11/24/2006 12:00AM

Numbers don't tell the whole story

Email

NEW YORK - Excelsior - 94.5, Empire - 93, NYRA - 76. Those were the ratings released last week by a state panel charged with soliciting and judging bids for the New York racing franchise beginning in 2008. Rather than marking the end of the franchise process, however, these supposedly decisive numbers are barely first-quarter scores in a game that is really only beginning.

The bid scores, announced last Tuesday by the Ad Hoc Committee controlled by outgoing Gov. George Pataki, confirmed only what we knew going in. First, that both Excelsior Racing Associates and Empire Racing Associates are politically well-connected outfits capable of producing ambitious business plans. Second, that the process was inherently tilted against the New York Racing Association, which received low marks because it believes it already owns the tracks and thus did not include lease payments in its proposal, and because of its shaky current finances, brought about largely by the Pataki administration's deliberate delays in implementing voter-approved video slot machines at Aqueduct.

The reactions from the three groups have been predictable. Excelsior hailed the panel's scores and said New Yorkers' "long wait is almost over" for seeing change in racing. Empire's president, Jeff Perlee, called Excelsior unqualified and a "dog-track operator." Both Empire and NYRA, which had expected to finish the distant third it did, dismissed the results and predicted they would ultimately prevail.

The decision awaits incoming Gov. Eliot Spitzer, whose own tangled relationship with the top-scoring bidder is emerging as a key issue.

Excelsior is named for the state's motto and has a New York connection in that one of its principals is Steve Swindal, the son-in-law of New York Yankees owner George Steinbrenner. Major League Baseball currently prohibits the mixing

of baseball and racing interests, however, and Steinbrenner and the Yankees are specifically not part of Excelsior.

Excelsior's other lead partner is Richard Fields, a Wyoming-based casino entrepreneur best known for developing the Hard Rock casinos for the Seminole tribe in Florida and for having an acrimonious falling-out with his former partner, Donald Trump. Fields is also trying to get a Wisconsin-based Oneida tribe approved to operate a casino in New York's Catskills region, another decision awaiting Spitzer when he takes office next month.

Spitzer's judgments on Fields's business proposals will be very

closely scrutinized because Fields donated $200,000 to the Spitzer campaign through four limited liability corporations, and also gave Spitzer the use of his private plane last May so he could attend fund-raisers in Phoenix, Tucson, and Cincinnati on the same day. Spitzer's campaign reimbursed Fields within the letter of campaign law, but the amount is in dispute and Spitzer has been

widely criticized for accepting the donations and using Fields's plane given his repeated vows to end

influence-peddling in state politics.

Spitzer has already hit a snag over his relationship with Fields. Last month on the campaign trail he said he didn't believe out-of-state Indian tribes should run New York casinos and "they won't be here under my administration." A few days later, a spokesman issued an inexplicable clarification that Spitzer was exempting the Fields-backed Wisconsin Oneidas from that policy.

Even with the political cover of an Excelsior endorsement from a Pataki-controlled group, Spitzer is going to have to do some fancy dancing to justify awarding either the Aqueduct slots franchise or a Catskills casino to his generous friend Fields, or to any out-of-state entity. This is also a problem for Empire, which has stronger legitimate local connections but whose equity-holders and board members include companies based in Atlanta, Louisville, and Toronto.

Spitzer is also going to have to address the primary question of which economic model the state should adopt. The three bids were intrinsically incomparable because they were entirely different in concept: Excelsior proposes a nonprofit racing operation but for-profit slots, while Empire saw both operations as for-profit and NYRA envisions both being nonprofit. What would Spitzer's rationale be for allocating slots or racing profits to out-of-state private investors instead of to the state treasury and the racing industry?

The final big issue is NYRA's assertion of ownership of the tracks and the land beneath them, a question it cagily shifted to federal jurisdiction by filing for Chapter 11 bankruptcy protection earlier this month and which could take years to adjudicate through the courts. That situation suggests that one possible resolution for this entire mess may be a private deal with the new governor where NYRA drops its land claim in exchange for a franchise extension under some reconstituted form that might make room at the table for some of the Empire and Excelsior people.

All three bidders have vowed to press on to become the sole operator. Given Spitzer's ties to Fields, and the underlying issues of out-of-state profiteering and land ownership, though, the ultimate franchise solution is probably going to be a lot more complicated than a score of 94.5 vs. 93 or 76.