NYRA expects to lose millions in 2011, hopes for 2012 profit

The New York Racing Association expects to lose millions in 2011, but hopes to turn a profit in 2012.

NYRA officials, who have not made their proposed 2012 budget available to the public, presented their 2011 budget overview and projections for next year to the state Franchise Oversight Board on Monday afternoon.

In the meeting, NYRA Executive Vice President and COO Ellen McClain was asked whether NYRA would have a net income loss of $20 million and she said, “Yes.”

“In terms of below-the-line expenses, we are going to be over budget because our retiree medical came in much higher that we thought. [Video Lottery Terminals] revenue were a factor, and we did not achieve the expectations in that sense,” she said.

The VLT money was not as high as NYRA had budgeted, as it took longer than expected to get the terminals online at the Aqueduct racetrack in Queens.

NYRA’s operating expenses showed better performance, though, as they met the projected betting handles, which is the money bet with NYRA, and benefited from a contract with NBC to produce “Summer in Saratoga.” McClain added that the company saved money by outsourcing its phone operations.

Going forward, she said, “We will produce net income in 2012, largely because of the VLT revenues.”

The proposed budget for 2012 includes less than a 1 percent increase in operating expenses, $20 million in capital spending and $93 million from 5,000 VLTs to pay for racing purses, capital expenditures and the operating budget.

NYRA is hoping to increase purses by more than 30 percent in 2012, with the hope of attracting more horses to races at their tracks — an average of a half a horse per race. McClain described this decision as a big one that the officials wrestled with, as it was hard to predict what the actual effect of increasing the purses would be.

“We do think that with this increase in purses it makes NYRA extremely competitive and we can compete for the horsemen … and increase our field size,” she said, noting that NYRA has the capacity to handle this increase.

The decision to increase payouts for winners drew some concerns from state Division of Budget Director Robert Megna, who also serves as the board’s chairman. “You already have relatively high purses compared to other tracks around the country and [have said] that as a result your yield per handle per result was pretty good. Now you’re going to increase something where you’re already of the world, by 30 percent,” he said.

NYRA President and CEO Charlie Hayward said the increased purses will be meaningful at Aqueduct, which he feels is losing horses to a course in Philadelphia.

He also rejected the idea that there is a ceiling to the benefit of higher purses, as Hayward noted that Saratoga has “far and away the highest purses,” but has the best yield per result.