EXECUTIVE SUMMARY OF THE NYRA REPRIVATIZATION PLAN
Pursuant to The New York State Racing Franchise Accountability and Transparency Act of 2012, NYRA management has a statutory plan for its prospective not-for-profit governing structure, which is comprised of three parts: 1) summary of NYRA’s reorganization efforts to date; 2) proposals for NYRA’s legal and governance structures; and 3) NYRA’s 2014 and 2015 actual results, approved 2016 budget, and proposed 2017 financial plan.
1. NYRA’s Reorganization Efforts – A Board-led Transformation: Progress and Accomplishments
The Reorganization Board has worked for the past three (and in particular, the past two) years with the NYRA management team to effectuate the change, and achieve the results, sought by Governor Cuomo. The Board has succeeded in a way that makes the New York Racing Association stronger, better run, more trustworthy, and much better able to continue to generate the significant economic impact, jobs and tourism that Governor Cuomo and the Legislature envisioned when they made the change in NYRA’s Board structure.
NYRA is under New Management – The management of NYRA has been transformed by new leaders with successful and established careers outside of NYRA. Led by CEO and President Chris Kay, NYRA also has a new General Counsel and Chief Administrative Officer, who formerly served as global General Counsel for one of the “Big Four” accounting firms (Deloitte); a Senior Vice President for Racing Operations from California’s Hollywood Park (pursuant to NYS 2012 Task Force recommendations); a Senior Vice President and Chief Experience Officer (the first in the sports industry) who formerly served as an executive with a sporting goods company and with a major movie company; a new Vice President of Security, who formerly served as the Special Agent in Charge of the U.S. Secret Service’s New York Field Office, as well other new hires at various leadership levels throughout the company.
Financial Performance – NYRA has instituted several initiatives to reduce costs and generate additional revenues. As a result, in 2014 NYRA achieved an operating surplus of approximately $1.7 million, its first operating surplus in recent years, and NYRA’s surplus will be $3.5 million in 2015. NYRA is also debt-free for the first time in years, having paid off a $25 million note to Genting.
Governance, Integrity and Accountability – NYRA has made extensive operating reforms in areas such as risk management, compliance, corporate governance and attention to legal issues. For example, NYRA has changed from a local auditor to KPMG, one of the “Big Four” auditing firms. Over the last several years, NYRA’s audits have been “clean”, i.e. in the view of KPMG our financial statements accurately present, in all material respects, the financial position of NYRA.
Economic Impact – NYRA is the cornerstone of New York State’s horse racing industry, which generates $2.1 billion in annual economic impact and over 17,000 statewide jobs. With a commitment to generate more tourism and provide greater financial incentives to NY bred owners, NYRA’s operation of Saratoga Race Course alone is responsible for the creation of an annual economic impact of more than $237 million in the Capital Region, a significant boost to that local economy which continues to grow.
NYRA DRAFT – 04.12.16
Safer Horseracing – NYRA has instituted a number of changes to improve equine safety for the equine athletes and jockeys, such as empowering veterinarians to take action when necessary, requiring record keeping on certain drug administrations, establishing a system for jockeys to report violations, creating a Board committee on equine safety, hiring a safety steward, and many others. The number of equine catastrophic injuries on NYRA racetracks is below the average nationwide.
Improving the Quality of Racing – NYRA has made racing much more enjoyable for stakeholders and guests by creating “must see” big events days such as (a) Belmont Stakes Racing Festival, with over $10 million in purses, and many guest-centric innovations; (b) Stars & Stripes Day with horses competing from around the world; (c) increased grades stakes and purses on Whitney Day; and (d) a robust Travers card of races (“Saratoga’s version of the Breeders’ Cup”). NYRA broke records for wagering on Belmont Stakes Day and for the Saratoga meet. NYRA has also created new events that shine a bright light on New York agriculture, such as our Taste NY weekly Saratoga events, and Saratoga Showcase Day, which features New York bred horses.
Support for New York Breeders – NYRA is dedicated to New York bred horses, and has worked closely with the New York Thoroughbred Breeders to make New York one of the few states to see an increase in the number of foals in recent years. NYRA devoted almost $40 million in purses to owners of New York bred horses in 2014, and a like amount in 2015.
Support for the Backstretch Workers – Over the last two years, a number of dormitory renovations has taken place at all three racetracks. New construction on the first of three large dormitories at Belmont commenced in 2015, as part of a multi-year, $28.8 million renovation/new construction program.
Enhancing the Guest Experience – NYRA has taken considerable steps to improve the experience for all fans at all tracks, including:
- NYRA installed 378 high-definition televisions and 3 high-definition video boards, as well as provided several high-definition “point of view” cameras for fans to customize the way they watch horse workouts, horses in the paddock, and the races. At the finish line, NYRA has also installed a high-definition slow motion camera.
- At the 2015 Belmont Stakes, fans were able to experience a great package of entertainment, including performances by the United States Military Academy at West Point’s veteran band, the Jersey Boys, and the Goo Goo Dolls, who also performed a concert after the last race.
