10/10/2007 11:00PM

Plan would cut NYRA's share of slot cash

EmailThe New York Senate is considering a proposal by state Sen. William Larkin that would change the breakdown of slot-machine revenue at the Aqueduct casino, awarding the casino operator a larger share and the New York Racing Association less, legislative officials said. Larkin's proposal would alter the terms of a 30-year extension of NYRA's franchise to run the state's three major racetracks that is supported by Gov. Eliot Spitzer and the state's Assembly.

Steve Casscles, counsel to Larkin, said Thursday that Larkin was concerned that the Spitzer proposal was too generous to NYRA and did not give the casino operator enough money. The Spitzer proposal would give NYRA the franchise to operate Aqueduct, Belmont, and Saratoga while reserving the operation of a slot-machine casino at Aqueduct for an outside contractor.

Though details have not yet been worked out, the discussion of a counterproposal to Spitzer's plan is the first offered by the Republican-controlled Senate, which has balked at supporting the Spitzer deal. The Assembly, which is led by Sheldon Silver, a Democrat like Spitzer, has indicated that it supports the extension. Any deal on the franchise will have to be approved by Spitzer, the Senate, and the Assembly.

The exact percentage that would go to the casino operator in Larkin's proposal has not yet been determined, Casscles said, but the additional revenue would come from the share that NYRA and its horsemen receive. Under the Spitzer proposal, NYRA would receive 7 percent of the net revenue, and horsemen would receive 6.5 percent. The casino operator would receive approximately 26 percent of the net revenue - estimated at $600 million annually for the Aqueduct casino - though that percentage declines as net revenue hits certain marks.

Casscles said the revenue percentage for the casino operator would not attract high-profile casino companies to bid for the Aqueduct contract. In addition, Casscles said the percentage allotted to NYRA amounted to a "subsidy for a money-losing business."

"What's the point of giving a subsidy to a company that is taking $20 million from the taxpayers each year?" Casscles said, in reference to recent financial losses for NYRA, which filed for bankruptcy late last year. "They'll just keep losing money."

Paul Larabee, a spokesman for Spitzer, said the governor continues to support all of the elements of the NYRA franchise extension, which would also require the state to help NYRA emerge from bankruptcy.

"Some of the potential operators have taken some issues with the extension, which isn't surprising," Larabee said. "But to date, none of the legislators have made a recommendation or presented an alternative beyond a superficial comment that they won't accept what the governor has offered."

On Wednesday, officials for two of the four companies that are seeking the franchise told the state Senate's Committee on Racing, Gaming, and Wagering that they would not bid for the casino portion of the franchise unless the casino operator retained a larger percentage of the revenues. Larkin is chairman of the committee.

The companies were Excelsior Racing Associates, a partnership of casino and real estate developers, and Mohegan Sun, the casino company that is a partner in one of the bidding groups, Capital Play. The other two are NYRA and Empire Racing Associates, which Wednesday lost several of its partners, including Magna Entertainment and Churchill Downs Inc.

Excelsior also said that it would not bid on the casino franchise unless slot machines were also legalized at Belmont Park, something that Larkin has supported.

"You had two groups telling us that they wouldn't bid because the rates are too low," Casscles said. "Everyone keeps telling us that you need to build a nice place to get people to bet, and these rates won't attract the capital that would result in nice places."

The New York Legislature granted slot-machine licenses to nine racetracks in 2001. The legislation, which has since been amended several times, required racetracks to reach deals with horsemen on subsidies from the slot machines for purses.

Two Thoroughbred tracks were granted slot-machine licenses: Aqueduct in New York City and Finger Lakes in Farmington. The rest were granted to harness tracks, most of which were on the brink of closing prior to the licenses being granted. Only the Aqueduct casino has yet to open, and most of the casinos are generating revenues well below initial projections.

Asked why NYRA did not deserve a subsidy when the other tracks use slot-machine revenue to support their money-losing racing operations, Casscles said that the Spitzer proposal presented a different scenario by granting the racing license to one operation and the slot-machine license to another operation.

The NYRA casino licensee "would be subsidizing an operator that they can't control," Casscles said. "It creates a conflict there."