Updated on 12/09/2013 2:14AM

Steven Crist: NYRA admission increase should get the gate

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Admission to Belmont Park and Saratoga has been $3 for the grandstand and $5 for the clubhouse since 2005, well below the cost to walk into major tracks in other states, including Arlington ($8/$8), Del Mar ($6/$10), and Santa Anita ($6/$8.50). Given those industry norms and nine years of flat pricing, it was not entirely unreasonable for the New York Racing Association to consider a modest increase in those charges for 2014.

A savvier group of overseers would have either considered the increases and put them on hold, or raised them by about a dollar to $4 and $6. Instead, the NYRA board on Wednesday voted to jump those prices from $3 to $5 for the grandstand and from $5 to $8 for the clubhouse next year, increases of 66 and 60 percent, respectively, that have already prompted a firestorm of outrage from customers and erased whatever goodwill NYRA had accrued under new management in recent months.

It was a tone-deaf decision on several fronts, even when you put aside the fundamental illogic of instituting price increases at a time of declining attendance and the ongoing loss of market share to casino-gambling facilities that have no entry fees.

The timing is premature. NYRA executives believe they are offering a more valuable product these days that somehow justifies a price increase. “We’re adding value,” said Chris Kay, NYRA’s chief executive, but could only cite the planned installation of 500 new televisions at Saratoga as proof of this hypothesis. Belatedly making overdue technology upgrades should not be a pass-along cost to customers. NYRA may well improve its facilities and its racing over the next year, with new racing officials in place and some capital funds to spend, but why not wait until some improvements have actually been made?

The price increases also have the appearance of gouging the small core of customers who still attend the races regularly while simultaneously shoveling more and more purse money at horsemen. Thanks to revenue from the Aqueduct racino, purses in New York have skyrocketed in the last three years, with the $46,000 maiden race of 2010 now worth $75,000. Purses were too low and the increases have lent a stability to the local game, but average field size has actually decreased and it is hard to find anyone outside the organization who believes that the quality of racing has improved.

No one is advocating a significant rollback in prize money, but increasing the admission prices against a backdrop of soaring purses forces one to wonder whether the $2 million NYRA hopes to receive from the admission increases could be better captured by decreasing purses by around $800 a race – roughly a 1 percent reduction for owners as opposed to a 60 percent hike for customers..

There was enough dissension over the price increases at the Wednesday meeting that the board decided to conduct market research and “test” them at Belmont before officially instituting them for Saratoga, an impractical compromise meant to mollify those with reservations. Attendance at Belmont is so low that a few weeks of attendance data in May and June is going to be meaningless. It also seems rather unlikely that market research will uncover many customers who are in favor of higher entry fees. All that this delay accomplishes is to keep the issue alive for months and make NYRA appear indecisive as well as insensitive.

What made the increases even more maddening was the revelation during the meeting that the primary reason NYRA would be facing a shortfall without them is an increased Federal income tax bill in 2014, one that most board members were unaware of and that none could adequately explain. Apparently the racino revenues being directed to the not-for-profit NYRA are considered taxable income, which could not possibly have been anyone’s intention. Before asking customers to pay for $2 million of a questionable new $12 million tax bill, NYRA should at least be hiring expert tax counsel and working with legislators and regulators to address that situation.

Some board members seemed shocked that NYRA would be taxed on statutory payments and taxed on gross inflow instead of net profit. If they were horseplayers, they would be quite familiar with such a situation, since that is exactly how the federal government treats racetrack bettors who have the temerity to make an occasional taxable score.

Perhaps the only hope that customers can take from NYRA’s federal income-tax situation is that perhaps it will motivate industry officials to address that situation. If the antiquated rules for withholding and taxation of gambling winnings were changed, it would put so much money back into circulation, and create so much additional racetrack handle, that the tracks could afford to pay customers $5 to walk through the gates and still come out ahead.