State watchdogs of the New York Racing Association want it to rein in its spending and learn to operate without relying heavily on millions of dollars in video lottery terminal revenue.
For months, members of the state’s Franchise Oversight Board have chastised NYRA for its reliance on VLT funds, which NYRA projects will enable it to turn a profit for the first time in recent years. In its 2012 budget, NYRA projected that VLTs at Aqueduct would account for about $93 million this year, of which about one-fourth would go toward its operating budget.
In the oversight board’s 2011 annual report, which was released Thursday afternoon, it said NYRA’s budget shows it’s too reliant on VLT funding. The report says this source of funds has allowed NYRA to indulge its habit of spending more and more each year, with a $24 million loss in 2011 and a $17 million loss in 2010. The hole grew from 2010 to 2011, the report notes, even though NYRA received an influx of $6.3 million from VLT revenue in 2011.
To view the entire report by the Franchise Oversight Board, go to the Capital Region Scene blog at DailyGazette.com.
“This status quo is simply unsustainable,” the report says. “If expenses are allowed to continue to grow, not even the substantial investment by the state into NYRA through the VLT support payments will be enough to cover the losses incurred by NYRA’s operations.”
For 2012, NYRA projected a net income of $18.9 million. The state said that outcome is possible only because of $20.6 million in budget support and $27.5 million for capital projects from the VLT money.
The rest of the VLT revenue for 2012 goes to breeders and increasing purse sizes at racing at Aqueduct, Belmont and Saratoga, with NYRA predicting that the latter expenditure will mean more income.
Based on this dynamic, the oversight board is saying that NYRA needs to develop a budget that revolves around making a profit off of racing.
“NYRA must establish a long-term financial goal to end its reliance on VLT subsidies and immediately develop plans on how it will meet this goal,” the report said.
It is not clear whether this long-term planning will come under the purview of the Reorganization Board, which is scheduled to take over NYRA in the near future.
The state Legislature has passed a bill that would allow the state to name a majority of NYRA’s board members. The legislation still needs to be signed by Gov. Andrew Cuomo and the new board won’t take effect until the state appoints a majority of its members. The 17-member board will serve for three years, before handing power back over to NYRA, and include eight appointees from Cuomo, two from the Senate and Assembly leaders and five from the outgoing NYRA board.
The governor’s office wouldn’t comment on a timetable for implementing the new board, simply noting that the legislation hasn’t even been signed.
The new board will be responsible for reviewing the corporation’s current capital plan and reviewing internal controls and policies. It will likely address other concerns raised in the report, like the frequently repeated criticism that NYRA inadequately markets itself to new fans. In many meetings the board has called for a strategic shift that might reach out to a new generation of fans to ensure racing’s longevity in the state.
NYRA has maintained that higher purses, paid for by VLT revenues, will attract fans, but oversight board members have called for a review of this claim, according to the report.