Comptroller: NYRA on "very shaky financial ground" Story Discussion
By DREW KERR dkerr@poststar.com | Posted: Monday, July 12, 2010 3:45 pm | (10) Comments
Related Links DiNapoli's report
SARATOGA SPRINGS -- Auditors from the New York State Comptroller's Office will monitor the New York Racing Association's finances in real time, as the organization's financial prospects remain uncertain, state officials announced on Monday.
New York State Comptroller Thomas DiNapoli said he will place the auditors with NYRA because the association remains on "very shaky financial ground," and has moved too slowly to reform its budget since emerging from bankruptcy in 2008.
NYRA is projected to run a nearly $19 million deficit this year and faces insolvency as early as 2011 if revenues from video lottery terminals that are slated to be installed at the Aqueduct Racetrack don't materialize as expected, auditors who looked at the organization's finances said.
"After declaring bankruptcy and getting bailed out by taxpayers, NYRA continued business as usual for too long," DiNapoli said in a statement announcing the added oversight. "There's too much at stake to let NYRA continue its fiscal mismanagement."
The audit comes two years after state leaders agreed to cancel the majority of NYRA's state debt and give the organization $105 million to pay off non-state debt, leaving the organization with about $25 million in cash.
NYRA ceded ownership of its three race tracks, Aqueduct, Belmont and the Saratoga Race Course, to the state in exchange for the financial aid.
Officials at NYRA have reduced operating expenses by around 2 percent since emerging from bankruptcy, and year-to-date expenses are about $1.5 million below budget so far this year.
But auditors said the cuts haven't gone far enough, and that the organization is relying to heavily on the expected VLT money.
NYRA only began seriously considering savings in February, as concerns over cash flow mounted, auditors said. At that point, the association reduced purses and eliminated 12 positions in order to save about $5 million, according to the auditors' report.
DiNapoli said NYRA could still save millions of dollars by, among other things, reducing the amount spent on services such as advertising and eliminating the free transport of horses between tracks.
Auditors also took aim at NYRA's staffing costs. The organization's payroll has increased by $1.9 million, to $69.2 million, since 2008, and seven executive staffers make between $255,000 and $460,000 a year.
Responding to that complaint, Charles Hayward, NYRA's CEO, said administrators had foregone pay raises for the last two years and said a "staffing analysis" would be completed before the 2011 budget is done.
Not all of NYRA's financial problems are of the association's making, however.
Betting, NYRA's primary source of revenue, fell by 13 percent between 2006 and 2009, and the New York City Off Track Betting Corp., now in bankruptcy, could owe NYRA as much as $30 million by the end of the year.
The state's inability to select a VLT operator for the Aqueduct Racetrack, which had been expected to bring NYRA $30 million in revenue by now, has also hurt the organization.
A fourth round of bidding for the VLT contract began earlier this year, and a recommendation for a new operator is expected in early August.
Last week, though, two of three bidders who had expressed interest in running the gambling devices were disqualified for failing to comply with the state's demands. Only one firm, Genting, remains in the running.
DiNapoli said the narrowing of the field to a single entity does not bode well for NYRA.
"When you start with six potential bidders and end up with only one, it begs the question of how the process was handled and whether the state can actually close the deal," he said. "The fact is, NYRA can't make it long without significant restructuring and revenues from VLTs."
Auditors suggested NYRA come up with a contingency plan to enact if the process ultimately fails, but Hayward said in his response to the comptroller's office that he remains optimistic the gambling devices will be up and running soon.
Removing revenue from VLTs, he said, would mean reducing personnel costs buy up to 30 percent and would force a "painful restructuring of more than 25 union contracts."
"Such drastic cuts would compromise our ability to fulfill the franchise and ultimately jeopardize the long-term future of the New York State equine industry," Hayward wrote.
NYRA officials declined to elaborate beyond the written response provided to the state.
The audit comes almost two months after New York lawmakers agreed to loan NYRA $25 million to avoid a shutdown of racing, including the six-week meet at the Saratoga Race Course in Saratoga Springs.
The loan, which the comptroller's office said should allow NYRA to continue operating through the end of the year, is expected to be repaid with funds from VLTs. .
Copyright 2011 The Post-Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
.
