07/27/2004 11:00PM

Smith has thoughts on reforming NYRA


LEXINGTON, Ky. - When Steven Duncker, the co-chief operating officer of the New York Racing Association, was continuing his search for a new chief executive last month, he wanted advice from someone familiar with leadership qualities.

So Duncker called Tim Smith, the commissioner and chief executive officer of the National Thoroughbred Racing Association.

Duncker wanted to know what kind of person would be right for NYRA, which has been embroiled in political, financial, and criminal controversies for the past year. Smith replied, "That sounds like an interesting job."

That set the wheels in motion for both Smith and Duncker.

"I was really surprised," said Duncker, who added that he had already interviewed four candidates on the recommendation of an executive search firm. "I told him, 'You'd be perfect for the job.' And he said he was interested. If I had known Tim Smith would have even considered the NYRA job, I would have saved myself a whole lot of trouble."

On Tuesday, Smith, 56, announced his resignation from the NTRA, effective Sept. 1, although he said he had not made a final decision about joining NYRA.

In many ways, his emergence as the top candidate to become NYRA's president and chief executive officer is surprising. A former chief operating officer of the PGA Tour, Smith would arguably have wider influence on the national racing industry at the NTRA. But, according to friends of the 56-year-old Smith, he craves challenges, and restoring NYRA to its former position of power - a project that could include taking NYRA private and seeking control of offtrack betting in New York - is perhaps the greatest challenge in the game today.

At the same time, Smith can leave after six years as the NTRA's only commissioner knowing that he has gone a long way in helping the NTRA to fulfill its goal of becoming the sport's league office.

"It's a neat job," Smith said Tuesday of the NTRA's top position. "The NTRA is fully poised to grow to the next level and realize its full potential."

The New York Racing Association, on the other hand, is threatened on many fronts. Life there has always been complicated. NYRA operates as a quasi-governmental organization, putting extraordinary limits not only on its ability to offer promotions but also to borrow money for capital improvements. To get things done at NYRA, a president needs to be able to get things done in Albany, where political power has an enormous influence on its affairs.

The past 12 months have not been kind to NYRA. Twenty mutuel tellers pleaded guilty to tax-evasion crimes, and two senior members of NYRA's mutuel department pleaded guilty in helping the schemes. NYRA escaped criminal prosecution by agreeing to restructure its management, pay a $3 million fine, and submit to oversight by a court-appointed law firm. Charges against the association will be dropped in June 2005 if NYRA meets all the conditions.

Furthermore, NYRA has been unable to begin a project to install 3,000 slot machines at Aqueduct because of uncertainty over the status of its state-awarded franchise, which expires at the end of 2007. MGM Grand, its partner in the project, has balked without assurances that its loans to NYRA will be guaranteed whether or not the current association holds the franchise.

NYRA, which operates Aqueduct, Belmont, and Saratoga, was once the undisputed heavyweight in the racing world. But its influence has waned because of a variety of factors, including the rise of Churchill Downs Inc. and Magna Entertainment Corp., companies that have spent heavily to acquire tracks and muscle their competitors.

Magna has also spent heavily this past year on lobbyists in Albany to make its case that the NYRA franchise could be in better hands. While the political process in New York is famously unpredictable, it's certain that NYRA will fight hard to keep its status.

Smith said that getting a franchise extension should not be the only goal for NYRA.

"I'm not sure it's a simple franchise extension versus improving and perhaps reforming and even restructuring some aspects of New York racing," Smith said Tuesday.

Although Smith would not be specific, his comments on Tuesday raised some interesting possibilities. One possibility, according to New York racing officials, is the idea of taking NYRA private - raising investment funds from the New York community and the racing industry at large to free NYRA from the brunt of its regulation while insulating it from takeovers. Under that structure, NYRA could still operate as either a for-profit or nonprofit company for the benefit of the racing industry, along the same lines as Keeneland or the Oak Tree Racing Association.

From there, the next logical step would be for NYRA to make a run at offtrack betting in New York, which is run by six regional public-benefit companies including the massive New York City Off-Track Betting Corp., which handles $1 billion a year. In 2001, NYRA came out on the short end of a run at OTB; the city of New York agreed that year, after a competitive bidding process, to sell NYCOTB to Magna, a plan that was scuttled because of a lack of political support. The losing bidder was a partnership between NYRA and Churchill.

Raising that kind of money, to take NYRA private and buy an OTB company - a sum in the range of hundreds of millions of dollars - while fighting political battles and seeking a massive overhaul of the rules governing New York racing, would be the ultimate challenge indeed. So in that sense, Smith's interest in NYRA is understandable. Accomplishing all of that would most likely be far more difficult than convincing a fractured racing industry to come together to support a league office and embrace modern marketing and sponsorship strategies - Smith's most recent accomplishment on a long resume.