NYRA Board Recommends Reprivatization

The New York Racing Association (NYRA), which has been operating under the auspices of a government-appointed Reorganization Board of Directors since 2012 in an effort to reestablish solvency and improve the racing product, moved a step closer to reprivatization on Tuesday. By a unanimous voice vote, the board members advanced a three-pronged set of transition options to state officials, indicating a preference for a new 15-member board made up of a majority of appointees who would be recommended by the current NYRA executive committee and four appointed by elected officials.

Nearly four years ago, Gov. Andrew Cuomo seized control of the inconsistently profitable NYRA when it was $25 million in debt, had a high rate of catastrophic equine injuries, and had no systematic plan for investing in its facilities and improving customer-facing amenities. This re-org board, which controls Aqueduct, Belmont Park and Saratoga Race Course, was initially supposed to remain in place only for three years. But in 2015, its governance was extended for an additional year.

Now, according to a draft of the NYRA board's executive summary for reprivatization that was outlined at Tuesday's meeting, the time has come for the re-org era to end. NYRA has been debt-free since April 2014, shown a $5.2 million operating surplus for the last two years combined, decreased equine injuries below the national average in each of the past three years, and has spent more than $20 million at all three racetracks during 2013-2015 to enhance the guest experience.

“I think we've done the job that we were supposed to do,” said Michael Del Giudice, the NYRA board's vice chairman. “So the question now is to build support in the governor's office and in the legislature for [reprivatization].”

Pursuant to Section 207(1)(d) of the Racing, Pari-Mutuel Wagering and Breeding Law, the re-org board is required to facilitate its own transition by proposing “no less than 180 days prior to its termination, recommendations to the governor and the state legislature.” According to NYRA, the statutory notes further clarify that the “franchise shall be returned to private control, remaining in the form of a not-for-profit corporation.”

Del Giudice said that based on NYRA's past four years of improved performance, and in discussions he has recently had with elected officials, this year's attempt at reprivatization has a good chance at going through.

“We've obviously talked to a bunch of the members of the Assembly and the Senate,” Del Giudice said. “The representatives from Saratoga have been very strong in favor of private [control] and I know some of you [board members] have expressed that to us as well. I think a number of senators, including the chairman of the racing committee, have come out in favor of private control as well, so I think it's leaning in that direction.”

These were the three transitional options to seat a new 15-member NYRA board that were outlined at Tuesday's meeting:

Option 1: New NYRA board to have majority of private members and four publicly appointed members (10 members selected by the current NYRA executive committee; two selected by the governor; one each by the president of the senate and the speaker of the assembly, plus the NYRA chief executive officer).

Option 2: New NYRA board to have all private members, selected by the current NYRA executive committee.

Option 3: Current NYRA Reorganization Board to remain in place if the governor and Legislature choose to retain the status quo and extend the tenure of the re-org board for one additional year.

Both before and after voting on the reprivatization plan, the board debated several issues. Key among them were:

1) Whether the board should simply present all three options to elected officials, or indicate a clear preference for one of them.

2) The pros and cons of giving elected officials a say in who would sit on the new board.

3) The potential pitfalls of leaving the option open for the re-org board to remain in place for a second year past its original expiry date.

4) Whether ex-officio representatives from the New York Thoroughbred Horsemen's Association (NYTHA) and New York Thoroughbred Breeders, Inc. (NYTB), which currently have (and would continue to be granted) non-voting status on the board, should instead be allowed to vote.

Ultimately, this was the motion that was read into the record: That the NYRA Reorganization Board of Directors “hereby approves the NYRA privatization plan as presented to the meeting of April 12, 2016, and further recommends to the governor and legislators that NYRA should be returned to private control with either all private appointees or majority private members with minority public appointees.”

But a flurry of voice amendments, which could not be properly attributed though the online feed of the NYRA meeting, chimed in just before the vote was taken to add:

“It should be specific—with four public appointees…”

“…and the latter being preferred by the board.”

The voice vote was then unanimous, and Del Giudice assured board members that he would articulate the specific preferences of the board's desire for how the private/public appointees should be split in a cover letter that would accompany the plan when it got sent to elected officials.

After the vote, John Hendrickson, a special advisor to the board, spoke up via speakerphone to emphasize the importance of not allowing the re-org board to remain in place for another year.

“I think we have to be very clear that we're not advocating kicking the can down the road and that we don't allow that to happen,” Hendrickson said. “I think it's time for this to come to its conclusion. I said it once before: If they [extend] it again, what prevents government from running racing forever? So I think we have to have this conclusion, and we have to be very strong on it. I want our government to keep its commitment. We were told it was three years. We're already at four, they're talking about five—let's put an end to this.”

Also after the vote, ex-officio member Rick Violette Jr., who separately serves as the president of the NYTHA, said via speakerphone that he would like the NYTHA and NYTB ex-officio appointees to instead be granted voting status as “bona fide” members of the board. “That's the way it was on the prior board, and I'd just like that to get some consideration,” he said.

“We heard you, but I think as far as our report is concerned, we like it the way it is, frankly,” Del Giudice replied. “Otherwise it's going to be mixing up a couple of organizations, and I'm not sure we want to do that.”

Without further discussion on the matter, Del Giudice adjourned the meeting. @thorntontd