Comptroller says NYRA’s future uncertain
New York State Comptroller Thomas DiNapoli speaks at a news conference in Febuary. DiNapoli issued a report Friday saying the future of the New York Racing Association is uncertain. File photo
By Paul Post, The Saratogian
Posted: 06/10/16, 12:26 PM EDT | Updated: 11 hrs ago
SARATOGA SPRINGS >> State Comptroller Thomas DiNapoli says New York Racing Association is not financially viable without gaming revenue from Aqueduct Racetrack’s casino, despite NYRA’s claim that it realized profits the past few years.
An audit DiNapoli’s office released Friday faults NYRA’s auditing techniques and says the firm that runs Saratoga Race Course, Belmont Park and Aqueduct has actually racked up a $109 million deficit the past five years.
But NYRA officials, in a response made April 25, defended its practices, business model and fiscal condition.
The audit finds no fault with a state-appointed Franchise Oversight Board responsible for monitoring NYRA’s budget and financial practices.
The report came out one day before Saturday’s Belmont Stakes, the biggest day of the year on New York’s racing calendar.
“There are important decisions being made about NYRA’s future right now,” comptroller’s spokesman Mark Johnson said. “We wanted to provide information to help the Legislature and governor with those decisions.”
However, there are just four business days left in the current legislative sessions, which is scheduled to end Thursday.
Johnson said it took time for DiNapoli’s office to respond to the comments NYRA made six weeks ago.
NYRA and Gov. Andrew Cuomo have been at the center of a firestorm of controversy since Tuesday when John Hendrickson, Cuomo’s racing advisor, resigned in protest of the governor’s handling of New York’s thoroughbred industry.
Cuomo has called for a NYRA board makeup that would continue the state’s influence over the firm — it currently has 12 state appointees — and eliminate some of the money NYRA gets from Aqueduct’s casino.
Under NYRA’s franchise contract, the state agreed that NYRA should receive a percentage of gaming revenue each year for operations, purses and capital projects.
DiNapoli said: “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. 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.”
If DiNapoli is correct in saying that NYRA depends on gaming revenue, then Cuomo’s plan — if approved — could have dire consequences for NYRA.
Johnson, the comptroller’s spokesman, said the audit was prepared “without any consultation with the governor’s office whatsoever.”
“The bottom line is, NYRA will be destitute without VLT (video lottery terminal) money,” Hendrickson said Friday. “It’s part of their business plan.”
He called DiNapoli’s audit “another cheap shot, released by an Albany politician, the day before the Belmont.”
“The governor’s budget director was on the NYRA board,” Hendrickson said. “It sounds like DiNapoli is saying Governor Cuomo’s government-appointed board failed? If so, why would we now want even more of the same? I believe this audit illustrates that stealing VLT funds makes no sense if you truly care about NYRA’s financial health.”
“NYRA had received a clean audit from KPMG (a global auditing firm) for the past four years,” Hendrickson said. “NYRA uses the same accounting practices as New York government agencies. NYRA and the comptroller disagree on how the money is shown on a balance sheet. But the bottom line is the report showed the legally owed VLT mortgage payments are vital to racing’s survival. The VLT money is contractually owed for land that was given to the state. They are not support payments. They are mortgage payments.”
Audit: NYRA is losing money on horse racing
By Stephen Williams June 10, 2016 | Updated June 10, 2016 10:30 p.m.
PHOTOGRAPHER: MARC SCHULTZ
Members of the board of directors for the The New York Racing Association, Inc. (NYRA) met at the Holiday Inn in Saratoga on Wednesday August 12, 2015.
SARATOGA SPRINGS — A new state audit came down hard on the New York Racing Association on Friday, saying it continues to lose money on its traditional thoroughbred racing operations.
While NYRA has reported profits for each of the last three years, the audit by state Comptroller Thomas P. DiNapoli said that was only due to revenue from the video lottery terminals at Aqueduct in Queens.
“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 said.
DiNapoli also questioned some of NYRA’s expenses, including a $250,000 bonus paid to President and CEO Christopher Kay.
NYRA officials strongly defended their organization, which runs the horse-racing tracks at Belmont, Aqueduct and Saratoga Race Course, where the annual summer meet starts July 22.
“The purpose of the OSC’s audit was to determine if NYRA received, spent and accounted for its revenues and expenses properly, and the OSC’s report clearly states that we did,” said NYRA spokesman Patrick McKenna. “This finding has been previously reported by our accounting firm, KPMG, who has issued a ‘clean audit’ for each of the last four years.”
The audit’s release comes on the eve of NYRA’s biggest annual event — the Belmont Stakes — and as the state Legislature and Gov. Andrew Cuomo debate how to return the organization to private control after four years under state supervision.
NYRA’s return to profitability after years of losses, a bankruptcy, and management scandals are central to NYRA’s argument that it should be allowed to return to private control. It has been under the control of a state Franchise Oversight Board since 2012.
Despite the claim of overall profitability, DiNapoli said racing operations, taken alone, lost $109 million over the last five years.
The profit claimed by NYRA is only possible, the audit said, because NYRA is excluding employee retirement and post-employment health care costs from its calculations.
“NYRA needs to come up with a plan to make money on racing operations, especially as it seeks to return to private control,” DiNapoli said. “Without such a plan, NYRA’s long-term solvency could be a long shot.”
In a written response, Joseph J. Lambert, NYRA’s senior vice-president and general counsel, noted that a 2008 bankruptcy settlement guarantees VLT money to NYRA for the rest of the term of the franchise — through 2033,
“Both the ‘state settlement agreement’ and the existing statutory framework found in New York State Tax Law utilizes VLT revenues as a means to support the thoroughbred and standardbred racing industries in New York State,” Lambert said.
“There was never any requirement, contrary to the OSC claim, that NYRA must have a budget that determines profitability exclusive of those VLT funds. Instead, NYRA has used those funds to support jobs in the state’s agriculture and tourism sectors, and also serve as the cornerstone of the horse racing industry in New York, an industry that generates a $2 billion economic impact.”
Over the three years covered by the audit — 2012, 2013, and 2014 — the auditors found that NYRA received $318 million from the VLTs, with $68 million going to racing operations, $91 million to capital programs, and $159 million to racing purses, which are paid out to horse owners.
The Assembly and Senate and Gov. Andrew Cuomo’s office are actively discussing legislative proposals to reprivatize NYRA, with a goal of resolving the matter in Thursday’s scheduled adjournment of the Legislature.
Maureen Lewi, chairwoman of the Concerned Citizens for Saratoga Racing, said the timing of the audit as the Legislature debates privatization raises questions about the role of politics in its release, and the role politics could play in the future if NYRA isn’t returned to private control.
The concerned citizens group favors a return to private control. Lewi said it was unfair to judge NYRA’s finances without the VLT revenue, since the state promised it in return for NYRA giving up ownership claim to three tracks, including Saratoga Race Course.
“NYRA’s overall condition is sound because of VLT revenue,” she said. “That’s exactly our point.”
In NYRA’s telling, it made $1.7 million on racing operations in 2014 and $3.6 million in 2015. But DiNapoli said that that profit calculation didn’t include pension and retiree health insurance costs, and should have.
The auditors and NYRA officials differed on whether Kay had clearly met the measures used to qualify him for a $250,000 bonus in 2014, after one year on the job. Kay’s base salary that year was $300,000.
Based on the audit, DiNapoli recommended that NYRA develop a long-term plan to eliminate deficits on racing operations, as well as consider other measures to increase financial accountability.