Saturday, February 27, 2010

New Jersey's Brave Initiative

To those of us inured to the tortoise-like pace with which anything relating to racing moves through the New York state government, New Jersey may be a revelation. After less than two months in office, incoming NJ Governor Chris Christie has apparently pulled together a plan that radically reshapes racing in the Garden State and that might even work.

According to press reports, a seven-member commission appointed by Christie has a plan that will end thoroughbred racing at the Meadowlands, and refocus racing at Monmouth, with three-day racing weeks and hugely improved purses -- as much as $1 million a day, topping even stakes-heavy Saratoga's daily average of more than $700,000. The plan, which is reportedly ready to be introduced next week, already has the approval of the New Jersey Sports and Exposition Authority, the agency that runs the two tracks. There are conflicting reports as to whether the New Jersey horsemen agree. According to Dave Grening in the Daily Racing Form, they're considerably less than enthusiastic.

Under the plan, Monmouth would run a 50-day meet, spread out from May 22nd through Labor Day, with racing only on Friday, Saturday, Sunday and holiday Mondays. That would be a high-level meet with $1 million on the table in purses every day. Then there would be a second, regional-level meet, also at Monmouth, from late September until Thanksgiving, with racing only on Fridays and Saturdays (apparently it's too tough to compete with pro football on Sunday) and daily purses of $250,000-$300,000, or about what Aqueduct offers. The Meadowlands would continue to operate, but for harness racing only.

The plan is not a certainty to be implemented. The horsemen's agreement with the NJSEA calls for 141 racing days a year, and the Governor's plan would cut that in half. If the horsemen don't agree, they have the power to cut off Monmouth's simulcast signal, which would certainly doom the whole enterprise. And the plan appears to need approval from the New Jersey legislature as well. One can understand the opposition from horsemen, especially the men and women who have mostly claiming horses and who are just scraping by on the current schedule. Cutting the number of racing days in half -- even with a planned expansion of each of the remaining days to 12 races -- would reduce the total number of races by something like 40%. And the NJ-based trainers already have to move somewhere -- Aqueduct, Tampa, Gulfstream or Laurel -- for the winter, so the three-day racing week at Monmouth would complicate their lives even further. Ship to Philadelphia or New York on Wednesday and Thursday? Would a racing secretary who wanted full fields for the weekend even let them do that?

But New Jersey racing needs to do something. The NJSEA lost about $13 million last year, after taking into account some $9 million in simulcast profits, and the purse subsidy from the Atlantic City casinos expires soon. Without radical change, the bloodletting would just continue, and so the Governor's commission deserves a lot of credit for trying something different.

Will it work? Maybe. If horsemen cooperate and are willing either to stable at Monmouth and ship their lower-level horses out to other mid-Atlantic tracks or to stable elsewhere and ship in to Monmouth on the weekends. The track isn't that far from Fair Hill in Maryland and other off-track training facilities in the mid-Atlantic, so some trainers with good stock could well be lured to compete for the higher purses. Michael Matz, Graham Motion, Steve Klesaris, Mike Pino and Mike Trombetta, for example, all have training bases at Fair Hill, and all have horses that they routinely ship as far as New York in search of the right race.

Will a high purse structure lure some owners and trainers away from Saratoga? Perhaps, but it won't happen in a year. There's so much built into the Saratoga season -- summer houses, charity benefits, racing organization meetings, endless fund-raisers for Albany pols -- that it'll take more than a nice purse structure somewhere else to destroy the magic that's been created over the past century and a half. And I haven't seen the financial analysis backing up the New Jersey plan, so I'm not at all sure that the proposed $1 million daily purse structure is realistic. But, if Jersey could run 12 races a day with 12-horse fields, they'd attract a huge handle, and that might just work. Tough job for a racing secretary, though, trying to make sure that those big fields actually go to the gate.

Both NYRA's continuing expansion of the Saratoga meet -- it'll be nearly seven weeks this year -- and the New Jersey three-day weekend plan are attempts to deal with the fact that no one goes to race tracks during the week anymore. The boutique tracks -- Saratoga, Del Mar and Keeneland -- thrive, or at least survive, by offering a scarce product. Offer too much of that scarce product, as I fear NYRA is doing at Saratoga, and there's a good chance that its scarcity value will cease to have the same appeal. Repackage the product into a weekend getaway, as New Jersey seems to be proposing, takes a different approach. The Jersey Shore isn't a bad destination at all for long summer weekends, and it's a lot easier for people to say that they'll take a couple of holiday-weekend trips, and maybe even visit the race track, than it is to commit to a summer house for two or three months.

A third option, so far untried by any major track, is to scale back dramatically, so that each track has its own spot on the calendar. Shorten Saratoga back to four or five weeks in August (which would let the local kids get back in the homes their parents rented out before school starts in the fall). Run a month of six-day racing weeks at Monmouth in July instead of stretching the season out over the whole summer. Pack up and take the horses to the super turf racing at Colonial Downs for June. Fix up Pimlico enough so you could have a really great meet their for the month of May, not just for Preakness weekend.