Posted in Local on Monday, July 12, 2010 3:45 pm Updated: 3:49 pm. | Tags: Nyra, Comptroller, Audit,
Cuomo blasts NYRA for contracting with out-of-state workers to handle telephone wagering
Published: Friday, April 29, 2011
By PAUL POST ppost@saratogian.com
SARATOGA SPRINGS — Gov. Andrew Cuomo has blasted New York Racing Association for contracting with Churchill Downs’ Twin Spires in Oregon to handle its telephone wagering business.
Cuomo, in a Thursday letter to NYRA, asked that any activity under the contract be done by New York employees.
"NYRA's decision to locate these activities and the potential jobs out of state is extremely troubling given the extraordinary investment New York State has made to maintain NYRA's viability over the years," Cuomo said. "My top priority as governor is to create jobs in New York state. As such, I expect you to do everything possible to ensure that these telephone wagering activities are conducted within New York state by New York state taxpayers. The Empire State Development Corporation stands ready to help you to identify options for keeping these jobs within the State. I would ask your full cooperation in this effort and look forward to a prompt response."
NYRA spokesman Dan Silver said Friday that no union jobs will be lost, although some non-union part-time positions will be eliminated. NYRA has seen dramatic increases in its telephone and Internet account wagering business since New York City Off Track Betting Corp. closed on Dec. 8.
For the period Jan. 1 to April 23, telephone wagering has gone up 95 percent from $6.7 million to $13 million, compared to the same time frame a year ago. For the first quarter of 2011, call volume is up nearly 400 percent, from approximately 91,000 last year to 440,000 this year, an approximate daily increase from 1,000 calls to 5,000.
Silver said the new telephone wagering contract, which took effect this week, was done because Twin Spires has vast experience and more capacity to handle calls that should improve customer service. "They’re already handling calls," he said. "The outsourcing was not made as a cost savings mechanism. Previously, we had a call room here on track at Aqueduct."
Since OTB closed, NYRA has increased its pool of union workers from 90 to 150. "The approximately 30 union tellers that were working in our Telebet operations will now move to the live windows at the track, a position that they generally prefer," Silver said. "The only workers that will be displaced are non-union extras that serve as part-time employees."
In September 2008, NYRA obtained a new 25-year franchise to run racing at Saratoga Race Course, Belmont Park and Aqueduct Racetrack. Under deal, the state took over ownership of all three tracks, which NYRA says are worth more than $1 billion, and the state absorbed tens of millions of dollars of NYRA debt.
State Senator Andrew Lanza, R-Staten Island, has introduced legislation (S.4876) that would require NYRA to contract with call centers in New York. It’s on the senate Finance Committee’s agenda for Monday.
There is no same-as bill in the Assembly.
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
NYRA overcharges bettors $8.6M, will lower takeouts to correct error
By Matt Hegarty
The New York Racing Association said on Wednesday that it will lower its takeout on superexotic bets from 26 percent to 24 percent beginning on Dec. 28 to make up for an error that regulatory officials said could have cost bettors $8.6 million over the past 15 months.
The reduction will affect trifecta, superfecta, pick three, pick four, pick six, and Grand Slam wagers. NYRA received approval to lower the takeout on the bets on Wednesday from the New York State Racing and Wagering Board after the board passed a resolution requiring the association to take a series of steps to rectify the error, some of which could be extremely difficult to carry out.
NYRA and racing board officials pinned the error on a provision of complex, wide-ranging amendment to the state's racing law passed in 2008 that affected only NYRA's three tracks -- Aqueduct, Belmont, and Saratoga. Both sides said on Wednesday that they had no knowledge of the provision until alerted to it by auditors over the last few days.
"The racing board is certainly not saying that anything nefarious was done here," said a board spokesman, Lee Park, on Wednesday. "But ultimately NYRA is responsible for it."
At the enactment of the amendment, NYRA was immediately required to raise the takeout on all of its wagers by 1 percent, a measure that drew widespread criticism from price-sensitive bettors. The provision requiring the 1-percent bump, however, expired on Sept. 15, 2010, creating a situation in which NYRA was improperly calculating the superexotic takeout at a 26-percent rate, NYRA and racing officials acknowledged on Wednesday.
That's because an existing New York law that was superseded by the 2008 amendment sets the maximum legal takeout rate for tracks in New York at 25 percent. As a result, when the provision in the 2008 law expired, NYRA should have been required to re-set the superexotic rate to 25 percent, but it didn't.
The association said in a statement that it was reducing the takeout rates to 24 percent in order to make up for the error, which was caught only when the state comptroller began auditing the New York State Breeders' Fund last week, according to an official who spoke on the condition of anonymity.
