11/22/2006 1:00AM

NYRA a distant third, but race isn't over


The next operator of New York's three biggest racetracks and what is expected to be the East Coast's biggest casino will almost certainly be either Excelsior Racing Associates or Empire Racing Associates, some state officials contended on Wednesday.

Excelsior, which is headed by New York Yankees partner Steve Swindal, and Empire, a group of New York businessmen and racing companies, were rated as the front-runners on Tuesday by a state committee that evaluated bids for the franchise to operate Aqueduct, Belmont, Saratoga, and a casino at Aqueduct for 20 years starting in 2008. Left far behind was the only other bidder and the current franchise holder, the New York Racing Association, whose bid scored poorly and whose franchise expires on Dec. 31, 2007. The committee's decision is nonbinding.

"It really was a photo finish, to use your language, between Empire and Excelsior," said Bernadette Castro, a member of the state committee and the commissioner of New York's Parks, Recreation, and Historic Preservation office, on Wednesday. "That being said, NYRA did not fare well at all. There was a lot of difficulty in scoring NYRA for anything but third in any of the categories. And I think the reasons are obvious."

In the committee's two-part scoring, based on whether or not slot machines would be legalized at Belmont Park, Excelsior emerged on top in both scenarios with 94.6 and 97 ratings. Empire received 93 and 92.5, while NYRA trailed distantly at 76.5 under both scenarios.

The slight difference between the scores for Excelsior and Empire has given Empire officials hope that their for-profit bid will ultimately be accepted by the legislature, which must approve the franchise. That will likely not happen until 2007, after governor-elect Eliot Spitzer takes office.

Members of the committee said Wednesday that Excelsior's bid received the highest score in part because of its strategy to operate the casino as a profit venture and the tracks on a nonprofit basis. Excelsior has plans to renovate Belmont Park and develop the property on Long Island, offering an up-front fee of $100 million, a payment that would balloon to $200 million if slots were legalized at Belmont.

Empire, whose bid was solely a profit venture, offered $100 million up front under both scenarios and $7.5 million to the state each year over the life of the franchise. However, considering the current economics of the racing industry, it is unclear whether there is significant value in operating the tracks on a for-profit basis. Much, if not all, of the value of the franchise is in the Aqueduct casino, which has not received final approval by state officials.

Indeed, NYRA, which has held the franchise since 1955, filed for bankruptcy this year, one year after receiving a partial loan from the state to keep afloat. Many racing experts contend that the association's inability to operate profitably is due to the structural idiosyncrasies of New York racing law, which is expected to be reformed when the new franchise is awarded.

NYRA failed to bring any partners in its bid, and so the association's proposal suffered from its own history, which in addition to the bankruptcy filing includes a recent deferred-prosecution agreement to escape charges of tax fraud related to convictions of employees in its mutuel department.

Excelsior's partners include Richard Fields, a former associate of Donald Trump and a real-estate developer, and Tishman Speyer Properties. Swindal, the head of the group, is the son-in-law of Yankees general partner George Steinbrenner, and committee members said that the link to Steinbrenner and the Yankees played a role in how they voted.

Empire's partnership includes a handful of top racing companies and real-estate developers, including Churchill Downs, Magna Entertainment, Woodbine Entertainment Group, and Delaware North. All four of those companies have been eagerly seeking slot machines at their tracks: Delaware North is already the operator of three casinos at racetracks in New York, and Woodbine operates the largest casino in Toronto at its track.

Also in Empire's partnership is Scientific Games, a bet-processing company, and the New York Thoroughbred Horsemen's Association, which gave its endorsement to Empire earlier this year.

NYRA officials are planning to make another effort to retain the franchise by working with the legislature and government officials after Spitzer takes office. Charles Hayward, the chief executive of NYRA, said on Wednesday that the association may be down, but it's not out.

"The committee's decision is not binding, and the bids themselves are not binding, so it's difficult to say what this all means," Hayward said.

NYRA is also planning to play its hole card in the next several months. As part of its bankruptcy reorganization, a federal judge could play a role in deciding whether NYRA or the state owns the racetracks. The committee based its work on the assumption that the state owns the tracks. If a judge ruled in NYRA's favor, the franchise renewal process would take on an entirely different character.

Hayward said that NYRA will attempt to get final approval for the casino at Aqueduct, which would put it in better financial shape when the legislature is considering the franchise question.

"In the end, we're hoping to get a better listener in the next governor, and to get the [slot machines] up and running," Hayward said.