11/18/2005 12:00AM

No way to solve a money crunch

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NEW YORK - There are three possible outcomes to the murky future of New York racing when the New York Racing Association's franchise expires in 2007 or if the organization runs out of money before then.

The first is the continuation of the current NYRA or some reconstituted version of the not-for-profit model that began in 1955; the second is the sale of the franchise to an outside company such as Churchill Downs or Magna; the third is the takeover of the operation by the state of New York and the administration of racing by the government.

The first two models are familiar. For a preview of the third, consider Carole Stone's Nov. 17 letter to NYRA, outlining her vision of how it should stay solvent until slot-machine revenues kick in 12 to 18 months from now.

Stone, a former state budget official who chairs the state's new oversight board charged with reviewing NYRA's finances, recommended that NYRA raise the takeout on wagers, stop paying some of its bills to the racing industry, and monetize its long-term contracts by borrowing money from private investors.

"The board believes that resolution of the problem should be borne without diminishing the value of the franchise, or shifting the burden of any solution to the state's taxpayers or other elements of the industry," Stone wrote in the letter.

That philosophy completely contradicts Stone's recommendations, which shift nearly the entire burden to horseplayers. Apparently racing's customers are neither taxpayers nor a "segment of the racing industry." What she really is saying is that the state, which could solve NYRA's short-term cash-flow problems overnight by suspending the parimutuel tax for a year or allowing NYRA to sell off some unneeded land, is not going to lift a finger to help.

A takeout increase will exacerbate rather than solve NYRA's problems. Stone apparently does not understand that more than 80 percent of betting on NYRA races takes place away from the track, and that those bet-takers rather than NYRA will retain the bulk of any takeout increases. What she proposes will simply transfer money from the public's pocket to the accounts of the state's offtrack betting corporations and out-of-state simulcast operators. In addition, by taking betting dollars out of circulation and blunting NYRA's competitive advantages in the national simulcast market, it will prompt a dramatic decrease in betting handle.

"If it's aimed at helping NYRA, it would do just the opposite," said NYRA vice president Bill Nader.

Apparently the Breeders' Cup and the National Thoroughbred Racing Association are not a segment of the racing industry, either. Stone recommended that NYRA "defer" over $3 million in dues to those organizations until at least 2007. She also wants NYRA to mortgage its contracts with ABC and Equibase, and to press for quick settlements of outstanding lawsuits at what would surely be reduced prices.

What these proposals have in common is that the state contributes absolutely nothing, not even loans of the sort she instead wants to come from the private sector. The $10 million to $20 million that NYRA needs to stay afloat until the slots start whirling is not even a rounding error in the state budget. The state could make those loans, or defer NYRA's parimutuel taxes until the slot revenues begin, either of which would solve the current problem and generate long-term income for the state. The sale of land at Aqueduct is an even easier solution.

Instead, Stone proposes that the government should do nothing except collect larger commissions at the OTBs through a takeout increase that will do little for NYRA but drive its handle down and bust out its customers more quickly.

The issue is not whether NYRA should continue to exist, a legitimate question that deserves a full and public airing that will probably not happen until a new governor is elected in a year. Nor is this a matter of a bailout. Whatever money the state invests in keeping NYRA afloat would be repaid with interest, and the state has a much larger interest in ensuring the continuity of New York racing until slot revenues, hundreds of times larger than the current cash-flow shortage, begin to accrue.

If Stone's shortsighted recommendations are a sign of what government operation of racing would look like in New York, it is clear that this would be the worst possible outcome to the current crisis.