NYRA turns it around

PHOTOGRAPHER: Justin Mason

Mending the New York State Racing Association’s public woes seemed a herculean task in the days leading up the 143th meet at the Saratoga Race Course in 2013.

The private, not-for-profit corporation awarded a 25-year contract to operate the state’s three thoroughbred tracks in 2008 continued to struggle with debt and seemed perpetually under fire with allegations of mismanagement. Moreover, NYRA was suffering an image crisis — unable to escape more than a decade of troubling headlines about its operations or convince the public it could adequately guide the future of horse racing in New York.

Chris Kay set foot in Saratoga Springs just 16 days after being brought on to lead NYRA into a new, less tumultuous era. A former chief operating officer of a Fortune 500 company, he came to the job with vast business acumen but entirely bereft of experience in the thoroughbred industry.

With NYRA, Kay knew he’d have to hit the ground running and learn quickly. His hiring caused a dismissive chortle from some racing insiders, who rhetorically questioned how an executive who ran operations at Toys ‘R’ Us could improve the embattled association or the quality of racing in New York.

“There was never a day that was boring, that’s for sure,” he recalled of his first days at the historic track.

Kay’s experience as an executive taught him to prioritize; and not worry about solving every problem at once. And at Saratoga, he started with the basics: customer service.

He encouraged NYRA workers to engage track visitors in conversations and implemented a small degree of accountability by having workers sport name tags. He also started a program to recognize those workers making a positive difference at Saratoga — “the unsung heroes” of NYRA, as he called them.

“You are the host of this house, and everyone who comes through this door is your guest.,” he recalled telling workers.

Corny, perhaps, but Kay’s first year at Saratoga saw increased spending by fans. Even with attendance down for the 2013 meet, customers at Saratoga spent 14 percent more on average than they did the previous year. Kay attributes this increase to an improved customer experience.

“You can tell if people are having a good time, and it doesn’t have to be anecdotal,” he said. “You look at how much they spend.”

Kay’s job now is to translate an improved experience at NYRA tracks into a larger fan base, improving the quality of racing and chartering a course that will keep the association in the black long after he delivers a report to bring it back to private control in April 2015.

To date, Kay’s work has drawn accolades from NYRA’s reorganized board of directors, a governing body crafted by Gov. Andrew Cuomo to lead the association back into private hands. In one year, Kay has helped to mend relations with state legislators, restore a degree of public confidence tarnished during a 2011 betting takeout scandal and guide the almost perpetually debt-ridden organization to a year-end surplus.

“There was a lot thrown onto his plate for someone who came in just last summer,” said John Hendrickson, a Saratoga Springs philanthropist who serves as a non-voting member on NYRA’s 17-member board. “And I think there’s a lot he’s done to turn it around. I give him high marks.”

NYRA’s ongoing transformation appears to be the product of a fundamental change in its core, starting with the 2012 firing of Charles Hayward, its CEO for eight years, and Chief Counsel Patrick Kehoe. Both were removed after a state report indicated the association had withheld roughly $8.6 million more from certain exotic wagers than it should have.

The state Inspector General opened an investigation into the case, while Cuomo advanced legislation that took public control over the majority of NYRA’s board for three years. The governor’s move reduced the 25-member board by eight positions, leaving 12 seats to be appointed by the state.

The new board strayed from the old practice of appointing industry insiders. An eclectic blend of new board members from various walks of life helped breed a new mentality more open to running NYRA as a business.

“We have an excellent board now,” said Charles Wait, a carryover member of the board with more than 30 years of experience. “The public-private nature of it has created a very good dynamic. We in the private sector now understand better the state’s needs, and I think the state understands better the needs of the racing industry.”

The new board has also placed trust in Kay’s leadership and decisions that haven’t always resonated well with people in the horse racing industry. For instance, Kay has brought aboard a number of six-figure-salaried executives who have little if any background in the racing industry.

Kay hired Lynn LaRocca, who formerly served as senior vice president of marketing for Modell’s Sporting Goods, in the newly created position of chief experience officer, and Joe Lambert, former general counsel at Deloitte Consulting, as NYRA’s top attorney. Both were given annual salaries of $280,000 per year. He also grabbed Kevin Rogan, chief compliance officer at Siemens Corp., to fill that role at NYRA at an annual salary of $170,000.

In total, Kay said the new executives make about $45,000 more than the ones who were filling their respective capacities before. But he said each brings an impeccable reputation to the job — something that should help restore some of the public confidence in NYRA lost during the takeout scandal.

“We have to demonstrate credibility,” he explained.

Kay also doesn’t see their lack of experience in the racing industry — or his own — as a hindrance, since he’s also brought aboard other employees with deep backgrounds in the equine industry. Martin Panza, longtime vice president of racing and racing secretary at Betfair Hollywood Park in California, was hired as senior vice president of racing operations, while Frank Gabriel Jr., former CEO of the Dubai Racing Club, was hired as racing secretary.

Essentially, Kay has divided NYRA’s executive leadership into those who handle the business model and those who manage the racing. And he insists the model he’s molded at the top will be sustainable with a budget that will remain in the black.

Even with the new hires, NYRA is forecasting a $250,000 surplus by year’s end, without including the video lottery terminal revenue afforded to it by Resorts World Casino at Aqueduct. Without that VLT revenue, NYRA would have realized a $10.5 million deficit in 2013.

The projected surplus comes as the result of a number of management decisions, ranging from swapping out vendors to eliminating inefficiencies. For example, NYRA is shutting down its training facility in Aqueduct for several months this summer, since it has two others operating at the same time.

NYRA is also turning an eye toward boosting revenue. In Saratoga, the association increased general admission prices from $3 to $5 and grandstand admission from $5 to $8, the first price increases since 2000. The price hike, however, came with a caveat: NYRA reduced the cost of season passes from $35 to $30 so frequent patrons at the track would realize savings. The association has also aggressively marketed the passes, resulting in a record 3,391 sold as of Friday; only 1,402 season passes were sold all of last year.

Kay is also spearheading an initiative to aggressively market some of the top stakes races so they draw even greater crowds. His philosophy is to boost the purses for those races, draw an impressive card of horses and then create a buzz about the event that draws fans who might not ordinarily venture to the track.

He compared races like Saratoga’s Whitney and Travers stakes to the post-season in professional baseball. While fans might not come out to a regular season game, they make a point of coming out to the ballpark once October rolls around.

“When you get to the playoffs, that’s when people really pay attention,” he said.

NYRA’s mending under Kay hasn’t been without some bumps along the way. Though the Belmont Stakes drew the third-largest crowd ever at the downstate track, NYRA also drew criticism from some fans who complained about inadequate restrooms, excessive concession prices, a malfunctioning public address system and no cellphone or WiFi service.

In a five-page letter this month, the state Racing Fan Advisory Council asked NYRA to re-evaluate its practices to avoid the negative experience some fans relayed to them after the third leg of the Triple Crown this year. Chairman Patrick Connors also asked to have a public meeting in Saratoga Springs in August with Kay and LaRocca to discuss ways to improve the fan experience.

“The letter was not so much to be critical, but to make sure NYRA is aware of the issues fans were facing,” Connors said, “and that they’re being taken seriously.”

Republican state Senator John Bonacic, chairman of the Senate’s Racing, Gaming and Wagering Committee,also warned NYRA that it needs to be cognizant of issues like those that arose at Belmont and realize there’s more work to be done. But he also credited Kay and the reorganized board’s leadership for what they’ve accomplished so far.

“They have brought about significant improvements in the way NYRA operates,” he said.