Updated on 09/17/2011 9:43PM

Public-private plan for N.Y.

The Jockey Club
Friends of New York Racing, led by Tim Smith (above), recommends a new company be formed to operate Aqueduct, Belmont, and Saratoga.

A racing industry advocacy group issued a report on Monday that calls for the creation of a public-private partnership to replace the New York Racing Association and for the introduction of slot machines at Belmont Park.

, written by Friends of New York Racing, is the first salvo in what is likely to be a complicated and contentious lobbying fight over the future of the sport in New York, where the non-profit NYRA is the state-licensed operator of Aqueduct, Belmont, and Saratoga racetracks.

NYRA's franchise to operate the tracks and a slot-machine casino that is planned for Aqueduct expires at the end of 2007. Last week, state legislators passed a bill that will require the appointment of a panel to develop by Dec. 1 a formal request for proposals, seeking bids from companies that want to operate the tracks and the casino.

The report recommends that the non-profit approach be scrapped for a more traditional company that is allowed to make a profit and that could include shares for New York's six regional offtrack betting companies. NYRA currently is required to pay any profits beyond $1.85 million to the state's Thoroughbred Capital Investment Fund, which then loans the money back to NYRA for capital improvements.

Many of the FNYR recommendations would require changes that have not been politically realistic despite numerous reports that have reached similar conclusions.

"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, half-way measures," the report acknowledged.

FNYR was formed last year and is led by Tim Smith, the former chief executive of the National Thoroughbred Racing Association who was briefly a candidate to become chief executive at NYRA. The group's board includes representatives of New York's racing industry along with officials from a number of racing companies, including Churchill Downs and Magna Entertainment, the country's biggest racetrack operators outside of NYRA. Although Churchill and Magna are expected to bid for the franchise, the report states that FNYR will not bid nor recommend a bidder.

The report contends that NYRA as a private entity would be worth anywhere from $500 million to $1 billion, depending on the number of OTB companies that choose to join and the legalization of 5,000 slot machines at Belmont Park.

The six OTB companies in New York are politically powerful public-benefit corporations that distribute profits to the localities that own them. The report recommends that the companies "should be permitted, but not compelled, to merge operations and assets" with the proposed private company. In exchange, the localities would receive stakes in the private company, including shares from slot-machine revenues.

Smith said on Monday that details of the report had been shared with four OTB companies but that it would be premature to comment on their interest in being part of a private company.

The report also calls for state laws to be changed to allow for expanded Internet and telephone betting, one of the largest growth segments of the Thoroughbred industry. Current laws restrict telephone betting to NYRA and OTB companies, despite the dominance in the market by national companies such as Youbet.com and Television Games Network, NYRA's national account-wagering partner.

The report references the slot-machine revenues at tracks in West Virginia, Delaware, and Canada, contending that the lucrative revenues created a stronger horse racing industry and increased payouts to the government in each location. With slots at Belmont in addition to Aqueduct, the report contended, purses could increase 60 percent and revenues to the government could be $600 million a year.

Slot machines were legalized at eight racetracks, including Aqueduct, in 2001. NYRA's management declined to seek slots at Belmont Park and Saratoga because of concerns over local objections and the desire to keep the tracks as racing-only facilities.

Aqueduct's casino is expected to be open by mid-2006. The project has been delayed because of NYRA's ongoing legal problems - it is currently operating under a deferred prosecution agreement - and the concerns of NYRA's casino partner, MGM Mirage, over the status of its contract should NYRA lose the franchise. Legislation was passed earlier this year making MGM's contract binding on any franchise winner.

FNYR issued the report just days after the state legislature ended its 2005 session. During the last day of the session, on Friday, legislators passed a bill supported by Gov. George Pataki creating an oversight board for NYRA and accelerating the process by which the bids for the franchise will be developed.

"The current timing appears unusually conducive to a fresh look at racing's structure" the report said, adding that reform of state-created corporations is a bi-partisan priority.

Smith said that FNYR would gather public comment on the recommendations for the next 60 to 90 days before issuing a final report in October, two months before the deadline to create the request for proposals committee. In the meantime, FNYR plans to develop a model racing law with help of the Racing and Wagering Law Program at Albany Law School in the form of draft legislation.

New deal for New York

Key points in the report issued Monday by Friends of New York Racing, suggesting a new company to operate Aqueduct, Belmont, and Saratoga:

* Scrap current not-for-profit New York Racing Association in favor of a public-private partnership that could be worth $1 billion.

* Invite - but not compel - New York's regional OTB companies to merge with the new partnership.

* Install 5,000 slot machines at Belmont Park in addition to 4,500 slots already authorized for Aqueduct.

* Overhaul the state's racing regulations