January 2012 New York State Rep Report

If you are a NYRA customer, or interested horseplayer, here's a recap of happenings from our New York State Rep, Vic. If you'd like to become a state representative, please email info@hanaweb.org.

Overview:

• In December of last year, New York State Racing and Wagering Board (NYSRWB) ordered New York Racing Association (NYRA) to pay back bettors roughly $8.6 million and offer a discount going forward on exotic wagers. NYRA was charging 26% for the past 15 months, when it should have been 25%. NYRA called it an "unintentional oversight."
• A poll conducted by Siena College found that New Yorkers are slightly supportive of expanding casino gambling in the state (53% in favor), but not of the proposed $4 billion convention center at Aqueduct (57% opposed). The letter of agreement for the convention center was signed on January 3. The convention center could spell the end of Aqueduct, with winter racing moving to Belmont Park.
• Legislation has been introduced that would enable Suffolk OTB to re-file its Chapter 9 bankruptcy application and potentially repay its debts, which includes money owed to NYRA and Churchill Downs.
• NY Comptroller Thomas DiNapoli said in a statement that NYRA stands to waste the money from VLTs if it does not carry out the recommended reforms. NYRA responded by saying that it would have been too costly to implement all the recommended reforms within one year, but it remains committed to completing them. Of the nine recommendations made during the course of two audits in 2010, five have been partially implemented and the rest have yet to begin. The audit report is attached.
• Separate from the official audit, Thomas DiNapoli stated that NYRA will lose $19.7 million in racing operations in 2012. NYRA responded by calling the figure "misleading," and said it projects $19 million in net income, "not a net loss" (there's probably some confusion in labels here, but the comptroller may be right, especially since he said "in racing operations" – see NYRA 2012 Budget below).
• Timothy McGinn, a former board vice chairman of NYRA, has been charged in a federal indictment of defrauding investors through his brokerage firm. He faces 30 counts of fraud and up to 30 years in prison.
• Thanks to VLT Revenue, purses at Aqueduct have increased by almost 40%. This has led to a massive increase in claiming activity at a time when claims are usually dull. From December 28 through January 20, there were 116 claims totaling $1.9 million.

NYRA 2012 Budget:

• Gross Revenue is expected to swell 35% in 2012, almost entirely due to VLT Revenue (without VLT Revenue, the increase drops to 6.2%).
• Net Income is expected to be $18.9 million in 2012 (adjusted for VLTs, this changes to a Net Loss of $19.5 million).
• Free Cash Flow is expected to be $10.4 million in 2012 (adjusted for VLTs, this drops to ($14.5) million, even after reducing expected capital expenditures from $20.3 million to $4 million).
• The injection of VLT Revenue is expected to increase purses by 43% in 2012.
• Because of the increase in purses, NYRA has assumed "an average increase in field size per race of 0.5" and, as a result, "a 5% to 8% increase in daily average handle." To be specific, the increase is 7.2%, 5.4%, and 6.3% at Aqueduct, Belmont, and Saratoga, respectively. Note that any adjustments to the financial information above do not consider these assumptions. It's obvious that the numbers would be worse if further adjusted.

NYSRWB Monthly Meeting:

• At the request of New York's Franchise Oversight Board, NYSRWB has commenced an investigation into NYRA's account wagering practices (specifically whether NYRA has extended credit to some bettors whose accounts weren't adequately funded). NYRA refutes these allegations. NYSRWB does not comment on ongoing investigations.
• NYSRWB approved a blood alcohol content (BAC) testing rule in thoroughbred racing. The rule includes mandatory testing of jockeys each race day and discretionary testing of other licensed individuals. A BAC of 0.05% or more will be considered alcoholic impairment. Jockeys testing positive are banned from racing that day and could face suspensions, fines, and other penalties. The rule goes in effect April 27, coinciding with the opening of the Belmont Park Spring/Summer Meet. Note that the current NYRA house rule (BAC less than 0.04%) will remain in effect.
• NYSRWB approved an amendment to the minimum required betting interests in thoroughbred trifecta wagers, reducing the requirement to 5 (previously 6).