06/30/2005 11:00PM

NYRA overhaul? It could happen

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NEW YORK - The 76-page preliminary report issued last week by Friends of New York Racing thoughtfully analyzes the industry's problems, suggests alternative business models for the future, and documents how similar changes have succeeded in other jurisdictions.

In Utopia, the report would be a blueprint for a complete overhaul of the structure of New York racing. In reality, it stands an excellent chance of joining a thick shelf of similar reports that have been rejected by a political system in which the status quo, no matter how damaged and dysfunctional, is always the odds-on favorite.

The FNYR report itself refers to "a steady stream of studies, commissions, legislative amendments, tax reductions and other attempts to 'fix' the NYRA business model" and adds, "What is perhaps most startling from a review of this history is how many of these different, independent studies and groups reached virtually identical conclusions, and how consistently State Government - and the racing industry itself - either ignored them or responded with inadequate halfway measures."

That steady stream of futility has included the Delafield Commission report in 1973, the report of the Joint Legislative Task Force in 1980, the Stanley Fink plan in 1981, and the Advisory Commission on Racing in the 21st Century (of which I was a member) in 1994.

Those "virtually identical conclusions" were that the not-for-profit New York Racing Association business model created in 1955 is outdated and no longer provides racing with access to sufficient capital to keep the industry competitive; that the system of six regional OTB public-benefit corporations puts the tracks in competition with its retailers; and that there are proven, viable alternatives that would integrate the tracks and OTB's under a superior private, public, or hybrid business model that could both improve racing and create more revenue for government.

The virtually identical response from government to each report was to reject structural overhaul because the OTB system was too deeply entrenched. Instead, small and short-lasting Band-Aids were dispensed, usually in the middle of the night on the final days of legislative sessions, and decade after decade those entrenchments only got deeper.

So why should it be any different this time around?

The quick and popular answer is that something must happen because NYRA is in ruin, plagued by "scandals" and that even its traditional Republican supporters won't be able to win it another franchise renewal when its current 10-year extension is up in 2007.

This is the impression that politically fueled investigations led by Democrats including Eliot Spitzer, New York's attorney general, and Alan Hevesi, the state comptroller, have tried hard to create.

The idea that the less-than-ideal way NYRA has operated is the source rather than a symptom of the underlying problems neither holds up to scrutiny nor presents an insurmountable obstacle. The combination of federal monitoring, new management and procedures, and now a newly created state oversight agency provides enough reassurance and rationalization for NYRA, perhaps under a new name or aegis, to continue on along with the current OTB structure. Cynics are betting on another two years of sound and fury, followed by another decade of the status quo, and then another excellent report calling for complete reform in June of 2017.

There is one factor that could make things different this time, however: the imminent arrival of video lottery terminals, aka slot machines, at Aqueduct in 2006. The potential revenue from what will be the only legal one-armed bandits in New York City is so vast a trough that the politicians seem sure to stake out prime feeding spots, even at the cost of being bothered to restructure the racing industry.

Trying to predict how it will all turn out at this point is a little like making a Kentucky Derby futures bet tomorrow - on the 2007 Derby. Everything hinges on the outcome of the 2006 gubernatorial election. Spitzer, an announced candidate and a shoo-in for the Democratic nomination, is running 10 to 15 points ahead of Gov. George Pataki in early polls, and Pataki has yet to announce whether he will seek a third term. If he doesn't, it is widely considered unlikely that the Republicans can field a viable candidate against Spitzer unless Rudy Giuliani wants the job.

You can go broke handicapping these races, though. In 1994, Mario Cuomo was considered a cinch to be reelected against the then-obscure Pataki. Cuomo wanted to dismantle NYRA, but Pataki scored the upset and NYRA got a franchise extension. A dozen years later, the most important race for NYRA may again come at the polls.