Sunday, April 9, 2017

NYRA Privatization Plan Will Still Leave Cuomo in Control

Budget talks have ended in Albany. As a result, the compromise plan agreed on by New York’s Governor Andrew Cuomo and legislative leaders for “privatizing” the New York Racing Association (NYRA) is now the law. Thanks to Tom Precious’s report in the Bloodhorse, we now know the broad contours of the NYRA plan. From the point of view of racing fans, bettors, horse owners and other industry participants, it ain’t pretty.  In fact, it’s pretty much a continuation of the politically dominated NYRA structure that we’ve been living with for the past five years. A pity that the Governor and Legislature missed the chance to do something new and imaginative.

Back in 2012, when the state took over NYRA, it established a Board of Directors of 17 members – seven appointed by the Governor, two each by the State Assembly and State Senate, and the remainder holdovers from the “old NYRA” Board. The current acting NYRA Board chair is Michael Del Giudice, a longtime Cuomo family consigliere.

That 2012 legislation also confirmed substantial oversight power by a state agency called the Franchise Oversight Board (FOB), originally established in 2008 when NYRA was in bankruptcy proceedings. No surprise, Governor Cuomo’s appointees dominate the Franchise Oversight Board.

NYRA had originally been scheduled to return to “private” status by 2015, but that deadline was extended twice, most recently to October 2017. The state budget bill creates a “new NYRA” that will take over  from the existing NYRA Board this year. You can read the text of the bill here.

Initially, Cuomo – who apparently hates racing and has never so much as set foot on a NYRA track -- had wanted to continue to control even a “privatized” NYRA, through a combination of a plurality of Board appointments and increased powers for his Franchise Oversight Board. Under the compromise agreement with legislative leaders that is embodied in the budget, his control will be reduced, but by no means eliminated.

First, the new legislation sets up a Board of 15 members – a bit too big for effective governance, so the real power will rest with NYRA CEO Chris Kay or his successor and with the smaller executive committee. Of those 15, Cuomo will directly appoint two, the State Assembly and Senate leaders one each, and the existing NYRA executive committee, dominated by Cuomo appointees, will appoint eight. The remaining three slots will be filled by the NYRA CEO and by representatives of the New York Thoroughbred Horsemen’s Association (NYTHA) and the New York Thoroughbred Breeders. In exchange for those NYRA Board seats, the breeders and NYTHA agreed to put a NYRA Director on each of their own Boards. I’m not sure the trade-off was worth it; would a labor union want a management rep sitting in on its executive board?

So, counting the eight members appointed by the Cuomo-friendly executive committee, the Governor would start out with 10 of the 15 Board members owing their appointment to him. That may change over time, particularly if Kay or a successor CEO uses his influence to have his own supporters named to the NYRA Board as the terms of the original Directors expire, but it certainly sounds like continuing Cuomo control, at least for a while, since the existing NYRA Board executive committee, which Cuomo controls, will appoint a majority of the new Board.

As for the Franchise Oversight Board, Cuomo had initially wanted the FOB to have the power to impound NYRA funds – including purse money – and to appoint an outside financial adviser if the FOB found that NYRA’s finances were at “significant risk.” In the compromise version, the draconian impounding sanction would require a unanimous vote by the FOB, including the votes of FOB members appointed by the legislature. That may satisfy some Albany politicians’ desire for a slice of the power pie, but it doesn’t do much to calm NYRA’s and horse owners’ fears. Those fears were already high, given Cuomo’s statements earlier this year about reneging on the contractual deal that gave NYRA and the horsemen’s purse account a share of the enormous profits from the slot machine palace at Aqueduct.

Cuomo doesn’t like racing, and sees it as an untapped source of money for the things he does like. It’s dangerous to leave him in charge.

On the positive side, the bill mandates a negotiated agreement between NYTHA and NYRA over the number of winter racing dates at Aqueduct. Blue-collar horsemen depend on the winter season, when Pletcher, Mott and McGaughey are away, to get the purses that will tide them through the summer. NYRA has been pushing for years to reduce or even eliminate winter racing.

In a different world, where state policy wasn’t made by three men in a room, in the annual Kabuki play that is the New York budget process, a reprivatized NYRA might look very different. Instead of a Board of Directors appointed by or beholden to, the Governor, what about a Board with members elected by racing’s different constituencies – fans, bettors, owners, breeders, trainers, backstretch employees, etc.? Of course, that kind of Board might require a CEO who actually knew something about racing, but that wouldn’t be a bad thing, would it?

Instead, we’ve got what looks very much like business as usual, only now NYRA won’t even have to pretend to be a public agency and offer minimal transparency. And we know how well all that secrecy worked in the past, when old old NYRA was run by Dinnie Phipps and his pals. Worked so well that they ended up in bankruptcy court.

As the Tweeter-in-Chief would say, Sad.

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