VLT revenue keeping NYRA in the black for year
SARATOGA SPRINGS A $10.3 million loss from the New York Racing Association’s racing operations during the first half of 2013 prompted renewed calls for fiscal belt tightening at Wednesday morning’s meeting of the NYRA board of directors.
Even with the operating loss, NYRA headed into July with a net income for the year of $8.2 million and is projected to turn a profit for the second year in a row, largely as the result of budget support generated by video gaming operations at Aqueduct. And while it will turn a profit, it won’t be paying any taxes this year and isn’t expected to pay any until late in 2014, as board member Stuart Subotnick said NYRA had racked up more than $19 million in tax credits.
NYRA spokesman Eric Wing said the possibility of paying no taxes was based on preliminary information, and input from outside accountants will be needed in order to determine the final responsibility.
“There are many moving parts to all of this,” he said.
Subotnick estimated NYRA’s tax bill would be almost $10 million this year, which it wouldn’t have to pay, and about $13.7 million in 2014, of which it will likely be required to pay only about $4.3 million.
NYRA CEO Chris Kay and a handful of board members, including chairman David Skorton, focused on the deficit in racing operations.
“The critical figure to me is the operating profit or loss before the [video lottery terminal] funds,” Kay said. “We must find a way to decrease the expenses we can control ... and we must also find a way to increase our revenues.”
This sentiment was echoed by board member Stuart Subotnick, who said, “We have to act like the VLT revenue isn’t staying here.”
The future of the VLT payments, which are used for NYRA’s capital projects, purses and operating budget, have been in question since last year. State regulators, including Comptroller Thomas P. DiNapoli’s office, have said NYRA needs to be able to balance its budget without VLT revenues.
Revenue from VLT payments was guaranteed to NYRA as part of legislation passed in 2008 that awarded NYRA the franchise to run racing at Aqueduct Race Track, Belmont Park and Saratoga Race Course. As part of that deal, NYRA gave up its ownership claim on the three tracks, which now belong to the state.
NYRA board advisory member John Hendrickson referenced this deal in Wednesday’s meeting, saying, “NYRA in its history fought for VLT revenue ... so let’s not forget, this isn’t a gift.”
NYRA board member Michael Dubb also made the case that the state has a vested interested in ensuring stable VLT payments, as a strong NYRA operation has a big economic footprint.
While the VLT payments are written into state statute, NYRA board member Bob Megna, who is also the state’s budget director, suggested laws can change.
“Gaming in New York is going through an ongoing transition,” he said.
One way NYRA officials hope to turn their operations profitable is with the introduction of bars and restaurants in New York City, which would take the place of betting parlors that had been operated by the now-defunct New York City Off-Track Betting Corp. Subotnick said their goal is to open 40 locations in New York City by 2017.
“If NYRA doesn’t execute on the restaurant piece of the budget going forward ... we will continue to operate at a loss,” he said.
Preventing or possibly delaying this outcome are city and state lawmakers, who would need to authorize NYRA to move into New York City.
Some good news for the board was provided with an update on the Saratoga meet, which finishes its 40-day run Monday. Total handle is up almost 2 percent year-to-date and the 3.1 percent drop in attendance was much less severe than what other tracks nationwide are experiencing.
Kay highlighted the fact that spending on food and beverages, group sales and merchandise was up 18 percent as of Aug. 19. Following the large crowd for the Travers, he said, “I’m hoping the numbers will even be stronger when we get them [for the whole meet].”
At the meeting, NYRA also announced plans to implement upgrades to its online wagering platform in time for next year’s Triple Crown. They had initially hoped to have the improvements in place by this fall, but complaints from state regulators over the process for selecting a firm to make the upgrades forced NYRA to start the search over. A new search is starting this weekend, and NYRA anticipates it will identify a firm by October.
David O’Rourke, NYRA’s vice president of corporate development, described the potential improvements as “game changer,” saying it would better equip NYRA to compete with other online gambling outlets, which is one of the fastest areas of growth in horse racing wagering.
Kay, who been on the job since July 1, also announced at the meeting that NYRA has selected a firm to head the search for a senior vice president of racing operations.