02/21/2007 12:00AM

Excelsior named top franchise bidder


Excelsior Racing Associates, the for-profit company formed to bid on the New York Racing Association franchise, was ranked highest among three bidders for the franchise by the Ad Hoc Committee on the Future of Racing because of committee members' belief that the company's financial backing and commitment to improve racing exceeded the other two bidders, according to the conclusions of a report issued by the committee on Wednesday.

In the report, Excelsior was ranked highest overall under two different bidding scenarios, beating out two other bidders, the for-profit Empire Racing Associates and NYRA, which submitted a response under a not-for-profit structure. Excelsior achieved the first-place position by being ranked first in four of seven grading categories in one scenario and five of seven categories in the other.

The Ad Hoc Committee was formed in 2005 to issue the request for proposals, evaluate bids, and release a report to the legislature and governor recommending how the franchise should be awarded. The franchise, which expires at the end of this year, includes the right to operate Aqueduct, Belmont, Saratoga, and a casino at Aqueduct for 20 years. The second scenario allowed the operator to operate a casino at Belmont as well.

"The Committee determined that among submitting bidders," the report said in its conclusion, "Excelsior could reasonably be expected to best provide over the proposed franchise period for the operation and maintenance of the racing facilities, the conduct of race meetings at such facilities, the pari-mutuel betting on the races to be run at such race meetings and the video lottery gaming facility at Aqueduct racetrack in a sound and economical manner consistent with the traditions of thoroughbred racing in New York, ensuring the long-run viability of thoroughbred racing in the state for the support of government."

The 270-page report released on Wednesday detailed the responses of all three bidders to the committee's request for proposals. The committee issued the raw results and rankings of its recommendations late last year, but did not approve the final, complete report until a meeting on Wednesday morning. The report was approved unanimously, the committee said.

The fate of the report is unclear. The speaker of the state's Assembly, Sheldon Silver, has called the committee's work irrelevant because of the election last year of Gov. Eliot Spitzer, who would need to approve any franchise deal. In addition, NYRA declared bankruptcy late last year, and its protection under the bankruptcy court and an unresolved issue over whether NYRA or the state owns the racetracks has stalled any movement in the legislature toward working to select a new franchise holder.

Excelsior's bid was strengthened in part by relatively high estimates for revenues provided from slot machines at Aqueduct, which allowed the company to project relatively higher spending on capital projects and industry improvements. For example, in the first year of operation, Excelsior estimated that each slot machine at Aqueduct would produce $591 in revenue per day, for a total of $2.66 billion in annual revenue; Empire estimated $414 a day, or $1.86 billion, and NYRA estimated $400 a day, or $1.8 billion.

In the report, committee members said they asked Excelsior to furnish studies that would validate the estimate, which Excelsior provided. Later in the report, the committee said that since Excelsior had pledged to spend more on capital spending than Empire, it valued Excelsior's bid higher because any overestimate would only reduce the company's profitability. In contrast, if Empire underestimated its revenues, the company "could be tempted to make distributions to their partners."

"Given the choice between projections and guarantees, the Committee determined to err on the side of the significantly higher guaranteed capital improvements and programs offered by Excelsior," the report said.