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Fighting to keep NYRA viable
It has been three years since Charles Hayward resigned as president and CEO of Daily Racing Form and 32 months since he took over as president of the New York Racing Association. Hayward, who later took on the title as CEO, has had to guide NYRA through a most difficult period that included a deferred prosecution after NYRA was charged with conspiracy to commit tax fraud.
During his tenure, NYRA has sued the state and former New York Gov. George Pataki, declared bankruptcy, and unsuccessfully negotiated with the state to get a slot machine parlor at Aqueduct off the ground. The past year has been spent formulating NYRA's bid to win the right from the state to retain the franchise to run racing at Aqueduct, Belmont, and Saratoga past this year, when the current franchise expires.
On the eve of the 139th Saratoga season, which begins Wednesday, Hayward sat down with Daily Racing Form's David Grening to discuss the meet at hand and the future of the NYRA.
Daily Racing Form: For a long time it was a widely held belief that this could be the last Saratoga meet conducted by NYRA. Now there is a strong belief that NYRA will be able to retain the franchise to run racing at Aqueduct, Belmont, and Saratoga for the next 20 years. What do you believe?
Charles Hayward: I believe, and you read all the reports right before the Belmont Stakes, that the current administration seems to believe that NYRA's the most qualified to run racing. And I think if you look at the three competitors that would be a logical conclusion. I think also in bankruptcy [court] there are two big, outstanding issues right now, which is the state is still maintaining we don't belong in bankruptcy, and we still have a claim for a disposition on who owns the land. And I'd like to think that as part of this whole process we could resolve all those issues and NYRA could come out of bankruptcy. That would be good for New York State and good for racing.
Do you believe that a year from now you'll be preparing for the 2008 Saratoga meet?
On July 20, Gov. Eliot Spitzer announced that by Sept. 4 he would make a recommendation to the state legislature on who should get the franchise. Is this six-week deadline a good thing?
I think any deadline is a good thing, because there's been such lack of certainty certainly throughout the whole Pataki administration. This statement does not suggest what we heard earlier, which was that NYRA would be the entity that would run racing. But I think Sept. 4 gives us a little less than four months to re-bid some contracts and get a lot of things done. There are a tremendous amount of contracts that are really up in the air right now. It seems to me that [with] this process limited to the existing bidders we can make our changes in our bids and they can evaluate them. As I understand it, the Sept. 4 date is the deadline for turning this over to the legislature. It still has to be approved by both the Senate and Assembly and then the governor. But, yes, anything that puts a deadline on it is very helpful.
Would NYRA consider partnering with any of the other bidders?
That's something we'd have to discuss with our board, but I don't think that it's likely that we will be partnering with the existing three bidders.
We want racing to be first and foremost in this new franchise deal. Despite the representations made by the other three bidders, the conclusion I look at when you look at them hard [is] they're more interested in the gaming and the development and, frankly, their presentations back in March reflected that. We still think racing should control this enterprise, and it's not clear to me that that's what the other interested bidders would have.
Do you believe Gov. Spitzer wants racing to be first and foremost as opposed to development?
I don't know. The one time I spoke to Gov. Spitzer - before he was elected - he was very conversant with the number of breeding farms, the number of jobs in the industry, the amount of economic benefit that was provided, particularly upstate. I think taken in its entirety - the racing and the breeding - I think that's very important to him.
Is NYRA willing to relinquish any claim it has to the land the three racetracks sit on to receive a 20-year franchise extension?
The ultimate determination would have to be made by the board. We recognize there has to be a resolution to the land issue for the benefit of racing. There are a number of different ways that that can be done. We would welcome the opportunity either in the context of the bankruptcy court or the franchise to talk to the state about that. I think a new franchise and the resolution of the land claim probably go hand in hand.
If you're unlikely to partner with any of the three existing bidders, are you still seeking a partner to run the casino operation or is NYRA considering taking on that project?
I think one of the options we have is to bring in a partner much like we had with MGM. It was a pure operating agreement. MGM did not have any equity stake in the operation, so I think that's certainly a possibility.
Is closing Aqueduct and turning Belmont into a virtual year-round facility something you see happening eventually? And is winterizing Belmont feasible and how?
The Aqueduct and Belmont situation is very complex. Number one, some people look at the idea of closing Aqueduct as a way to reduce winter racing. I would hope owners, breeders, and NYRA alike know that winter racing is very important to NYRA. As an example, for the whole Aqueduct meet our average purses are around $350,000, and that ranks 10th in the country. So our program is certainly weaker than the rest of the year, but it's still a pretty strong racing product. Whether it's Aqueduct and Belmont or just Belmont, winter racing is here to stay.