You see the problem. To get from here to there requires collective action, or an order from an as-yet-nonexistent national authority. If just one track tries to scale back, the others are likely to move in and try to steal its racing days and its horsemen. Not to mention that there's definitely an advantage, both economic and psychological, in horsemen's being able to stay put at a single track for a significant period of time. All that loading up the stable and shipping to a new track every few weeks may have been fine for Bing Crosby movies, but it really is hard on trainers, their employees and families, and, probably, on the horses. (Though no one doubts that the best way to train is somewhere away from the race track, if only we could all afford it.)

But, as one of the most perspicacious blogs on racing notes, if we don't make drastic changes, there will be nothing left to change. My own feeling is that we need to downsize substantially -- fewer racing days, shorter meets, many fewer mares bred each year -- in order to have a viable industry that can support some people, rather than what we have now, a non-viable, too-big industry in which almost everyone, from the trainer with three horses at Suffolk Downs to Ahmed Zayat, is in trouble. New Jersey's plan may not work, or even get off the ground, but it's good to see some innovative thinking.

Thursday, February 25, 2010

NYRA Salaries

Congratulations to NYRA on, albeit reluctantly, releasing the salary data for its top executives. In an age when all sorts of information is available at the push of a computer key or click of a mouse -- it took me all of five minutes to find comparable salaries at Churchill, Magna and Penn National -- NYRA Chairman Steve Duncker's excuse that the salaries were kept secret "for competitive reasons" rings a little hollow. Nonetheless, it's good to see NYRA recognize that its status as a quasi-public entity demands a lot more transparency than is required even of a publicly listed for-profit corporation.

And, make no mistake, NYRA is, for all practical purposes, a public entity. It's franchise deal with the state, under which NYRA gave up its (contested) claim to own the land its race tracks are built on, made it clear that NYRA is the entity through which New York State chooses to operate its (the state's) tracks. All the rest is window-dressing. Not that handing track operation over to NYRA was necessarily a bad thing. Just think about where we'd be if all of racing, and not merely the Aqueduct slots deal, were being managed (sic) by Larry, Moe and Curly (oops, that should have been Paterson, Sampson and Silver).

But, if you're doing the public's work, you need to be open to public scrutiny. With the President of the United States earning $400,000, and most senior New York State officials well under $200,000, it's understandable that there would be some negative reaction to NYRA's salaries, even if they're not, as Duncker took pains to point out, anywhere in the league of salaries at Churchill Downs, Inc., Magna and Penn National.

Sure, execs at other companies in the busiiness make a lot more. At Churchill Downs Inc., CEO Bob Evans got $904,000 in cash, plus stock worth $2,078,000 and options valued at $1,154,000 in 2008, the latest year for which SEC reports have been filed. But Steve Sexton, the guy at Churchill who actually ran the race track, made "only" $423,000 in cash plus $44,000 in stock. Not all that different from what Charlie Hayward and Hal Handel earned at NYRA. At Penn National, where almost all the profit comes from slot machines, salaries and bonuses were obscene -- CEO Peter Carlino took home $1,560.000 in cash, $880,000 in stock, and options worth $4,525,000 -- but that's for running an integrated gambling business, not race tracks.

And, whatever the reason -- and the reason is mostly the dazzling incompetence of New York state government -- NYRA is losing money. In that situation, it's always sensible, if only for public relations purposes, to demonstrate a little belt-tightening. I don't know what Charlie's and Hal's mortgage payments are, but I bet they could have survived even after taking a symbolic 5% pay cut. Might have been a shrewd political move.

Sunday, February 14, 2010

Maryland Bidders Respond to Blood-Horse Queries

Three of the leading bidders for the Maryland Jockey Club's assets -- Jeff Seder of Blow Horn Equity LLC, David Cordish of the Cordish Companies, and Joe DeFrancis -- have each responded to questions posed by The Blood-Horse's Evan Hammonds. While the answers all contain a fair bit of puffery, the three interviews do show some fundamental differences in orientation. It probably won't matter a lot in the bankruptcy court. The court's job is to get the most money it can for Magna Entertainment's creditors, rather than worrying about the future of Maryland racing. But it's still instructive to analyze those differences, if only so we have some idea what to expect once we know who the winning bidder is.

[For those who want to read the full interviews, they can be found here (Seder), here (Cordish) and here (DeFrancis). For a quick way to decide who'd be best for Maryland racing, just look at the photos and see who you're most likely to trust.]

Disclosure: I've worked with and for Jeff Seder for a number of years and consider him a friend.

The three interviews aren't precisely comparable, since The Blood-Horse's Hammonds didn't ask each bidder the same five questions, but there are some areas in which we can compare the three.

First, qualifications. Cordish touts the 100-year history of his family real estate firm, which has more recently expanded into restaurant and entertainment ventures, including the Baltimore Live! complex on that city's inner harbor. No mention of any racing-related experience. DeFrancis, in contrast, has lots of experience. He notes that he and his sister Karen "have almost a half-century of experience in the business of managing racetracks." Into the ground. Seder hasn't (yet) run a racetrack, but he's spent a lifetime around thoroughbreds, developed a slew (sic) of scientific tools for evaluating their performance, and has hands-on experience in running medium-sized businesses, which is what the MJC is.

