09/06/2004 11:00PM

NYRA solves one problem, but still must find a new leader


The New York Racing Association has emerged from its premier summertime meet in Saratoga Springs, N.Y., without its No. 1 choice for a new chief executive officer, but with a solution that puts to rest a controversy over how it accounts for purses owed to horsemen.

NYRA lost its top choice to take over the CEO duties when it was unable to come to contract terms with Tim Smith, the former National Thoroughbred Racing Association chief executive. But the resolution of the horsemen's account controversy is a step forward for NYRA, which has been operating under the scrutiny of a court-appointed monitoring firm, Getnick and Getnick. The monitor is part of a deal with federal prosecutors that includes the restructuring of the organization to make it more accountable in the wake of a tax fraud scandal that has threatened the survival of the association's franchise.

NYRA was intent on hiring Smith, who was a former member of the Carter administration and the former deputy commissioner of the PGA Tour, in order to shore up its credibility and put the organization on track to have its franchise renewed by the end of 2007, when the current franchise expires. In a statement released on Saturday, Smith said he had taken himself out of the running for the NYRA job after he had "reached the conclusion that I can make a bigger contribution to racing in New York by working on a new business model for the industry than in racetrack operations."

Smith declined a request for further comment on Tuesday. Steve Duncker, the co-chief operating officer of NYRA, said that Smith and the association "were not able to agree on terms," but declined to provide any details about the negotiations.

An official close to Smith said that Getnick and Getnick had raised concerns about the scope of Smith's expected duties at NYRA. Getnick and Getnick thought Smith's role as the head of NYRA could create the appearance of a conflict of interest if Smith, as expected, tried to overhaul how the New York racing industry is structured, in part by putting together an investment group to take NYRA private, the official said.

The official also said that Smith's compensation at NYRA had become an issue. Smith made $750,000 in base salary as the commissioner of the NTRA, but his total compensation package, including incentives, approached $1 million.

The loss of Smith comes when NYRA's Saratoga business dipped compared to record-breaking numbers last year. Monday, Saratoga officials blamed poor weather for an 8 percent decline in attendance and a 1 percent decline in all-sources handle, to $15.8 million a day. Still, purses were a record at $637,495 a day.

NYRA's commitment to paying some of the strongest purses in the country despite its ongoing problems played a large part in the resolution of the controversy over its horsemen's account. Last Friday, NYRA announced that it had fully funded the account to completely cover all of its liabilities to owners and trainers.

"This is certainly very good for NYRA's credibility in front of the state legislature, and it's very good news for NYRA and its horsemen," said Bennett Liebman, a former New York racing commissioner who is now the head of the Albany Law School's Racing and Wagering Law Program.

The issue first cropped up in 2003, when NYRA officials claimed in a letter to state regulators that the association owed $14 million to its horsemen because the company was borrowing against horsemen's deposits. The New York Thoroughbred Horsemen's Association initially attacked NYRA for the practice, but by November of last year the two groups had worked out an agreement to separate the purse account from NYRA's balance sheets.

That new purse account is now fully funded, in part by revenues generated from new simulcast contracts, including an agreement signed last week with Television Games Network, and in part by deposits NYRA has made to the account since it was created, Duncker said. The NYRA deposits came from money that was made available after NYRA pared operating expenses at the track, according to Duncker.

Television Games Network, the horse racing television and account-wagering company, has had an exclusive contract to distribute NYRA's signals to in-home customers since 1999. The new, multi-year deal reaffirms TVG as NYRA's exclusive in-home distributor.

Duncker would not provide details about the TVG contract or other simulcast deals, citing the need to keep business agreements confidential, but said that NYRA was able to raise funds for the account through the contracts "by positioning our simulcast signal as a strategic asset."

A likely possibility is that TVG paid an upfront fee to NYRA because of the value of the association's signals to the network.

"From a TVG perspective, as you look across the landscape as far as racing product that is out there, NYRA was right at the top of the list," said Ryan O'Hara, the chief executive of TVG, who also declined to discuss details of the contract.

Robert Flynn, the executive director of the New York Thoroughbred Horsemen's Association, said that he had not been told of the exact details of the agreement with TVG, but said that the horsemen's association was assured that the new deals would not have any negative impact on purses.

"We would have rejected anything that NYRA agreed to that would have solved one problem just by creating another," Flynn said.