Number two, there is a tremendous amount of duplicative infrastructure. Belmont's like a little city, and as you know it runs all year round. We have 2,200 stalls here, most of our trainers are based here, and we only have 600 stalls at Aqueduct. So for the six months that we're at Aqueduct we're shipping two-thirds of the field nine miles away. That, coupled with the security barn, puts a lot of pressure on the trainers and their help and so forth. I think that there are substantive challenges that would have to be overcome. There are different opinions, but in listening to the different opinions, I do not believe that with the placement of the grandstand that we could race on the current main track in the winter. So we would have to have a second track, which the training track could be a candidate, or another track. But before a determination would be made this is something that really needs to be studied and would be a seven- to 10-year implementation if in fact it was deemed the right thing to do.
Considering NYRA is still in bankruptcy, what is NYRA's financial situation right now, and has NYRA begun putting together a reorganization plan?
There was a date in June when all the claims by those who felt they were creditors of NYRA, and on what basis, had to be in. We're in the process of going through those claims right now. We literally have to go through each claim to determine our view of the validity of them, so that's a fairly lengthy process. There's no question, though, that there is no real viable plan of reorganization until there's some determination as to the franchise. So we would not have a plan of reorganization until we knew what was going on with the franchise.
Despite being in bankruptcy, NYRA recently announced a significant purse increase for the last three weeks of Belmont and all of Saratoga. You mentioned that you hoped this would increase field size and thus increase handle. Was there an increase at Belmont, and is it realistic to believe you could improve upon the $15.6 million average daily handle from last year at Saratoga?
We didn't anticipate significant field increases at Belmont, because we announced it on a Friday, we took entries the next day for the Fourth of July. We just didn't want there to be a big gap and have people hold their horses out of races.
The economic justification for the purse increase . . . is that we looked at purses we paid per day, we looked at the monies that had been earned, and we basically had discussions with the new [New York Thoroughbred Horsemen's Association] management and we told them it was our goal to pay out in total purses the amount of money that had been earned for purses in 2007. Just on a year-on-year basis through the first four months at Aqueduct, we were $2 million below what we paid the prior year.
We felt we needed to increase purses somewhere in the neighborhood of $4 million to $5 million in looking at our projections. If you add up the projected increases of the purses for Belmont and the increases at Saratoga, that comes to about $4.3 million. If this increases wagering, it's also going to increase our purse liability, so sometime around the second and third week of August we'll go back and look at how we did at Belmont.
We didn't increase purses speculating that we were going to get all that money back in handle. We increased purses because we want to make sure we pay out dollar for dollar all the purses earned in 2007.
Besides the purses, what changes are in store for horsemen and fans at this year's Saratoga meet?
We've made some capital improvements. We spent about $1.2 million in upgrading the clubhouse floor and the copper roof on the clubhouse and grandstand. We've redone five barns at Oklahoma. The interesting thing about that is if I took you around Oklahoma and showed you 20 barns, you wouldn't be able to tell me which five barns had been replaced because we had a historical architectural consultant come in. I think there's just been a better plan to prepare, whether it's flowers or whether it's painting. With all the concerns about NYRA's financial problems, there have been discussions about the buildings being in less than good care, and that's just not the case. . . . I think the place looks great.
Racing-wise, we had an unprecedented demand for stalls. We took a little bit of a calculated risk moving the Whitney from the second Saturday to the opening Saturday as part of the Breeders' Cup Challenge series, but that looks like it's going to be a heck of a race. I think we could have as many as 10 to 12 horses with all the credible horses. We're certainly going to get off with a big bang.
This is the third year of the security barns. Do you believe they have achieved your desired objectives and are they here to stay, or, if given a franchise extension, would NYRA look for other, less cumbersome ways to stop potential cheating?
I think our goal of the security barns was to take control of the Lasix and keep the private practitioners out of the stalls on race day. I think we accomplished that, but it's come at great expense to NYRA and at great expense to the trainers. I think the longer-term solution is an investment in testing protocols and to increasing the financing associated with that. We just upped our contribution to the Racing and Testing Medication Consortium to $100,000 from $25,000 last year, and I think pushing hard on the implementation of getting anabolic steroids out of horses on race day is very important.
I think longer-term, the $750,000 that we spent on the security barn and the commensurate amount of money that the trainers have to spend on additional help could be better spent on aggressive testing procedures. I'm very glad that we did it, I think it's been beneficial, but the longer-term solution is to have less tolerance of race-day medications.
Bill Nader had sort of become the face of NYRA during the Saratoga meet, which obviously receives more media attention than do the downstate meets. How will NYRA compensate for his absence?
Bill was unique in his racing knowledge, his enthusiasm, and his ability to convey both. John Lee has really stepped up in some ways and will be talking to the media more regularly. There are other things that Bill did, for example, talking about the giveaways. The fellow that's now responsible for that, Mike Romano, is probably going to take over that role. And I'll probably have to make a struggling attempt to fill some of Mr. Nader's shoes. But he's going to be there for a week, so we might press him into service.
