the Empire State Economic Development Corp.; Daniel Hogan, the chairman of the New York State Racing and Wagering Board; and David English, the chief budget examiner of the Division of the Budget.

Empire officials focused on their plans to develop the property at Aqueduct into a resort that would compete with casinos in Connecticut and Atlantic City.

Empire is a for-profit company that includes major racing companies such as Churchill Downs, Magna Entertainment, Woodbine Entertainment, and Delaware North Companies. The partnership also includes the real estate development companies SL Green Realty and the Cordish Companies and has been endorsed by the New York Thoroughbred Horsemen's Association.

Marc Holliday, the chief executive of SL Green, testified that Empire believed it could generate at least an 8 percent return on investment should it be awarded the franchise, although cash flow for the first five years "would all be going in the wrong direction" because of the amount of money the group would spend on capital expenditures.

NYRA officials used part of their presentation to cast doubt on the ability of for-profit operators to act in the best interests of racing. NYRA's proposal is a nonprofit business model. Jim Heffernan, a NYRA trustee, criticized the recommendation of last year's ad hoc committee to award the franchise on a 20-year basis and to require that all assets of the franchise be turned over to the state at the end of the franchise period. Heffernan contended that such requirements would provide no incentive to upgrade the tracks or build new facilities.

Officials for NYRA, which filed for bankruptcy late last year, stressed that their financial problems were caused by a "broken model," in the words of NYRA chief executive Charles Hayward, who cited what he called outdated statutory requirements.