Because NYRA had been advertising and calculating the superexotic takeout rate at 26 percent, the payouts for the bets were not deceptive or mathematically incorrect. But the payouts on superexotic bets would have been higher – to the total of $8.6 million in improperly calculated payouts – had the takeout rate been set properly at 25 percent.
In a statement, NYRA said that it had no knowledge of the sunset provision until they were alerted to it by the board earlier this week.
"This change was unintentionally overlooked due to the complexity of the takeout provisions in the racing law," NYRA said in the statement. NYRA officials declined to comment on Wednesday beyond the statement.
The error is likely to present political problems to NYRA just months after a lucrative casino at the association's Aqueduct racetrack opened. During the past decade, since casinos were legalized at nine New York racetracks, including Aqueduct, NYRA has come under indictment because of fraud by its mutuel tellers; agreed to the establishment of an independent monitor for its operations; filed for bankruptcy; and reorganized under the guidance of the state while exchanging the deeds to its three tracks for a 25-year racing franchise. Every misstep of the association in the past 10 years has been seized on by politicians as a justification for revoking NYRA's franchise to operate the tracks under state law.
During the Wednesday meeting, the racing board passed several resolutions requiring NYRA to make good on the error, but the steps adopted by the board illustrate how difficult it will be to make any fair restitution because of the unusual impacts created by the oversight.
For example, NYRA will be required to attempt to identify bettors who may have been affected by the error by examining the payouts made to customers of its account-wagering system since Sept. 15, 2010. But while those bettors may receive additional money, the policy will neglect the customers of out-of-state wagering operations who might also deserve higher payouts, along with the legions of ontrack customers who do not have records of their transactions.
NYRA will also be required to take steps to clear up tax issues that the error may now create for bettors, since the higher payouts under the 25 percent takeout rate may trigger automatic withholding provisions. Any effort that requires bettors to pay new taxes on bets that they have already cashed is likely to cause an enormous amount of push-back.
In addition, the error also had an impact at simulcasts sites across the nation, by delivering more revenue to out-of-state wagering facilities and account-wagering operations that took the NYRA signal. Out-of-state betting operations keep the difference between the takeout and the amount they pay for the signal, and in this case, they would have retained an additional 1 percent of the betting handle on all NYRA races since Sept. 15, 2010. NYRA and the board would probably have few legal means by which to reclaim that revenue if they attempted to do so.
And not even the racing board was aware of the error, since it signed off on documents throughout the past 15 months that described the superexotic rate at 26 percent. Under New York's laws, the board is required to review and approve NYRA's business plan every year, and the plan that was approved for 2012 listed the superexotic takeout rate at 26 percent rate. The board also approves NYRA's simulcast contracts, which list the takeout rates applied to all wagers.
Park acknowledged that auditors at the board were unaware of the error until earlier this week.
"This all happened very quickly," Park said.
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
Updated: Wednesday, October 20, 2010 5:19 PM Posted: Tuesday, May 18, 2010 2:32 PM
Photo: AP Photo
New York Gov. David Paterson
State officials in New York have agreed on one point: that they will not let the New York Racing Association shut down after the Belmont Stakes (gr. I) or for the Saratoga summer meet.
How exactly the racing group, which is running out of money, will stay afloat is still the sticking point.
"That’s not going to happen," Gov. David Paterson said May 18 of a looming NYRA shutdown.
The NYRA board was told two weeks ago it was running out of money as early as June, in part because the New York City Off-Track Betting Corp., which is in bankruptcy protection, has delayed payments to NYRA and other tracks as it deals with its own cash flow problems. NYRA says NYCOTB owes it $17 billion, and NYRA officials have said they could be forced to shut down the day after the Belmont Stakes.
"We have a plan to loan NYRA, in the short term, money to get through Saratoga and we’re working on a long-term plan to help them beyond that," Paterson said.
The new plan, sources said, involves a direct loan by the state of at least $17 million--which could resolve NYRA’s financial problems through the year.
"I think they’ll pass it," Paterson said of lawmakers and the new bailout plan.
But Assembly Speaker Sheldon Silver did not commit to passing the NYRA bill. "I haven’t seen the bill yet," Silver said.
Nor has Assembly Racing Committee chairman Gary Pretlow. But he said he is confident state help for NYRA is on the way. "We’re not going to let Saratoga fail," Pretlow said of the upcoming race meet.
