08/04/2008 11:00PM

Official ties NYRA slots cash to crowds

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SARATOGA SPRINGS, N.Y. - The New York legislature will find it difficult to justify giving the racing industry a cut of slot-machine revenues in the future, unless the New York Racing Association is able to generate increases in attendance at its three racetracks, a former government official said at a law conference here Tuesday.

Paul Francis, a budget official for former Gov. Eliot Spitzer and current Gov. David Paterson, said during a panel at the conference that declining attendance at Aqueduct, Belmont, and Saratoga would be interpreted by state legislators as a failure on the part of NYRA's management to increase public interest in horse racing. That could put in jeopardy NYRA's subsidy from a planned casino at Aqueduct, Francis said.

"You need to think hard about what is the purpose of the subsidy," said Francis, who continues to negotiate on behalf of the state on agreements to open the casino despite his recent resignation from Paterson's adminstration. "If attendance continues to dwindle, it's going to be difficult to justify."

Racing officials are wary of attaching any importance to attendance figures because of the decades-old decline for the industry in the face of the rise of off-track betting and account wagering. The decline has been industry-wide, with the exception of some boutique tracks like Saratoga, Del Mar, and Keeneland.

Many legislative officials have estimated that a casino at Aqueduct will generate approximately $500 million annually in net revenues. Of that total, NYRA and its horsemen are expected to retain approximately $85 million.

Awarding subsidies to horse racing from track-based casinos is common in many states, including West Virginia, Iowa, Pennsylvania, Louisiana, Florida, and Indiana. Most of those states do not tie the subsidies to the performance of the racing side of the business, but the New York legislature put in place a condition that NYRA hit undefined "benchmarks" as a condition of a 25-year franchise extension awarded earlier this year. An oversight panel put in place by the franchise extension is supposed to review NYRA's franchise every four years, using the benchmarks as measures.

Stephen Duncker, the chairman of NYRA, said at the conference that attendance figures had largely become irrelevant to most racetracks because of the rapid growth in account wagering over the past 10 years. The racing industry has been aggressively marketing account wagering because it is considered the most convenient way for horseplayers to wager, in a day and age when conducting business over the Internet is considered the most practical way to increase revenues.

"We've made it very, very easy for a fan to stay home and bet, and it's going to get easier," Duncker said.

Duncker added that NYRA has attempted to increase its attendance with little success over the past 10 years and contended that other racetracks have faced the same problems.

The use of attendance figures as a benchmark is perhaps most troubling to NYRA racing officials this year because of a significant decline at Saratoga through the first two weeks of racing at the upstate track. As of Tuesday, through 12 days of live racing, attendance is down 16.6 percent, according to NYRA figures, in part because of heavy rain during the first few days of the meet. In addition, economic conditions in the United States are expected to worsen at least moderately over the next year.

Although slot machines were legalized at eight New York tracks in 2001, Aqueduct is the lone location that has yet to open a casino, in part because of political uncertainties surrounding the extension of NYRA's franchise. Three groups have submitted bids to the state to operate the casino, but Paterson and state legislative leaders have yet to agree on an operator.

Francis said that the selection of an operator will be made soon, but cited difficulties in getting the governor's office and the leaders of the senate and the assembly to agree. All three entities must approve of the operator.

NYRA officials have privately criticized the delay in the selection of an operator, contending that the state is losing millions of dollars for every day that the casino is not open. Duncker said NYRA has played a minimal role in selecting which company will run the casino.

"It's largely out of our hands," he said.