09/03/2007 11:00PM

NYRA gets governor's nod

Kristin Callahan/Ace Pictures, Inc.
Eliot Spitzer

The New York Racing Association and New York Gov. Eliot Spitzer have reached an agreement that would extend NYRA's franchise to operate the state's three largest racetracks for the next 30 years in exchange for the association's abdication of its ownership claims of the tracks and its aid in selecting an operator for a slot-machine casino at Aqueduct racetrack, NYRA officials and Spitzer said on Tuesday.

The agreement, which was approved unanimously by NYRA's board on Tuesday morning, will form the basis for a recommendation by Spitzer to the state legislature on the awarding of the franchise to operate Aqueduct, Belmont, and Saratoga, the most prominent year-round racing circuit east of the Mississippi. NYRA's franchise to operate the tracks expires at the end of this year, and any agreement to extend the franchise will have to be approved by the state legislature, which has clashed with Spitzer, a Democrat, since he took office at the beginning of this year.

"After careful consideration, I concluded that a reconstituted NYRA is the best entity to operate Thoroughbred racing in New York," Spitzer said in the release.

The recommendation by Spitzer is expected to jump-start an oftentimes stuttering process to select a franchise holder. Over the past two years, four companies, including NYRA, have jockeyed for position under both Spitzer and former governor George Pataki to obtain the franchise, largely because of the windfall that the slot machines at Aqueduct are expected to generate. Of the four companies, only NYRA was organized strictly as a non-profit.

According to the agreement, the state will provide NYRA with as much as $75 million to help the association emerge from bankruptcy court. NYRA filed for bankruptcy late last year, listing assets of $153 million and liabilities of $310 million, including tens of millions of dollars in unpaid real-estate taxes and obligations to its pension funds.

In exchange, NYRA will "irrevocably relinquish any present or future rights" to the ownership of the three racetracks, according to a copy of the agreement. Stephen Duncker, the chairman of NYRA, said on Tuesday afternoon that it was his belief that NYRA would physically transfer the deeds to the properties to the state.

Charles Hayward, the chief executive officer of NYRA, said that the agreement represented what was best for New York racing and the racing industry.

"This is not the NYRA winning, this is the industry winning," Hayward said.

The agreement was immediately criticized by Senate Majority Leader Joseph Bruno, a Republican who has a strained relationship with Spitzer because of an ongoing investigation into members of Spitzer's staff who allegedly used state troopers in attempts to gather unflattering information about Bruno. Bruno represents Saratoga County, where Saratoga Race Course is located.

"The governor's handling of the process to select a new horse racing franchise has had several false starts, and now has a questionable finish," Bruno said in the statement.

The Senate's Committee on Racing, Gaming, and Wagering, which is chaired by Bill Larkin, a Republican, has scheduled a hearing for Sept. 12 to discuss proposals to award the franchise. Bruno referenced the meeting in his statement and said, "The Senate will review the Governor's recommendations to determine its impact on Saratoga, Aqueduct, and Belmont."

Criticism of the deal also came from Empire Racing Associates, one of the companies that has been seeking the franchise. In a statement, Jeff Perlee, the chief executive of Empire Racing Associates, called Spitzer's decision to split the racing and casino components of the franchise a "losing bet" and urged the state legislature to reject the recommendation.

Karl O'Farrell, the chief executive of Capital Play Pty, another bidding company, said that he was "disappointed" by the announcement of the agreement and said that Capital Play will continue to lobby legislators on the merits of its plan to run both racing and casino gambling at the tracks.

A representative of Excelsior Gaming Associates, another of the bidding companies, declined to comment.

Also under Spitzer's plan, NYRA would be required to trim its board from 28 members to 19, with two members of the board to be approved by the governor, one by the assembly speaker, one by the senate majority leader, one by the state's breeding association, and one by the state's horsemen's association.

The recommendation that NYRA retain its franchise was in many ways expected. Over the past several months, Spitzer's staff members had hinted that the governor favored NYRA as the operator of the racetracks, and they had also indicated that Spitzer supported a separate award for the 4,500-slot machine casino at Aqueduct.

Spitzer's aides had floated several trial balloons that would have dramatically changed the racing landscape, such as closing and redeveloping Aqueduct and the legalization of slot machines at Belmont, but those proposals seem to have been cast aside. The agreement with NYRA says that all three properties will continue to host race meets, and further states that any development of Belmont "will not have a material adverse impact on Thoroughbred racing" at the track. Slot machines at Belmont would also require legislative approval.

Spitzer said that an operator for the slot-machine casino at Aqueduct would be selected within 60 days. Under the agreement, NYRA would get 3 percent of the gross win from the machines in order to satisfy its expenses and 4 percent to fund capital improvements at the tracks. Purses would receive approximately 6.5 percent of the gross win, and breeders awards would receive approximately 1 percent of the gross win.

Duncker said that a casino could be up and running at Aqueduct within 11 months of the building plans being approved. Casino revenues are expected to boost NYRA's total purse distribution from $115 million to $140 million, Hayward said.

NYRA was first awarded the franchise in 1955, and it has been extended on four occasions, most recently in 2000. In 1983, language was inserted into the franchise extension that appeared to obligate NYRA to hand over the track properties to the state, but NYRA argued in its bankruptcy filings that such an obligation would violate the state constitution's prohibition on the government taking property without just compensation.

The agreement announced Tuesday allows both parties to resolve the question without a lengthy court battle. In the past, Spitzer's aides have said that they were uncertain how a court would rule on the issue, and that they wanted to reach an agreement with NYRA to avoid a court-ordered resolution.