05/24/2010 11:00PM

New York approves $25M loan to aid NYRA


The New York State legislature approved a $25 million loan to the New York Racing Association as part of an emergency budget appropriation late on Monday, ending a prolonged period of uncertainty over whether the association would make good on a threat to close its three tracks as of June 9.

In a prepared statement, NYRA's chairman, Steven Duncker, said that the loan "guarantees world-class Thoroughbred racing" at the association's three tracks: Aqueduct, Belmont, and Saratoga. Last week, NYRA announced that it had sent notices to its 1,400 employees that it was considering closing the tracks as of June 9, four days after the Belmont Stakes, the third leg of the Triple Crown. The notices are required under state and federal law if a company reasonably believes that its ongoing operations are threatened.

NYRA had been pushing for the loan for nearly a year, as efforts by the state to select an operator for the long-stalled casino at Aqueduct continued to hit delay after delay. NYRA also claimed that its financial situation had suffered a significant blow when the New York Off-Track Betting Corporation filed for bankruptcy earlier this year while owing NYRA $14 million. That total has now risen to $17 million after the corporation adopted a cash-management policy that defers some payments to NYRA.

Although NYRA officials did not return phone calls on Tuesday, one official with knowledge of the association's financial condition said the $25 million loan will sustain the organization until sometime during the middle of the next year, provided that New York City OTB's debt to the association does not rise significantly during that time period.

The bill providing for the loan was attached to legislation that was necessary for the state to continue paying its bills as the legislature attempts to address a $9 billion budget deficit.

Under the structure of the loan, NYRA will receive $25 million of a $250 million loan that the state has already guaranteed to fund the construction of the Aqueduct casino "for services and expenses" at NYRA's three tracks, according to a memo prepared for the legislation by Gov. David Paterson's office.

Morgan Hook, a spokesman for Paterson, said that "details are still being worked out" on when the state would release the money, though he said that the money will likely be released to NYRA in installments.

"NYRA will be funded and no races will need to be canceled," Hook said.

NYRA would be required to pay the loan back by March 31, 2011, or within 30 days of the state signing an agreement with the operator of the casino, according to the memo. If the loan is not repaid by March 2011, the memo says, then the state's lottery would be required to pay the money to the state using proceeds that NYRA has been promised from the casino's operating revenues.

NYRA and its horsemen will receive approximately 13 percent of the casino's net revenues once it is up and running, a split that will likely total more than $60 million a year, based on analyst's projections for the casino's net revenues.

The state lottery is currently administering the bidding procedures for the 4,500-slot machine casino, which was authorized in 2001 and will likely be the highest-grossing casino on the East Coast. Under a request for proposals issued two weeks ago, the lottery will make a recommendation for the operator of the casino on Aug. 3. Paterson has said that he will accept the lottery's recommendation, but the operator will need the approval of the state's legislative leaders as well.

The state has scuttled two previous deals with a casino operator because of political and financial considerations.