01/23/2008 12:00AM

More pressure on NYRA deal

Email

A New York racing oversight board rescinded on Tuesday a resolution that gave its chairman unilateral power to approve temporary franchise extensions for the New York Racing Association.

The move, along with a call in the state budget for slot machines at Belmont Park, is expected to ramp up the tension surrounding negotiations on a long-term legislative extension for NYRA.

NYRA's franchise to operate Aqueduct, Belmont, and Saratoga expired on Dec. 31 and the organization has been conducting racing at Aqueduct under two temporary extensions brokered by Steven Newman, the oversight board's chairman, without the full board's input. The board rescinded Newman's power to make such deals by a vote of 4-1, with Newman, the board's only Democratic appointee, the lone dissenting vote. The current extension expires on Feb. 13.

The board initially passed the resolution on Dec. 17, when its chairwoman was Carole Stone, a Republican appointee of former Gov. George Pataki. Two days later, Gov. Eliot Spitzer, a Democrat, installed Newman as the chairman - though Stone retained a seat on the board.

The rollback will now require a majority of the board to approve any short-term extension to NYRA's franchise if ongoing negotiations by legislative leaders on a long-term extension are unsuccessful by the Feb. 13 deadline. The Republicans control the board by 4-1, and opposition to a long-term extension is being led by senate majority leader Joseph Bruno, also a Republican. Under state law passed at the time the board was created in 2005, the board has the power to appoint an operator for Aqueduct, Belmont, and Saratoga in the absence of a legislative agreement.

The long-term legislative deal opposed by Bruno is supported by Spitzer and the speaker of the assembly, Sheldon Silver, a Democrat. It would give NYRA a 30-year extension in exchange for the state taking undisputed title to the racetracks. Bruno has long taken issue with the length of the extension and with the composition of NYRA's board, favoring one that contains a majority of state appointees.

Negotiations over the long-term agreement have been taking place since Sept. 4, when NYRA agreed to a memorandum of understanding negotiated with representatives of Spitzer and Silver that included the 30-year extension.

In addition to the move by the oversight board, the negotiations were further complicated by the release of Spitzer's state budget on Tuesday afternoon. In the budget, which has to be passed by the legislature, Spitzer called on the legalization of slot machines at Belmont Park, forecasting that 4,500 machines at the track could raise $250 million for the state in the fiscal year that begins on April 1.

Bruno supports the legalization of slots at Belmont, but expansion of gambling is opposed by Silver, who reiterated after the budget was announced that the state "should not be tempting [its citizens] to play with their limited resources."

Slot machines are already legal at Aqueduct, but efforts to build and operate a casino have been stymied amid the uncertainty over NYRA's franchise. The prospect of legalizing machines at Belmont would attract gaming companies interested in operating the casino portion of the property and would likely inject a raft of lobbyists into the franchise negotiations.

Although some NYRA officials have said they support the legalization of slot machines at Belmont, one NYRA official said privately on Wednesday that enthusiasm for the machines has waned as more interest groups seek a share of the revenue. In addition, the official said, the recent upheaval in the financial markets will likely take a toll on state tax revenues and put pressure on legislators to earmark an even larger share of casino profits to non-racing groups.

New York is already forecasting a deficit this year of $4.4 billion, an amount that could grow if the financial sector - the largest component of the downstate economy - continues to feel the aftershocks of the subprime mortgage crisis.

Given all the turmoil, it is becoming more likely that NYRA will not participate in another short-term extension. Without a long-term legislative deal, NYRA officials could threaten to shut down racing on Feb. 13 and seek a resolution through the U.S. Bankruptcy Court. NYRA filed for bankruptcy late in 2006 and has repeatedly claimed in court that the association owns the three racetracks, a position that is disputed by many state officials.

If NYRA officials were to prevail on their property claim, the state's negotiating position would be considerably weakened, although the impact is far from clear. Any resolution to the property issue would likely take several years, and NYRA officials have said they would try to block any state effort to install an operator for the tracks while the issue is under litigation.

The two short-term extensions with the oversight board included language sought by NYRA that reserved its rights to claim ownership to the tracks. NYRA officials have been reluctant to accept temporary extensions for fear of damaging their case in bankruptcy court, and Newman's ability to broker these deals played a crucial role for them.