ELMONT, NEW YORK, October 11, 2016 - To the membership of the New York State Franchise Oversight Board:

I'm writing as a concerned New Yorker and I'm sure I represent many tax-paying citizens of our state.

The New York Racing Association, its Board of Directors, and executives seem to subsist in some kind of ideological bubble that won’t allow reality to interfere until the franchise is returned to them.

While assuming this position, the NYRA has exhibited questionable business practices and has shirked its fiduciary responsibility.

Of course, this comes as a result of delay tactics by state government that is efforting to maintain control of Thoroughbred racing on America’s most important horse racing circuit.

I dutifully ask that the FOB scrutinize the following:

NYRA's president and chief executive officer, Christopher Kay, has said his utmost priority is to make a profit, yet his authority has failed to lead NYRA down a sound fiscal path.

Payments from Genting's Resort World Casino, which were agreed to by the state as part of a franchise extension agreement, among other considerations, have not been met in full due in part to Governor Andrew Cuomo's arbitrary order to cap casino revenue at 2012 levels.

In 2007, NYRA traded the property rights of its three racetracks--Aqueduct, Belmont Park and Saratoga--for casino revenue. There were no caps in the Memorandum of Understanding signed by then Governor Elliott Spitzer.

Instead, NYRA rolled over in exchange for self-preservation considerations and took no action. It should seek remedy from the courts which is, of course, a related issue.

This year, New York State Comptroller Thomas DiNapoli audited NYRA and disagreed with NYRA's accounting methods. He also asked NYRA if they had a financial plan to operate at a profit, less dependent on casino revenue.

“NYRA relies on Video Lottery Terminals to stay in the black but that revenue stream isn’t guaranteed to continue as strongly, especially as new casinos open up across the state,” DiNapoli explained at the time.

“NYRA needs to come up with a plan to make money on racing operations, especially as it seeks to return to private control. Without such a plan, NYRA’s long term solvency could be a long shot.”

Kay reacted indignantly about the numbers and methods but nevertheless made a valid point. He disagreed in a prompt and detailed reply, but he has yet to respond to the second part: NYRA's existence with less, or without, casino revenue.

NYRA handles from five to ten times more off-track than it does on-track, varying from day to day and with the seasons. With NYRA Bets, NYRA effectively has become an online OTB.

This is good going forward because NYRA can't get people to come to the track, with the notable exception of Saratoga.

NYRA increasingly is relying on NYRA Bets as its main profit hub. If NYRA’s main source of income is to come from off track, why bear the cost of opening such large facilities as Belmont Park? In fact, why bear the expense of operating two facilities in such close proximity downstate?

These are the kind of concerns that NYRA's reorganization board should be working on so it can respond in a responsible and fiscally intelligent manner when called upon to explain its plans going forward. So far, NYRA has only suggested further reshuffling its board.

The Governor has challenged NYRA over the limits to the 2012 revenue cap with past knowledge that the NYRA won't fight for its rights.

DiNapoli's shot-across-the-bow and Cuomo's failed attempt to pass legislation that would further reduce casino revenue are always going to be in NYRA's future if the association fails to take action.

NYRA already has gone bankrupt without money from casino proceeds and it could happen again--a slippery slope at the very least.

The same goes for Nassau OTB which, by the way, still happens to owe NYRA over five million dollars. NYRA has been promised this payment, yet each quarter it continues to carry forward an operating loss due to the debt.

Again, NYRA should be seeking remediation through the courts.

Please recall that NYRA was promised Nassau OTB would establish a repayment plan by the same state government that already is attempting to renege on the deal for casino revenue and for the reprivatization of NYRA after three years.

NYRA has been asked repeatedly by your Franchise Oversight Board for breakdowns on betting, which NYRA claims is proprietary information. It is not.

All pool totals for every race with daily totals, broken down by on & off track wagers, are available and printed in Equibase result charts on a race-by-race basis. This is information that not long ago was transparently dispensed.

Parenthetically, this practice began at Churchill Downs Inc. several years earlier. But they are a publicly traded, and can act like corporations act. NYRA is, of course, a quasi-public, not-for-profit organization, not a private corporation, and should act accordingly.

NYRA's insistence on obfuscating facts the public has a right to know is its attempt to hide all the red ink. NYRA boasts about the figures at Saratoga, where it is highly profitable, but hides the downstate data in order to cloak the losses those tracks incur.

Attendance is also public information as NYRA has to remit to the state a 4% tax on paid admissions. As a concerned tax-paying horseplayer, I ask for uniformity and transparency in reporting, not just when the numbers look good.

I applaud the FOB members who recently called out Kay on his “we can't plan for the future” narrative. It's just part of the game-playing that rules NYRA policy while New York State clearly is lurking over its shoulder.

Time is past due for all involved in New York racing; NYRA, the state, and the FOB, to deal with big picture items in their entirety.

Thank you.

Respectfully,
Mark Berner, Horse Race Insider

Coming Thursday: Stars retiring early is only part of racing's problem? Tom Jicha takes a look.