Tuesday, March 5, 2013

NYRA's 2013 Budget

The New York Racing Association, after years of losing money in the pre-slot machine era, is now projecting a second year in a row of significant net income. Moreover, now that NYRA is to all intents and purposes an agency of the State of New York, its finances are out in public. You can see all the budget details here.

Budget projections revealed at the NYRA Board meeting last week predict gross revenue of $368 million for 2013, of which $93 million is from the slot machines (a.k.a. "video lottery terminals") at the Aqueduct casino. That compares to a projected $361 million for 2012, of which $90 million was casino revenue.

After “statutory expenses” (i.e., the State of New York’s take), net revenue is projected at $198 million, operating income at $46 million, and net income, the corporate bottom line, at $15 million. All these figures are projected to be up  a percent or two from 2012.

Despite smaller field size, caused by a horse shortage at Belmont and Aqueduct and the deterrent to out-of-state trainers’ shipping in because of New York’s tough Clenbuterol rule, NYRA projects a small increase in total handle for the year. Smaller field size at Aqueduct and the cutback in the number of racing days may, however, have already wiped that increase out. Positive factors for handle include the planned launching of the Longshots simulcast center at Aqueduct in mid-year and aggressive efforts to expand betting through the NYRA Rewards system, which returns more money to NYRA than when bettors place wagers through TVG or other off-track wagering platforms. Offsetting those expected gains in handle are decreases attributable to the drug rules’ effect on shippers and the sensible decision not to budget for a Triple Crown day at Belmont. If one horse does win the Kentucky Derby and the Preakness, that alone would boost NYRA’s annual handle by a percent or two. 

NYRA projects its operating expenses as being flat, at the 2012 rate of $153 million, despite a general 3% pay increase and the expected hiring of a new CEO and some other high-level staff. Some savings are expected by hiring an additional lawyer and bringing legal work in-house, as many corporations are doing these days. NYRA also projects a decrease in the state-mandated costs of its outside "integrity counsel."

NYRA is projecting almost $21 million in capital expenditure for this year, including completion of new dorms for backstretch workers at Belmont and the installation (finally!) of high-definition flat-screen television equipment, with TRAKUS software, at all three NYRA tracks.

One unhappy aspect of the budget, at least from horse owners’ point of view, is that less than all the money earmarked by law for purses will be paid out to owners. NYRA projects purse-designated income of $152.1 million for the year, but expects to pay out only $147.9 million. The $4-million-plus difference will go into the “purse cushion,” money that is earmarked for purses eventually but retained by NYRA to cope with seasonal fluctuations. That will more than double the size of the cushion, which was less than $4 million at the end of 2012. While that’s still better than the situation during the NYRA bankruptcy some years back, when the cushion was more than $20 million, it’s more than NYRA really needs to keep on hand for a rainy day. 

Is NYRA the profit-machine that, say, Churchill Downs, Inc. is? Well. no. But it's nice to see that New York racing has some measure of financial stability. That's certainly a different situation than the chaos of the last decade and more.

Can NYRA be self-sustaining in the long run? We know that, eventually, the State will want more of the slot-machine revenues. It would be good if NYRA's new CEO and his (I don't expect it to be a her) team can come up with a credible strategy that preserves the cachet of quality racing at Belmont and Aqueduct, bring in enough new revenue to keep the lights on and give horse owners a fighting chance to break even, and makes the slot machines a smaller piece of a bigger long-term pie. We shall see.

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