Switching leads: Lawmakers call on state to return NYRA to private control

Switching leads: Lawmakers call on state to return NYRA to private control

Switching leads: Lawmakers call on state to return NYRA to private control
October 12, 2015

As a horse runs around the turn heading into the final stretch of a race, part of a jockey’s job is to urge the animal to switch its “lead.” A horse usually kicks its left front leg out first as it arcs left around a turn, because it is more efficient. But if it continues to run with its left leg as the lead, it will get tired in the straightaway, so a good jockey will flip his or her wrist or give the horse a light tap with the whip to make it switch to lead with the right foot. Switching at the right spot is key. If you switch too late, the horse loses speed as it tires on the left lead. If you switch too early, it may tire on the right lead before the finish line.

This is an apt metaphor for the position the New York Racing Association now finds itself in. After three years of state control of NYRA’s board of directors, pressure is mounting to return control of the franchise to people with more experience in the industry.

“I think it is time for a change,” said John Bonacic, chairman of the state Senate’s Racing, Gaming and Wagering Committee. “Sometimes it is healthy to have change. And there are many people smarter than I who want the existing board removed or replaced, but in the last 12 months they have done a good job in making sure it is back in the black.”

Gary Pretlow, the Assembly’s Racing and Wagering Committee chairman, agreed. “The people who are now on the board, they all have good intentions, but none of them are racing people,” he said. “Yes, you can hire people to do that job, but I really don’t think the industry should be controlled by people whose interests are not in horse racing.”

The argument for this change is that NYRA’s caretakers are businesspeople who have been effective in the short term at balancing the books after a time of controversy and corruption, but are not best suited to outline a long-term vision for how the state’s three biggest race tracks should be operated. This was outlined in a letter signed by Bonacic and Pretlow along with Capital Region lawmakers who expressed concerns about the future of the Saratoga Race Course, which they called a “crown jewel of racing” and is one of the top summer vacation spots in upstate New York.

For lawmakers and concerned residents, a change now could capitalize on the stabilizing impact the state takeover had, and give horse racing a well-timed boost – much like a horse switching leads at just the right moment in the home stretch.

But there is little to suggest NYRA will go through large-scale changes anytime soon.

The Takeover

After tumultuous years in the ’90s and early 2000s filled with accusations of mismanagement and corruption culminating in a federal indictment for tax evasion and money laundering and a bankruptcy filing in 2006, NYRA was nevertheless awarded a franchise license in February 2008 to operate the state’s three biggest tracks – Belmont, Aqueduct and Saratoga. One key factor in the forging of the 25-year deal was a legal dispute between the state and NYRA over who owned the racetrack properties, worth billions. In exchange for extending NYRA’s franchise rights through 2033, the association dropped its claim to the properties.

NYRA is a nonprofit entity that has specific rules dictating how it can operate the betting at the tracks. Each race has a pot of money from a host of different types of bets – from just betting on the winner to betting on the order in which the horses will finish, known as exotic bets. That money is divided into specific payouts based on a formula. NYRA takes a cut, but money also goes to several other areas, including the state and the breeders of the horses. In spring 2012, it was discovered that NYRA had not paid out enough for certain exotic bets for 15 months in 2010 and 2011 and had never revealed the mistake to the state oversight board. In total, the association kept more than $8 million it should have paid to bettors.

The revelation led to a shakeup of the NYRA board. Gov. Andrew Cuomo quickly moved to restructure the entity, creating a 16-member board, with seven appointees made by Cuomo and two appointees each by the Assembly and Senate. The remaining five appointees came from the old NYRA board. When the state initiated the takeover, it was to be in effect for three years, expiring at the end of this month. But in this year’s budget, state control of NYRA was extended another year, making the end of October 2016 the target date for a return to private control.

The Future

Part of the reason the takeover was extended in last year’s budget was because the board had not put forth a transition plan for moving the association back into majority private control. NYRA is required to put forth a plan 180 days before the end of the takeover, which is now roughly April 2016.

If the report comes out on time, it sets up an intriguing timeline. The state budget is due April 1. Assuming the plan isn’t released before the budget, and therefore not included in the budget, then the state Legislature will have to take action before the end of the session in June.

Since 2016 is an election year, controversial legislation can often be hindered because of disputes, making any large-scale change to NYRA unlikely unless there is overwhelming consensus in the Assembly, Senate and the governor’s office. But this is an important issue to several incumbent lawmakers in the Capital Region, so simply extending state control probably won’t be a viable option, either.

Both Bonacic and Pretlow said they would like to see lawmakers pass legislation calling for only small changes to NYRA’s leadership, removing state control and replacing it with a more private model.

“I am a believer that the private sector can always do anything better than government,” Bonacic said. “So I don’t want government running NYRA. I would rather have smart, sophisticated people knowledgeable in the horse racing industry and having fiscal intelligence and a sense of economic vitality to keep a business going and thriving.”

“It should run well and be managed well, but we are not in the business of running racetracks,” Pretlow said. “That is not in our constitution to do. But we do issue licenses for people to do things and make money in New York and pay their taxes. What we are really interested in is getting a return from the entity. And if it were put into the hands of racing people, that will happen.”

In horse racing parlance, favorites in a race are referred to as “the chalk.” Right now, the chalk on the future of NYRA is a plan with a modest move toward a more private leadership that doesn’t disrupt day-to-day operations. Any other idea for changing racing in New York seems like a long shot.

Michael Gareth Johnson