09/24/2012 11:50AM

New York may solicit private company to replace NYRA as operator of state racetracks

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A top aide to New York Gov. Andrew Cuomo said on Monday that the state is considering a plan to seek a private, for-profit company to replace the New York Racing Association as the operator of the state’s three most high-profile racetracks.

Howard Glaser, Cuomo’s director of state operations, said on a radio show Monday morning that the state is considering issuing a request for proposals to replace NYRA, the not-for-profit company that by law holds the franchise to operate Aqueduct, Belmont, and Saratoga until 2033. The option will be considered once NYRA’s board is reconstituted with a majority of state appointees and the new board has time to assess the association’s operations, Glaser said.

“We’ll see when the new board is in place what the ultimate review will entail,” Glaser said.

Glaser was interviewed on the radio show by Frederic Dicker, a radio host who also writes a column for the New York Post. On Monday morning, Dicker, who is writing an authorized biography of Cuomo, quoted unidentified sources as saying that the new board would seek private companies such as Churchill Downs Inc., the Stronach Group, or “the manager of major entertainment destinations” to replace NYRA.

Earlier this year, the state legislature, acting at Cuomo’s behest, passed legislation requiring the dismantling of NYRA’s 25-member board, which currently has 11 state appointees. The new board, to be in place for three years, will have 17 members, of which 12 will be controlled by the state, including eight controlled by Cuomo.

Glaser said Cuomo is expected to sign the legislation “soon,” at which point he will make his eight appointments. Cuomo will also have the power to appoint the chairman. Currently, the NYRA board does not have a chairman. The term of the former chairman, Steven Duncker, expired at the beginning of September.

Rich Azzopardi, a spokesman for Cuomo, said on Monday morning that the governor would have no comment on his plans for NYRA’s board or the information in Dicker’s column.

Under an agreement reached in 2008 that allowed NYRA to emerge from bankruptcy, the state took the deeds to NYRA’s three tracks and gave the franchise to operate the tracks to NYRA for 25 years. That agreement was approved by the legislature.

It is unclear if the state would need new legislation in order to nullify the existing agreement. Chris Wittstruck, a lawyer who is an authority on New York racing law, said that it is possible the new board could approve a plan to dissolve NYRA at the end of its three-year tenure, freeing the state to select a new operator.

“It’s the simplest thing in the world for them to do that,” Wittstruck said.

NYRA has not been cash-flow positive for more than a decade. However, that is likely to change for the 2012 fiscal year due to payments that NYRA has begun to receive from a massive casino that opened at Aqueduct late in 2011, 10 years after it was first authorized by law.

On the radio interview, Glaser said that the “legal franchise” continues to reside with NYRA.

“That doesn’t change,” Glaser said. “That was part of a legal agreement. But that’s a different question as to who the operator is.”

J. Gary Pretlow, the New York representative who is the chairman of the New York Assembly’s Racing and Wagering Committee, said on Monday that he would be “opposed to any effort to privatize” the operation of the tracks.

“NYRA could work very well under the scenario we’d already put forward,” Pretlow said. “That is, they would operate under the new board and very strict oversight from the state for three years, and then we’d let them try to work it out.”

Cuomo and casino companies lobbied aggressively over the past year for gambling legislation in New York that would allow up to seven new casinos in the state. The state’s existing eight casinos are tied to racetracks and are restricted to operating devices called video lottery terminals, which are essentially slot machines that are tied into the state’s lottery system to get around the state’s constitutional ban on slot machines.

The legislation allowing for up to seven new casinos was passed earlier this year, but that legislation, which would put a constitutional amendment on the ballot, would have to be approved again by the legislature next year. The constitutional amendment would then have to be approved by a statewide referendum before the state could begin awarding casino licenses.

If the effort is ultimately successful, the existing legislation providing subsidies for tracks and horsemen from the operation of the video lottery terminals would not apply to the new casinos. The existing operators of casinos, including Genting New York, which operates the Aqueduct casino, are expected to be first in line when applying for the new licenses, which would also allow them to operate table games in addition to any type of slot-machine-like device.

Casino companies have been eyeing the sprawling property at Belmont Park in Elmont, Long Island, as a possible casino location for a decade. Several months ago, the state’s New York Racing Franchise Oversight Board approved a plan to solicit bids for two parcels of land on the property for redevelopment. The RFP for the parcels said that the property could not be used for video lottery terminals, though the RFP did not place any specific prohibition on other gambling activities.

Cuomo sought the dissolution of NYRA’s board after the association came under intense scrutiny last winter because of a takeout scandal and a rash of catastrophic breakdowns at Aqueduct. Cuomo and his aides have said that the two problems indicate that NYRA’s management is failing to operate the tracks successfully.

“The functioning of NYRA is substandard,” said Glaser on the radio program.

An investigation by the Inspector General into the takeout scandal has been conducted, but the results have not been released. In addition, a report examining the rash of Aqueduct breakdowns was completed more than a month ago and distributed to Cuomo’s office, but the office has declined to comment on the report.