Spitzer to weigh in on franchise process

New York Gov. Eliot Spitzer will propose in the next several days how his office believes the state should select the new operator of the franchise currently held by the New York Racing Association, a spokesman said Thursday.

The spokesman, Paul Larabee, would not divulge details but said that Spitzer, who was elected last fall, would use a report evaluating the bidders as a "starting point" in the politically and legally complex effort to select the next operator of New York's three major Thoroughbred racetracks and what is expected to be one of the East Coast's highest-grossing casinos. The committee was put together during the administration of Spitzer's predecessor, George Pataki, and the report, which was released on Wednesday, is nonbinding.

"While the report is detailed, it is by no means exhaustive, and the governor does not necessarily feel bound by its recommendations," Larabee said.

NYRA's franchise to operate Aqueduct, Belmont, Saratoga, and a yet-to-be-opened casino at Aqueduct expires on Dec. 31. Any franchise agreement will have to be approved by both the governor and state legislature after what are expected to be significant changes to the state's racing law.

The report by the Ad Hoc Committee on the Future of Racing laid out the scoring system used to evaluate the bids, as well as a synopsis of the three bidding groups' policies and expectations. The committee announced the results of its scoring late last year but not a detailed rationale for its selections. It ranked Excelsior Racing Associates, a for-profit partnership, slightly ahead of another for-profit partnership, Empire Racing Associates. Both were ranked well above NYRA.

The report also detailed for the first time the financial composition of Excelsior and Empire, which had named many of their major partners but had not divulged the stakes each partner had in the companies.

At Excelsior, according to the report, Richard Fields, the real estate and casino developer, is the single largest shareholder, holding 47.5 percent of the equity through a company called Coastal Development Racing Associates. Despite the size of the Fields stake, Excelsior has so far been publicly led by New York Yankees general partner Steve Swindal, the son-in-law of George Steinbrenner.

Fields has some history with Spitzer. He donated approximately $200,000 to Spitzer's gubernatorial campaign and allowed Spitzer to use a private jet to fly to several fund-raisers across the country. After the election, Spitzer returned approximately $100,000 of the Fields donations because it exceeded campaign contribution limits.

Asked if Spitzer needed to address any conflict of interest because of Fields's stake in Excelsior, Larabee said: "The governor has said hundreds, if not thousands, of times that he makes his decision on what is in the best interests of the state of New York."

An identical 47.5 percent interest in Excelsior is held by SIG New York LLC, but that stake is divided among eight individuals, according to the report. SIG is owned equally by Kinsman Racing Stable - which itself has five partners, all members of the Steinbrenner family - and Sarabel Racing Club LLC, which is owned by three members of the Chicago-area Johnston family. The Johnstons own and operate Balmoral Park, a harness track in Illinois.

Stakeholders in Empire, which was ranked second by the committee to take over the franchise, include at least a dozen major racing companies and individuals. With the exception of Woodbine Entertainment Group, which owns 17,500 shares, or 4.2 percent, all of the racing-related companies, including Churchill Downs, Magna Entertainment Corp., Delaware North, and Scientific Games, own 25,000 shares of the 410,326 shares that Empire initially offered, or 6.1 percent of the company.

Other companies with 25,000-share stakes include National Development Investors, which is a partnership of members of the Baltimore-based Cordish family and employees of the family's real estate development companies. In addition, individuals with large stakes in Empire include Stephen Green and Marc Holliday of the New York real estate company SL Green Realty Corp., who each hold 25,000 shares, and Marylou Whitney, the New York socialite and horse owner, who owns 15,000 shares.

One member of the Empire partnership, Max Hugel, who held 10,000 shares, died on Wednesday of cancer at the age of 81. Hugel, the founder of Brother International, was the chairman of Rockingham Venture Inc., which purchased Rockingham Park in New Hampshire in the 1980's. At one point in the 80's, Hugel was the deputy director of operations at the Central Intelligence Agency.

In its report, the Ad Hoc Committee stated that several members of the committee had reservations about the size and scope of the Empire partnership, especially when considering the combined market share of the racetrack companies in the fold.

"These members raised concern regarding potential antitrust matters and anti-competitiveness concerns," the report said. "Other members were concerned that the out-of-state holdings of these entities may not permit them to make decisions best for New York racing, a direct competitor to their interests."