Horse Racing News: NYRA audit paints a gloomy picture
Owners, trainers, jockeys or people involved with thoroughbred racing in one way or the other must have felt a financial pinch in the past few months. One would only lucky if he hasn’t because horse racing is struggling to survive on both sides of the Atlantic.
There was plenty of evidence of such an occurrence and the New York Racing Association’s (NYRA) woes approve of that notion. A report released by the Office of the State Comptroller should serve to settle any debate. The damning report spelled the end of NYRA unless a massive overhaul takes place. The report states that the NYRA is unlikely to escape insolvency from next year without the proposed Video Lottery Terminals at their Aqueduct Racetrack.
The NYRA filed for bankruptcy in the year 2006 and was rescued by the state through a 2008 agreement which transferred all its ownership rights in the tracks that it operated to the state. The state cancelled a majority of their debt and made an additional payment of $105 million for their non-state debts, leaving a surplus of $25 million to cover operational costs. The state has not yet made a selection of a contractor for the construction and operation of the Video Lottery Terminals (VLT) and as per the terms of the bankruptcy settlement, in the event of such delay, the state is required to provide the necessary funds to the NYRA to support its operations.
The VLT’s were delayed and without the estimated $30 million annual revenue, they were expected to contribute. The NYRA faced an acute shortage of funds which is threatening the upcoming racing season. Owning up to its obligations, the state provided the NYRA with $25 million for the season. The report however said that given its cash flow and spending patterns, the funding that the NYRA received would be spent till 2011. Without the revenue from the VLT’s which have been generating cash since 1958, the NYRA can no longer support its own costs.
The report cites some of the major causes for the lack of funds, some external and beyond NYRA’s control and some internal problems that the NYRA could address. The Comptroller’s office insisted that the NYRA did too little too late to cut down on spending and did not act at all to reduce its deficit until it was clear that the VLT’s would not be in operation by 2010 which was expected. Since the NYRA entered into a bankruptcy agreement with the state, its payroll expense had increased by 2.8 percent by 2010 despite its financial troubles, clearly indicating a failure to cut costs.
Factors outside the control of the NYRA, which the report identified as causes for the cash shortfall, included unpaid debts and a reduction in wagering due to the global financial crunch. The report stated that nationwide wagering had declined by 16.7 percent standing at $12.3 billion in the year 2009. The NYRA’s races, often considered the heart of American horse racing and betting, were severely hit. The decline in wagering at NYRA’s tracks stood at 13.2 percent bringing it to $2.22 billion on an annual basis. However, the reduced revenues contributed to NYRA’s deficit.
Another important factor was the New York City’s Off-Track Betting Corporation’s inability to pay $17.1 million dollars owed to the NYRA as compensation for wagers placed on NYRA races. The NYC-OTB has been facing financial troubles of its own and has also filed for bankruptcy and is now owned by the state as well.
While that might not be something the NYRA can control, it can certainly control its own costs. The comptroller’s office blasted the NYRA for failing to do just that. The report called on the NYRA to align its “operating expenses with its actual net revenues; implement the plan; monitor NYRA’s adherence to the plan; and promptly take corrective action if the operating expenses routinely exceed the net revenues.”
It’s a disappointment that the NYRA had to be told to do so, because one would think its standard practice and a pretty straight forward choice. Cutting costs if one is unable to generate enough revenue – a simple and effective strategy. Though, in the NYRA’s defence, they were expecting revenues from the VLT’s and expecting the NYC-OTB to pay up. Consequently, the state can be held responsible for contributing 17 and 30 million dollars to NYRA’s shortfall.
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