06/12/2006 11:00PM

Let bidding begin in New York


Bidding for one of the country's prized racing assets officially opened on Tuesday with the release of a document that outlines the process for groups seeking to take over the franchise currently held by the New York Racing Association to operate Aqueduct, Belmont Park, and Saratoga Race Course.

The document was prepared by a state panel, the Ad Hoc Committee on the Future of Racing, and asks bidders to submit proposals by Aug. 15 for the right to operate the three racetracks and a slot-machine casino at Aqueduct for 20 years beginning in 2008, under six possible scenarios. The panel will review the bids and make recommendations to the legislature and governor by Sept. 15.

Formally called a request for proposal, the document was the most important step taken so far by the ad hoc committee, a nine-member panel created last year to solicit bids for the franchise and then shepherd the bids through the legislative process to select a winner. The committee has held four public hearings during the last six months to hear recommendations on how to structure the request for proposal.

The winning bid needs to be approved by both houses of the state legislature and the governor, a process that does not appear likely to conclude this year. Bidders are being asked to structure their proposals around recommended changes to the racing law that could include politically charged issues such as the legalization of slot machines at Belmont and the overhaul of the state's offtrack betting system. The legislature is scheduled to adjourn on June 22.

The document outlines three possible scenarios under which to submit a bid, then modifies each one of those scenarios to allow slot machines at Belmont. The first scenario would entail no changes to racing law or the current racing structure, except to allow slot machines at Belmont. The second would allow "incremental changes" that could include changes in parimutuel taxation and laws governing in-home wagering and simulcasting, along with permitting individual OTB companies to partner with the franchise holder. The third scenario envisions all of the changes of the second scenario as well as the creation of one statewide offtrack betting corporation that would include racetrack officials on its board of directors.

Bidders can submit a proposal under any one of the scenarios, a combination of them, or all of them.

The NYRA franchise, which expires on Dec. 31, 2007, is expected to be sought by a number of racing and gambling companies, even though NYRA has lost close to $50 million over the past three years and has tens of millions of dollars in unpaid obligations to its pension fund and the state. The franchise's financial health is expected to improve significantly once the 4,500-slot machine casino at Aqueduct opens.

Among the companies expected to bid are NYRA, Magna Entertainment Corp., Delaware North Companies, Churchill Downs Inc., and a group formed earlier this year called Empire Racing Associates that is supported by the New York Thoroughbred Horsemen's Association, which represents trainers and owners at NYRA's tracks. All of the groups are expected to reach out to deep-pocketed partners or individuals to raise the hundreds of millions of dollars - or, under some scenarios, perhaps billions of dollars - necessary to win the franchise.

Jeff Perlee, the chief executive of Empire Racing, said on Tuesday that the time line laid out by the committee was a "bit on the aggressive side," but he also said that Empire has already reached out to "operational partners" that will form the core of the company's bid. He declined to identify any of the partners but said that Empire has scheduled a meeting on Monday to begin formulating its response.

"I can tell you that our partners will all be entities with deep operational experience in the racing industry," Perlee said.

Bidders have to identify themselves by June 30 to make a bid by the Aug. 15 deadline.

Changes to the existing offtrack betting structure are expected to meet resistance from the state's six OTB corporations, which distribute their profits to the counties in which they are located. OTB officials have been reluctant to cede their authority to the racing industry, and the proposal to create a statewide offtrack betting corporation would give New York's eight racing licensees - NYRA, Finger Lakes Race Track, and six harness tracks - a significant voice in the role of OTB's. Under a statewide offtrack betting corporation, the document said, existing revenue distributions to counties would continue to be made by the corporation, based on the 10-year average of the revenues distributed from 1995 to 2005.

The document asks potential bidders to assume that the state owns the racetrack properties, a position that is disputed by NYRA officials. NYRA is expected to address the ownership issue in its own bid to retain its franchise, according to Charles Hayward, the president of NYRA.

Hayward declined to comment Tuesday on the request for proposal, saying that he had not had time to fully digest the contents of the report, which covers 39 pages and was not made available until late Tuesday afternoon.

J. Patrick Barrett, the chairman of the ad hoc committee, said in a statement that he expected the land issue to be difficult to settle outside of the state's legal system.

"The committee believes that getting the process completed sooner rather than later was logical given the present franchisee's financial status and potential litigation over many issues relative to a possible turnover," Barrett said.

Among a long list of other conditions, the ad hoc committee's document asks bidders to provide information on the number of live racing days that the bidder would run, to identify likely capital improvements to the tracks, to detail the rates at which the tracks' simulcast signal would be sold, and to set takeout rates. The request also asks bidders to address issues related to racing and wagering integrity, equine and rider health and safety, improvements to backstretch living conditions, Thoroughbred retirement programs, customer service and amenities, and problem gambling programs.