08/28/2006 11:00PM

Four bids and many miles to go in N.Y. franchise race


Four groups - Capital Play Ltd., Empire Racing Associates, Excelsior Racing, and the New York Racing Association - submitted bids by a Tuesday afternoon deadline in pursuit of the franchise to operate New York's three most popular Thoroughbred racetracks, beginning in 2008.

The bids were submitted to the Ad Hoc Committee on the Future of Racing, a state panel that is overseeing the process and that issued a request for proposals in June.

Bidders were asked to put a value on a 20-year franchise to operate racing at Aqueduct, Belmont, Saratoga, and a casino at Aqueduct. NYRA's franchise to operate the tracks and casino expires on Dec. 31, 2007.

According to Robert Williams, the executive director of the committee, all the groups but Capital Play Ltd., an Australian bookmaking firm, submitted bids under six different scenarios outlined in the request for proposals. Capital Play's bid was limited to one scenario, which contemplates significant changes to the state's racing laws and the legalization of slot machines at Belmont Park.

The committee has said that it will release its recommendations to the governor and legislature - both of which must approve a winning bid - by Sept. 29. Under the committee's rules, bidders are prohibited from discussing their responses until the committee releases its recommendations, at which time the bids will become public, Williams said.

Empire, Excelsior, and NYRA were all expected to submit bids. Officials of Empire and Excelsior have said that their bids will be based on a for-profit business model while NYRA has said that it will seek to retain a not-for-profit structure. It was unclear on Tuesday how Capital structured its bid.

Charles Hayward, the chief executive officer of NYRA, declined to discuss the association's bid on Tuesday, citing the committee's rules.

NYRA has not announced any partners in its bid, but MGM Grand, the casino company, has a management contract to operate the casino at Aqueduct. Legislation passed last year protected the contract from being invalidated as a result of the bidding process.

Empire Racing Associates was formed earlier this year by a group of New York businessmen. The group has added a diverse number of partners to its bid, including Churchill Downs, Delaware North, Magna Entertainment, Scientific Games, SL Green Realty Corp., and Woodbine Entertainment Group. Empire has also secured the exclusive endorsement of the New York Thoroughbred Horsemen's Association.

Excelsior Racing is headed by Steve Swindal, the son-in-law of George Steinbrenner and a partner in the New York Yankees. The group also includes Richard Fields, a former associate of Donald Trump who has developed casinos in Florida, and Tishman Speyer Properties, a real-estate developer.

Last week, Swindal, said that the group's bid would incorporate the potential redevelopment of Belmont Park to include the construction of a hotel, retail shops, and restaurants.

"We think New York racing should be number one," Swindal said. "We're not going to do anything without talking to horsemen and breeders about the best possible plan of action."

The bidding process is complicated by a number of contingencies. First, the legislature has recessed for the year and is not expected to tackle the significant number of legislative changes needed to award the franchise until at least 2007. Second, Gov. George Pataki, a Republican, will leave office early next year, and his successor is likely to be New York Attorney General Eliot Spitzer, a Democrat with widespread support.

Officials in Spitzer's office said privately last week that he intended to take an active role in the process next year if he were elected governor. The officials said they believed the current process would not identify the ultimate winner of the franchise.

Also complicating the process is NYRA's contention that the association owns the racetracks and that the franchise cannot be awarded until the ownership issue is resolved. The Ad Hoc Committee disputes NYRA's contention and has asked bidders to respond as if the state owns the tracks.

Still further, the Ad Hoc Committee asked the bidders to respond under radically different scenarios. Three of the scenarios included an assumption that slot machines would be legalized at Belmont Park, a possibility that would grant bidders hundreds of millions of dollars in theoretical revenue that could be used for a laundry list of projects in the bids. Slot machines at Belmont are illegal under current New York law.

The four bids are a significant contraction from the number of groups that met a July deadline to identify themselves as candidates. At that time, 16 groups, including five of New York's locally owned off-track betting companies, indicated that they were considering a bid. Two of the 16 companies, Churchill and Magna, ultimately partnered with Empire.

None of the OTB companies submitted bids. On Tuesday, officials for some of the OTB companies said that they intended to continue to play a role in the franchise process by lobbying to retain New York's current structure, in which the locally owned OTB companies distribute their profits to the counties that own them.

Two of the scenarios in the committee's request for proposal asked bidders to contemplate a restructuring of OTB so that the companies would be owned as a joint partnership between the state and the new franchise holder.

Jeffrey Casale, the president of Suffolk OTB, said that he believes the current OTB structure "has been very successful," based on the revenues that the OTB has generated to local government, NYRA, and horsemen.

"We have no intention of running tracks," Casale said. "That's nothing we should do or can do. We do view this as an opportunity to work with the franchise holder, whoever it is, to improve the racing industry and our relationship with racetracks and horsemen."