Cuomo Submits NYRA Privatization Plan

The New York Racing Association would be returned to private hands, though with a tiny leash from state government that has controlled its operations over the past four years, according to legislation proposed June 8 by Gov. Andrew Cuomo.

Industry officials Wednesday night were studying the proposal, which would need legislative approval, to determine if there might be any impact on purse and breeding funds. Sources said they have been told the cuts in video lottery terminal revenue are directed at NYRA capital and operating funds,and not purse and breeding fund programs.

The Cuomo administration said a separate provision includes a $16 million a year state appropriation to NYRA for capital expenses, though it puts NYRA into the position of having to try to secure that funding each year as part of the state budget process.

The Cuomo bill also would require the new NYRA board to comply with the state’s open meetings laws; NYRA, under the current state control period, has held its meetings in public. NYRA insiders have whispered for nearly four years that the open meetings put the corporation at a competitive disadvantage with other racetrack companies around the country.

The NYRA board, controlled by Cuomo appointees since a state takeover of the not-for-profit corporation in 2012, would be given back to private control, though with some asterisks.

The Cuomo plan calls for a 17-member board. Six would be appointed by the governor, with two of them coming from recommendations by the leaders of the Assembly and Senate.

Eight members would be appointed by the executive committee of the current state-controlled NYRA board, and one would be given to the NYRA president. The New York Thoroughbred Breeders and New York Thoroughbred Horsemen’s Association would get one board seat each, but unlike legislative plans floating about at the state Capitol, the group would not get voting powers.

The governor, under the Cuomo plan, also gets to nominate the next NYRA chair to serve in the first three years; that person would serve at the pleasure of the governor, meaning he or she could be removed at any time for any reason.

Board members would serve for three-year terms and would be term-limited out of office after nine years. Board members would also have to get racetrack management licenses from the state, meaning they would be subject to criminal and financial background checks.

The state’s current Franchise Oversight Board, a panel composed of gubernatorial and legislative appointees that reviews NYRA’s finances, would see its powers over the racing corporation considerably increased. The powers kick in if NYRA “deviates materially" from its financial plan or if “in the opinion of the franchise oversight board" there is a “significant risk to the liquidity” of NYRA.

The new powers of the franchise oversight panel include hiring, at NYRA’s expense, an outside financial adviser; a mandate that NYRA submit a “corrective action plan" to address concerns raised by the state; and a requirement that NYRA hire a private corporate restructuring professional for a period of time as determined by the state.

The Cuomo administration had no comment on its NYRA bill. In a written memo accompanying the bill the administration sent to the legislature, it said the new oversight powers represent “reasonable public safeguards befitting a private, not-for-profit corporation charged with fulfilling an entirely public mission."

The bill’s introduction came a day after John Hendrickson of Saratoga Springs resigned as Cuomo’s special adviser to the NYRA board; Hendrickson said Cuomo didn't take his advice, didn't listen to him, and was poised to take measures—including the VLT payment reduction in the new bill—that are hurting the state’s Thoroughbred racing industry.

The Cuomo plan calls for NYRA to get 7% of net income from machines at Aqueduct Racetrack with a cap at $46 million per year. Of that, NYRA would have to spend or reserve at least $16 million for capital projects at Saratoga Race Course. Any money over the $46 million would be directed to the state lottery, which would then pass along the proceeds to fund public schools in New York.

The bill would take effect, if the legislature agrees, June 30, though members of the new board are barred from voting until they are licensed by the New York State Gaming Commission, the legislation states.

The memo accompanying the bill states that the current board structure expires, by state law, in October. Without action, the "board’s termination would call into question NYRA’s ability to operate the racing franchise," according to the memo.

The memo provides the budget implications to the state for the Cuomo plan: $12 million in additional revenue to the government in fiscal 2017-18 and a $16 million appropriation by the state to NYRA for capital expenses.