What have been the initial impressions of Internet wagering, which NYRA began offering in May?
The functionality I think has been strong. We're struggling, as I think a lot of account [wagering companies] are struggling, with the funding because of the crackdown on financial institutions like PayPal and other people due to the Internet wagering restrictions that the federal government has placed on it. Also, my belief when we launched this was anyone that wanted an Internet account, whether a New York resident or not, had an Internet account. But we're going to be aggressively promoting it at Saratoga. We're going to have some new promotional incentives in the rewards program for people. We are, for New York residents, the only Internet provider where you can get both TVG content and TrackNet media content. You don't have to have two accounts to do that.
Gate scratches have sort of been an epidemic around here for almost a year. What steps has NYRA made to try and curtail that. Secondly, in some situations like when a favorite gets scratched, should not the horses be backed out and bettors be given an opportunity to change their wagers?
There are two kinds of gate scratches that we keep track of. One is vet scratches at the gate, and the other ones are what we call trauma scratches, which is a result of some activity in the gate where a horse gets hurt. Total gate scratches were up like 40 percent, half of them were vet scratches, half of them were trauma scratches. One of the things that we've done - which I believe has helped, and therefore I think the numbers will come down this year - is that we created a new position called Racing Administrator Manager and hired Bruce Johnstone, a former trainer. He's in charge of the gate crew in the morning, he's in charge of the gate crew in the afternoon, he's in charge of the jockey valets. We've been more attentive to workouts in the morning. We had a fair amount of turnover in the gate crew, guys that are retired or moved on. We've hired some people that have some experience, so we think we have a stronger group than we've had. I think we've gotten better.
To your second point, I think it's in the hands of the stewards whether you back horses out or not. Those were 2-year-olds [on July 18 when 4-5 favorite Constance was scratched], and once one horse gets squirmy in the gate then another horse starts. The argument cuts both ways. Sure, from a business standpoint we would have loved to back them out, gotten more of that handle back through the mutuel pools. On the other hand, if you've got to back out these 2-year-olds and they're more skittish and got to put them back in again, are you increasing the opportunity that a horse is going to be left at the gate or become more skittish?
When we sat down in this same forum after you first took the job in November 2004, some things you mentioned as your goals were to return the business to profitability, reach out and be more collaborative with other industry stakeholders, create a statewide racing channel, and do a better job engaging the fans. Do you feel you've made progress in any of these areas?
The statewide racing channel isn't going to get fixed until we fix the OTB issue. There's no incentive for us to have people stay at home and wager on our races, because we only get 25 percent of an OTB wager as opposed to what we get wagered on track, so that one goes away. I think we started to make some significant progress in terms of the fan experience. I think the Internet wagering was a big step, and I think from a functional standpoint we've done that well. We hired Gavin Landry, whose specific job is director of sales and market development. He just started in early July, but he's going to be in charge of database development for our fans, our owners, our trainers, and communicate more regularly in using technology, which historically NYRA has been very poor at.
Getting back to profitability is really a function of fixing the OTB issue. We had a great June, but again, on every OTB bet we can make as little as 1.25 percent versus the 10 percent we make ontrack. Until the simulcasting, account wagering, and OTB pricing can be fixed - and I think we can fix it over time - that's the biggest impediment to getting profitable.
One thing that was quite divisive was [the New York Thoroughbred Horsemen's Association's] endorsement of Empire, which I don't think ever was anything more than the endorsement of the executive board. But I think that put trainers in a difficult spot. We've started our own trainer's advisory council and had one meeting, which was extremely beneficial, and we're probably going to meet again the first or second week of Saratoga. We have had a couple of meetings with the new management of NYTHA, and I think we're making some positive strides there. We've had a generally good relationship with the breeders. And again, the Bruce Johnstone position gives us a communication vehicle with the trainers that they didn't have before.
You recently got into the horse-ownership business, unleashing a good-looking 2-year-old filly According to Plan. Will she run in the Schuylerville, and how many others are you involved with?
Barclay Tagg said she's doing well. She's entered in the Schuylerville, which by the way looks like a really strong race. We're excited about that. She should get better as she goes longer. But to win at first asking and the way she did it was very exciting. We have I think a total of six horses in that partnership that was put together by Alan Quartucci and called North Shore Racing, and we're probably going to buy one more. We're hoping to see one or two others in the partnership at Saratoga.
Is it a good distraction for you from the day-to-day, hour-to-hour business of trying to operate this place?
It's a nice distraction because Steve Duncker, our chairman, [is] involved, some of his friends - Danny Meyer, a friend of Steve's from St. Louis who is in the restaurant business and a good friend of my wife's. It gives you another reason to smile, which is always helpful.