03/10/2006 12:00AM

New alliance rattles NYRA


The New York Racing Association is rapidly running out of friends.

NYRA officially lost the support of its own horsemen earlier this week when the New York Thoroughbred Horsemen's Association gave an exclusive pledge to a new company that intends to bid on NYRA's franchise to operate Aqueduct, Belmont, and Saratoga, which expires Dec. 31, 2007. The pledge has alienated NYRA officials who were not only blindsided by the announcement but were also left at the altar by a group that NYRA assumed would be in its corner when the heavy lobbying begins.

The new company, Empire Racing Associates, announced Tuesday that it intended to raise $3 million from New York owners, trainers, and breeders to lobby for changes in New York's racing law that would protect purses and racing dates when the franchise is awarded. Empire will then seek to raise hundreds of millions of dollars to bid on the franchise as a for-profit company.

Horsemen's officials said that Empire would give them their best chance to influence the bidding effort, which is expected to heat up this fall after the state's Ad Hoc Committee on the Future of Racing releases requests for proposals.

The horsemen's decision leaves NYRA without a powerful ally. It is a political reality that a successful bidder will need the support of horsemen in order to get the approval of legislators, who are loath to appear as if they don't support the elements of the horsemen's message: green space, agribusiness, and jobs. The mom-and-apple-pie message of the horsemen also provides a warm and fuzzy counterbalance to what the bidding process is really about - getting a piece of what will likely be the busiest slots casino on the East Coast at Aqueduct and possibly slot machines at Belmont Park.

Horsemen's officials did not deny that NYRA was kept out of the loop about Empire, but they also did not make any apologies.

"The horsemen have endured decades of arrogant behavior by NYRA, and the situation has not improved over the past several years," said Alan Foreman, the general counsel to the horsemen. "They've been told what to do and how to do it, and they've done it. But there is widespread belief now that NYRA will not get the franchise. So how could the horsemen not take steps to influence the process? I just don't think anyone felt that they could trust NYRA."

Charles Hayward, the chief executive of NYRA, said that what most upset him was that the horsemen were casting their lot with a company that was supporting a for-profit model for the racing franchise, using calculations developed by a racing advocacy group, Friends of New York Racing. One of the business models developed by Friends of New York Racing - which is based on the legalization of 5,000 slot machines at Belmont - calls for private investors to achieve a 20 percent return on investment.

"Empire is a pure-and-simple private-equity play," Hayward said. According to the Friends of New York Racing earnings model, said Hayward, "they want a 20 percent return on investment. So if they're talking about $500 million at least - and that's low - being the winning bid, then they're also talking about taking at least $100 million out of the racetracks every year. I'm just stunned that the horsemen support that."

Beyond that, NYRA officials said privately that they felt betrayed, contending that the horsemen have not had to sacrifice one purse dollar over the past five years despite NYRA's ongoing financial problems. The association has lost tens of millions of dollars over the past three years. But not once, NYRA officials said, has the horsemen's statutory purse obligations or the number of racing days been mentioned as a possible source to recoup money or pare expenses.

NYRA may still have some support waiting in the wings. The announcement of the formation of Empire listed Dennis Brida, the executive director of the New York Thoroughbred Breeders, as a member. A day later, Barry Ostrager, the president of the breeders' group, said that Brida's membership in Empire was in no way representative of a position taken by the breeders' group, which is leery of Empire's for-profit intentions.

"Any for-profit organization has to act to advance the best interests of their shareholders," Ostrager said. "The advancement of the best interests of the shareholders of any for-profit company that wants to operate the NYRA franchise may take that effort in directions that we do not support and will not support."

Asked if that meant the breeders supported NYRA, Ostrager did not commit. "Essentially, our position is that the best interests of the breeders are served by waiting," he said.

Brida may have summed up the ambivalency about NYRA best.

"I've always been a strong NYRA supporter," Brida said, "but what if NYRA is beyond redemption? Then what happens? If you have an investment in racing, like I do, if you have been involved in this business as long as I have, then you'd like to have some say in the future."