SARATOGA SPRINGS — The New York Racing Association continues to lose money, despite its claims to profitability, according to state Comptroller Thomas DiNapoli.
In letters to NYRA President Christopher Kay written Jan. 24 and released by his office on Monday, DiNapoli also faulted NYRA for doing little to implement the recommendations of a comptroller's audit released in 2016, including doing better long-range planning.
Of eight recommendations from audits in 2015 and 2016, DiNapoli said, none have been fully implemented. Four haven't been implemented at all, and four have been partially implemented, he said.
NYRA disputed the criticism, and the Comptroller's Office has little ability to enforce audit recommendations, unless it suspects criminal activity. In that case, DiNapoli's office could recommend local prosecutors pursue charges.
The racing association maintains that the comptroller has ignored documentation provided by NYRA about capital spending.
"Nevertheless, NYRA looks forward to building on recent successes and continuing to serve as the cornerstone of an industry responsible for 17,000 jobs and more than $2 billion in annual economic impact for our state," said association spokesman Patrick McKenna.
NYRA, a non-profit agency that oversees thoroughbred horse racing in New York state, has submitted a plan for major capital improvements at Saratoga Race Course, but no such plans have been put forth for the downstate tracks — Belmont and Aqueduct — overseen by NYRA. Either of those tracks could be sold to raise money, DiNapoli said. He also criticized the association's capital plans as too vague.
NYRA is making a profit because of revenue from the video lottery terminals at Aqueduct, which began operating in 2011. DiNapoli said he believes more of that money should be committed to capital improvements; he criticized NYRA because some of the VLT money is going to maintenance and operations expenses.
From Jan. 1, 2016 to June 30, 2017, total VLT revenue was $177 million, of which $37 million went to operations, $91 million to racing purses and $49 million to capital investment.
NYRA disputes the comptroller's audits and the new conclusions.
"Since 2011, NYRA has received and spent VLT funds precisely in accordance with statute and agreement," McKenna said. "Any suggestion to the contrary is factually inaccurate and legally unsupportable."
But a large part of DiNapoli's update is devoted to his concerns that NYRA continues to lose money on its horse racing operations, despite the association's claims of profitability.
"NYRA's racing operations continue to produce annual deficits, increasing to $18.1 million for 2016 and continuing for the first six months of 2017," DiNapoli wrote.
In 2016, the association claimed a profit of $4.6 million, based on its own accounting.
"NYRA has generated positive net income in each year since 2014," McKenna said. "This has been reported in financial statements that are audited by KPMG, who have issued a 'clean' and unqualified audit opinions every year."
At issue is DiNapoli's contention that pension contributions and other post-employment benefits for NYRA employees, as well as capital depreciation, should be included on NYRA's balance sheet. NYRA has not changed its accounting system, despite DiNapoli's objections.
"We found (in the earlier audit) that, although NYRA's overall financial condition (including VLT revenue subsidies) was sound, its traditional racing-related operations (excluding VLT funding) continued to produce multi-million-dollar annual deficits," DiNapoli wrote.
NYRA was under the supervision of a state-appointed Franchise Oversight Board from 2012 to 2017, including the period covered by the comptroller's audits. In 2016, NYRA maintained that the state oversight made long-term capital planning difficult.
"Given that NYRA's Reorganization Board was re-privatized in June 2017, we believe there is no longer any impediment for NYRA to have a long-term capital plan detailing how it would use VLT revenue for all its facilities," DiNapoli wrote in one of the Jan. 24 letters.
McKenna said the association has "robust project management systems and processes that include project scope, timeline and budget tracking. NYRA complies with all (Franchise Oversight Board) requirements regarding annual and long-term capital planning."
At the historic Saratoga racecourse, which draws far larger crowds to the summer meet than the tracks in New York City, NYRA has been investing in recent years in backstretch barn and dormitory improvements. For customers, there are plans for a new luxury clubhouse, but DiNapoli said no timetables or costs have been established for that or other improvements.
In New York City, DiNapoli said NYRA has looked at selling either Aqueduct or Belmont or keeping both open, though in 2017 he said capital improvements were planned at all three. He faulted those plans for lacking details.
"An annual budget that only has a simple list of projects is not sufficient to ensure that goals are met," DiNapoli wrote.
"NYRA has provided the [comptroller] with ample documentation throughout this process to support our positions," McKenna responded.
The 2018 Saratoga meet will run July 20 to Labor Day, Sept. 3.