- NYRA limited the attendance to 90,000 and, working with LIRR, completely renovated the LIRR station, all of which made ingress and egress much more pleasant and manageable for fans.
Saratoga Race Course:
- NYRA installed 1,063 new high-definition televisions, three new high-definition video boards, enhanced Wi-Fi capacity, and a new sound system.
- NYRA expanded the Saratoga Pavilion, which is the home of several Taste NY events, one of Governor Andrew Cuomo’s signature initiatives. Each Thursday, Friday and Sunday, NYRA features Taste NY wines, beers and food products.
- NYRA created the Walk of Fame, an open-air pavilion honoring the recipients of the prestigious “Red Jacket” award, created in 2013 to honor the best owners, trainers and jockeys in our sport, thus giving fans of all ages a way to “connect” with our stars.
- NYRA opened a state-of-the-art sports bar in what was formerly known as the lower Carousel, enabling fans to reserve tables and watch other sporting events in addition to our great races throughout the day.
- NYRA constructed a state-of-the-art simulcast center, Longshots, with 270 dedicated carrels, a sports bar, and dozens of new high-definition televisions.
- NYRA installed new flooring, airport-style seating and lighting within the clubhouse, as well as 507 new high-definition televisions.
- NYRA created an urban art program unveiled in 2013 featuring vibrant, horse-themed murals from internationally renowned “street artists” throughout the second floor and on our exterior walls.
||CURRENT – NEW YORK RACING ASSOCIATION
|• $25 Million in debt since 2011.
• Inconsistent profitability. .
• Improper calculation of exotic wagering take-out (20112012).
• High rate of equine catastrophic injuries, 38 in total in 2012.
• Inadequate investment in facilities, especially those used by customers.
|• Debt free as of April 2014.
• $1.7 million operating surplus for 2014 and $3.5 million in 2015. First back-to-back profitability since the bankruptcy.
• Implemented wagering accountability processes in 2013.
• Equine injuries below the national average in 2013, 2014, and 2015 with 22, 24 and 19 respectively.
• Spent $20+ million at all three racetracks during 2013-2015 to enhance the guest experience.
2. Proposals for NYRA’s Legal and Governance Structure
Legal Structure – Section 207(1)(d) of the Racing, Pari-Mutuel Wagering and Breeding Law requires the Reorganization Board to “propose, no less than one hundred eighty days prior to its termination, recommendations to the governor and the state legislature representing a statutory plan for the prospective not-for-profit governing structure of The New York Racing Association”, and the statutory notes clarify that the “franchise shall be returned to private control, remaining in the form of a not-for-profit corporation.” Therefore, going forward, NYRA will continue to be organized as a New York not-for-profit company and will be under private control.
Governance – Upon consultations with various constituencies, NYRA offers the following options relative to the selection and terms of the new NYRA Board:
Option 1. NYRA Board to have Majority of Private Members and Four Publicly
Appointed Members. The NYRA Board will have 15 members, all with equal voting rights. Two members will be selected by the Governor, one of which will be the first Chair. One member will be selected by the Temporary President of the Senate and one member will be selected by the Speaker of the Assembly. Ten members will be selected by the current Executive Committee of the Board upon the recommendation of the Nominations and Governance Committee.
Option 2. NYRA Board to have All Private Members. The NYRA Board will have 15 members, all with equal voting rights. All members and the Chair will be selected by the current Executive Committee of the Board upon the recommendation of the Nominations and Governance Committee.
With respect to options 1 and 2, prior to its recommendations, the Nominations and Governance Committee will have held soundings with all members of the existing Board. The NYRA CEO will also be a full member of the Board, and the following will be in effect:
- Board Terms: Three years, and eligible for two additional terms. Terms will rotate, starting end of 2017.
- Ex Officio Non-Voting Members: To include representatives from the New York Thoroughbred Horsemen’s Association (NYTHA) and New York Thoroughbred Breeders, Inc. (NY Breeders), with Board empowered to add others.
- Board Committees: Keep current statutory committees: Compensation; Finance; Nominating, and Executive. We would add two non-statutory committees: Equine Safety and Racing Committees, both of which are currently operating.
- To ensure transparency, NYRA will post on its website the reports of the CEO and CFO (and, as applicable, the Chair) from each Board meeting.
Option 3. NYRA Reorganization Board to Remain in Place. The Governor and Legislature may choose to retain the status quo and extend the tenure of the Reorganization Board for one additional year.
3. Financial Plan
In 2014, NYRA recorded its first operating surplus ($1.7 million) in recent years, as a result of our implementation of several revenue enhancing and cost saving initiatives. NYRA budgeted a surplus of $2.2 million in 2015 (which is now $3.5 million), has budgeted a surplus of $2.3 million in 2016, and projects a $2.8 million surplus in 2017. These operating surpluses, year over year, reflects our commitment to strong business processes and disciplines, which results in prudent cost cutting, strategic investments, and revenue enhancing initiatives.