Officials from the New York Racing Association shared good financial news with their state overseers on Monday.
“We had a very good [third] quarter,” said NYRA President Ellen McClain, who noted that business has been strong all year. This year’s budget for the troubled racing corporation projected almost a $19 million profit, breaking from the recent years of running in the red.
McClain and NYRA Chief Financial Officer Susanne Stover laid out NYRA’s finances in July, August and September to the state Franchise Oversight Board.
During this period, NYRA produced an operating income of $24.8 million, up about $10 million from the same period in 2011 and almost half of what was projected for operating income for all of 2012.
NYRA also generated a net revenue from racing of $59.9 million, which was an increase of 7 percent from the same period last year. There were $47.4 million in operating expenses, which was a 4 percent increase from the same period last year.
Stover also highlighted the fact that non-operating expenses, like retirement benefits and pension costs, were down in the quarter, but they’re projecting a $10.7 million increase overall for the entire year. This projected increase is still below the expected jump of $12 million in the 2012 budget.
It was also announced that NYRA has begun paying back a $25 million bailout loan against future video lottery terminal revenue. The organization has been making payments since April and the principal is down to about $20 million, which is expected to be paid off by September 2014.
The $23.8 million in VLT revenue for the quarter was consistent with what was expected, with about half of that total going toward purses.
In the recent quarter, NYRA also outpaced the uptick in nationwide gambling on thoroughbred races. While the industry as a whole saw a 2 percent increase, NYRA had a 14 percent increase and accounted for about 30 percent of the gambling on thoroughbreds in the country.
Despite the strong numbers, FOB members Steven Newman and John Crotty questioned the effectiveness of the investment in higher purses for races, which has been funded by about $45 million in VLT revenue this year. Crotty even suggested that the new NYRA board, which was appointed last month, consider shifting some of the VLT revenue toward other expenses that might increase handle and attendance. “I think you’ve maxed out … relative to what you’ve spent to what you’re getting back,” he said.
McClain countered that there was a strong correlation between the increased handle and higher purses and stressed that the equation has worked this year. She added that it wasn’t clear how big purses would have to be before they stopped generating higher handle, saying, “I don’t know what the magic number is.”
Newman also questioned whether NYRA should be disclosing more of this information to the public, as officials only give financial statements during state meetings. McClain argued that this would hurt NYRA’s competitive edge, saying later in the meeting that competitors were probably watching a webcast of the meeting.
Going over the capital expenditures for the year, NYRA officials said that they probably won’t spend the $20 million allocated for capital expenditures. After spending about $9.9 million in the first nine months on capital projects, like the renovations this summer at the Saratoga Race Course, it is expected they will only spend about $16 million for the entire year.
At the meeting the oversight board also approved a nine-month extension of the contract for NYRA’s bet processing company, United Tote. The firm was supposed to be replaced after October, but a replacement firm couldn’t be selected because Gov. Andrew Cuomo had essentially warned NYRA against making any major decisions until the new board was named.
The new board, which was named last month and will have its first meeting on Dec. 12, will review the details surrounding a successor to United Tote. The current contract will be extended without any changes.
At Monday’s meeting, McClain stressed that the switch could be done quickly and smoothly, even though it isn’t scheduled to happen until after the 2013 racing meet. “From a standing point we could switch in six weeks,” she said.