Negotiators are working on an alternative to a $17 million loan plan recently floated by NYRA. That plan failed because, lawyers told NYRA, it would be illegal for bonds to be used for the operating expenses NYRA had planned for the proceeds. Now, a new lending mechanism is being pursued in which the state would still provide a loan to NYRA, which could use the proceeds of this particular lending device for operating expenses.
NYRA officials have said they would not be in the financial trouble now facing the track operator had the state gotten a racino open at Aqueduct. A deal signed by the state several years ago provides that the state will make a good faith effort to help NYRA if it faced financial trouble if the long-delayed Aqueduct casino was not operating by April 2009.
Further, NYRA officials argue that the state--because it now owns NYCOTB--is on the hook for the money owed NYRA by the OTB giant. NYCOTB, in its Chapter 9 bankruptcy filing, acknowledges a $15 million debt to NYRA; officials at NYRA have said that amount has since grown to $17 million.
"NYRA has a good case for the money," Pretlow said. "OTB is the state and OTB owes NYRA, ergo, the state owes NYRA."
State officials said the new borrowing plan envisions the state Empire State Development Corp., a state agency that runs economic development efforts, lend NYRA between $15 million and $25 million. They said the plan would get around state constitutional prohibitions on gifts or loans of credit by terming the loan a “working capital’’ borrowing that NYRA would have to pay back before next March 31, which is the end of the state’s 2010 fiscal year.
If NYRA does not repay the loan, the proceeds would be taken from future revenues NYRA expects from a casino at Aqueduct racetrack. The Paterson administration expects a casino operator to be tapped–in what is now the fourth separate bidding process for the racino–sometime in early August.
The NYRA borrowing plan envisions taking down by as much as $25 million from a $250 million capital program that the state has in place to serve as financing for the future Aqueduct casino.
The Paterson administration has not yet proposed legislation for the NYRA borrowing plan. Officials are hoping for a deal with legislative leaders sometime this week.
Negotiators, however, have been cautious about getting too many of the details about a NYRA loan package out in public, in part, because the state is facing a $9.2 billion deficit, and a whole range of popular programs are facing sharp budget cuts.
In 2008, the Legislature gave NYRA the franchise to run races at Aqueduct, Belmont and Saratoga, and allowed it to emerge from bankruptcy. As part of the deal, the Legislature agreed to loan NYRA money in the event that no vendor was chosen to oversee video lottery terminals at Aqueduct. Almost two years later, that selection still hasn't been made -- and NYRA wants the state to honor its obligation.
A bill proposed earlier this month by Paterson's office called for NYRA to get $17 million to help pay for previous capital project expenses, as well as expenses going forward. Bond lawyers found those terms impermissible, and the plan was scrapped last week.
The loan envisioned for NYRA will come from $250 million in proceeds from issuing bonds. The money is being borrowed by the state to create the Aqueduct racino. The delay in getting that project developed is one of the reasons NYRA is short of funds; the other reason is the bankruptcy of New York City Off-Track Betting Corp., which owes NYRA about $17 million.
The shortfall, NYRA's leaders have maintained, could force the state's tracks to go dark.
"That's not going to happen," Paterson told reporters after a meeting with legislative leaders at the Capitol. "We have a plan to loan NYRA in the short term money to get through Saratoga, and we're working on a long-term plan to help them beyond that."
Under the terms in the new legislation, the state loan to NYRA would have to be paid back by March 31 or the state will take some of the association's cut of video lottery terminal revenues from the Aqueduct racino.
I hate NYRA, have they ever done anything positive for NY Racing? They are run like a criminal enterprise, yet our corrupt NY government continually puts themin charge, it's almost like someone is getting paid
In 2008, the Legislature gave NYRA the franchise to run races at Aqueduct, Belmont and Saratoga, and allowed it to emerge from bankruptcy. As part of the deal, the Legislature agreed to loan NYRA money in the event that no vendor was chosen to oversee video lottery terminals at Aqueduct. Almost two years later, that selection still hasn't been made -- and NYRA wants the state to honor its obligation.
this just means that they weren't too big to fail until the government helped them.
I hate NYRA, have they ever done anything positive for NY Racing? They are run like a criminal enterprise, yet our corrupt NY government continually puts themin charge, it's almost like someone is getting paid
they are defacto mafiosa......it's a JOKE......
the stimulation of the economy is one thing,,,,but the allowance of gangstas is another.....
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
Logged
