10/09/2007 11:00PM

Racing may shut down Jan. 1, NYRA warns

EmailThoroughbred racing in New York would shut down Jan. 1, 2008 if the state legislature does not approve a deal to award the racing franchise by that time, a top official with the New York Racing Association told members of the state Senate's Racing, Gaming, and Wagering Committee at a hearing Wednesday in Albany.

Charles Hayward, the president of NYRA, said that logistical issues and complications from NYRA's bankruptcy filing late last year would lead to a shutdown. NYRA's franchise to operate Aqueduct, Belmont, and Saratoga expires on Dec. 31.

"We've got a little less than three months to get this done, and if we don't, then racing won't continue," Hayward said.

Three Republican members of the committee dismissed Hayward's claim, contending that a state oversight board created two years ago could operate the tracks. But Hayward and NYRA chairman Steven Duncker said that the oversight board would likely be prevented from installing an interim management company by the bankruptcy court, which has not yet ruled on NYRA's claim that the association, and not the state, owns the racetracks.

According to Hayward and Duncker, the bankruptcy court's principal role is to protect NYRA's creditors. If the state were to take over operation of the tracks, the bankruptcy court would likely rule that the claims of the creditors had been put in jeopardy by NYRA's loss of control over its assets and revenue streams, the NYRA officials said.

Early last month, Gov. Eliot Spitzer, a Democrat, recommended that NYRA retain its franchise to run the racetracks for 30 years as part of a deal that would settle the ownership issue and give the state title to the three tracks. The deal would require the state to help NYRA emerge from bankruptcy protection.

The hearing was the fourth in a series of meetings about the racing franchise called by the Senate committee, which is chaired by Sen. Bill Larkin, a Republican. Only four of the 10 committee members attended, and they were addressed by representatives of the four companies that hope to operate the tracks and a casino at Aqueduct. The four companies are Capital Play, Empire Racing Associates, Excelsior Racing Associates, and NYRA.

During a hearing two weeks ago, officials from Spitzer's administration said that NYRA's ownership claim had the potential to force a shutdown in racing. The officials contended that the state had a legitimate claim to the land - a law passed in 1983 granted the state the tracks if NYRA lost its franchise - but litigation to resolve the issue could take several years. NYRA has argued that the 1983 law violates a constitutional prohibition against the state taking private property without due process or compensation.

Sheldon Silver, the leader of the Assembly and a Democrat, has endorsed Spitzer's recommendation for the NYRA franchise extension, but many members of the Senate, which is led by Republican Joseph Bruno, have been critical of the deal. Any franchise award would have to be approved by the governor, the Senate, and the Assembly.

During the hearing Wednesday, NYRA was consistently criticized by the three Republican committee members in attendance. Two of them, Thomas Libous and Joseph Griffo, left after questioning NYRA, which was the second company to make a presentation. The chairman, Larkin, and the ranking Democrat, John Sabini - who has indicated he supports the Spitzer recommendation - remained to hear the presentations by Empire and Capital Play.

Later Wednesday, after the hearing had concluded, Churchill Downs Inc. and Magna Entertainment Corp., which each purchased a $250,000 stake in Empire in 2006, said that they had withdrawn from Empire. Churchill and Magna were among several high-profile racing companies that joined the Empire bid last year, a group that also included Delaware North Companies, Scientific Games, and Woodbine Entertainment Group.

In addition, Marylou Whitney, the New York socialite and horse owner, said late on Wednesday that she was also divesting her shares in Empire. In a statement, Whitney said that Empire "has evolved into an entity with a vastly different look and feel, one that I no longer recognize."

Empire announced its formation early in 2006 after securing an endorsement from the New York Thoroughbred Horsemen's Association. That group dropped out of the company in July.

Empire officials who appeared at the hearing Wednesday did not make reference to any pending changes to their partnership. The officials did tell the committee that their management teams would be available to run the racetracks as interim operators if the oversight board takes over the tracks.

Excelsior Racing Associates made clear during its presentation that the company was not interested in receiving the franchise unless the legislature legalizes slot machines at Belmont Park and reduces the tax rate charged to existing casinos. Slot machines are illegal at Belmont under current racing law, but Larkin has been pushing the issue of legalization. Silver has said that the Assembly will oppose any further expansion of gambling in the state.

After Excelsior made its presentation, the first of the day, Larkin said that supporters of slots should lobby Spitzer to have a discussion with Silver about legalization of slots at Belmont. The casino at Aqueduct is expected to generate approximately $600 million in revenue, and a casino at Belmont is expected to generate similar numbers.

Excelsior also said during the hearing that one of its major partners, Richard Fields, has dropped out of the company. Fields, a major donor to Democrats in New York, recently purchased a majority interest in Suffolk Downs in Boston. The track is expected to bid on one of three casino licenses that Massachusetts expects to award this year.

The committee has not scheduled any further hearings. The New York legislature returns to session on Oct. 22.