Second, how do they view the racing component of what they're bidding for? DeFrancis claims that "no other bidder will try harder or care more about making Maryland racing successful than we will." A nice sentiment, and it's true that his family has been involved with Maryland racing for years, but, unfortunately, as part of the problem, not the solution. Seder makes the point that, except for DeFrancis, the other bidders are real estate developers and casino operators, who would probably view racing as a necessary inconvenience. Cordish talks about promoting big weekends, like the Preakness and Maryland Million, but is a bit vague on the extent to which he'd want to keep anything like the current number of racing days.

Third, all three bidders see the need for major upgrading of the Laurel and Pimlico facilities. Cordish plans to build his major entertainment complex around the slots palace at his Arundel Mills Mall, rather than at Laurel, but says the requisite words about upgrading the track facilities. Seder would emphasize making the tracks themselves much more attractive places to be, whether or not they end up with slots on the premises. DeFrancis admits the need for upgrading, but gives it less emphasis than either of the other two bidders.

Fourth -- I finally found an aspect of the interviews that really separates the bidders -- their favorite Preakness moment (that's the one question that Hammonds asked all three). For Seder, it's a close-up view of Afleet Alex's remarkable recovery from a near-fall -- all about the athleticism and courage o thoroughbreds. For DeFrancis, it was the epic Easy Goer-Sunday Silence battle in 1989, another great racing moment. And for Cordish? "Partying in the infield." Maybe he was one of those guys that I used to see, when I was watching from the grandstand, peeing on the outside of the porta-potties because the lines were too long.

All in all, you can't tell a whole lot from the Larry King-like softballs that Hammonds pitched to the MJC bidders and those bidders' answers. But there's nothing in the interviews to change the basic conclusions: Cordish cares about real estate and entertainment development, preferably at his mall and not at the track. DeFrancis may legitimately care about Maryland racing, but he had his chance, and look where we are now. That leaves Jeff Seder, who knows a thing or two about racing and race horses, and who's made a success of several other businesses. Now all he needs is enough money to outbid the others.

Friday, February 12, 2010

Transparency at NYRA? Not yet, it seems.

The fallout from the New York Racing Association's last public-relations blunder -- first resisting NY State Comptroller Tom DiNapoli's request for financial records, then under pressure, turning around and saying it would cooperate with DiNapoli's audit -- continues. Now state budget director Robert Megna, in his capacity as chair of the Oversight Board appointed to ride herd on NYRA when the latter's franchise was renewed back in 2008, wants to know how much NYRA CEO Charlie Hayward and his top assistants are being paid. And once again, NYRA seems to be stonewalling.

According to press reports, in 2006, when NYRA was required to disclose some of its finances as part of its bankruptcy proceeding, Hayward made $377,746, and, even more astonishingly, NYRA general counsel Pat Kehoe made $376,923. Since then, NYRA has replaced the almost certainly underpaid day-to-day operations manager Bill Nader -- who took the money and ran to Hong Kong -- with Hal Handel, who presumably is making something like the salary that Kehoe gets. Informed speculation says that Hayward, and perhaps Kehoe and Handel as well, are making more than $400,000 this year, as NYRA once again teeters on the edge o insolvency. (To be fair, that teetering is caused entirely by the so-called "government" in Albany that continues its farcical inability to get slot machines up and running at Aqueduct.)

NY budget director Megna, by the way, who has what must be one of the most impossible jobs in the state, public or private, earns $178,000 a year. That's a matter of public record.

Hayward told Megna at Wednesday's meeting of the Oversight Board that NYRA just needs a little time -- how much time was unspecified -- to put together a study that shows that Hayward & Co. are really underpaid, at least by the standards of the industry. One hardly knows where to start. So, you're underpaid. That comes with the territory when you're working for an organization that's supported by taxpayer dollars. Even Lloyd Blankfein of Goldman Sachs decided it would be wise to take a pay cut while his firm was subsisting on government handouts. And the new crop of General Motors execs had to genuflect to their majority shareholder, the US government, and settle for a lot less than their predecessors made back when the Chevy Bel-Air was the hottest thing on wheels.

And those execs at other tracks, if they are earning more than NYRA folks, just might have a reason for their swollen paychecks. Churchill Downs Inc., for example, actually seems able to make a profit, and hasn't taken any public money. I don't know what the paychecks look like at Frank Stronach's Magna tracks (though I suspect there's a whole lot of severance pay going round), but being part of leading Magna into bankruptcy probably isn't a good resume padder, so perhaps we should throw them out of the comparison altogether.

Sooner or later, just as with the financial documents that DiNapoli asked for, NYRA will have to do an about-face and comply with the state's request for the salary information. Delaying and coming up with dumb excuses just makes Hayward, who I know to be a solid manager who's a great improvement on prior NYRA chiefs, look bad.

C'mon Charlie, just do the right thing.