CONTACT:
Dennis Tompkins
(518) 474-4015
FOR RELEASE:
Immediately
July 12, 2010

DiNAPOLI: NYRA FACING INSOLVENCY WITHOUT
VLT REVENUES
Announces Real-Time Auditing of NYRA’s
Fiscal Condition

The New York Racing Association (NYRA) is
facing financial insolvency in 2011 if revenues from the video lottery
terminal (VLT) racino at Aqueduct Race Track fail to materialize and expenses
are not curtailed, according to an audit
released today by State Comptroller Thomas P. DiNapoli. DiNapoli announced
that he is putting auditors on-site at NYRA to provide intensive monitoring
of its fiscal condition and efforts to restructure operations.

“NYRA is still on very shaky financial ground,”
DiNapoli said. “After declaring bankruptcy and getting bailed out by taxpayers,
NYRA continued business as usual for too long. There’s too much at stake
to let NYRA continue its fiscal mismanagement. My auditors will begin real-time
auditing of NYRA’s books.

“The state also has to live up to its end
of the deal. But it looks like the selection of a VLT operator for Aqueduct
is still an open question. When you start with six potential bidders and
end up with only one, it begs the question of how the process was handled
and whether the state can actually close the deal. The fact is NYRA can’t
make it long without significant restructuring and revenues from VLTs.”

The audit examined NYRA’s financial condition
as of May 20, 2010 and operations from September 12, 2008 to March 31,
2010. DiNapoli had to use his subpoena power to force NYRA to turn over
financial records after it initially refused to give DiNapoli’s auditors
access to NYRA records.  

DiNapoli’s auditors verified that NYRA would
not have had sufficient cash to run track operations by early June without
external financing. On May 24, the Legislature approved a $25 million loan
for NYRA. Auditors determined that the $25 million loan should enable NYRA
to continue operations through the end of the state fiscal year.

Auditors identified several reasons for NYRA’s
continued financial troubles including:

• After emerging from bankruptcy in 2008, NYRA
  continued spending more than it was taking in rather than restructuring
  its operations. NYRA incurred an operating deficit of $8.9 million in 2009
  and is projecting a $19 million deficit in 2010;

• NYRA has not received more than $47 million
  in expected revenue: $30 million from the VLTs at Aqueduct and more than
  $17 million from the bankrupt New York City Off-Track Betting Corporation;
  and

• Most of NYRA’s revenue is generated from
  wagers on horse races, which declined by 13.2 percent from $2.56 billion
  to $2.22 billion between 2006 to 2009.

Auditors found that NYRA finally began to
identify significant spending reductions in February 2010, more than a
year after it declared bankruptcy and only after the Aqueduct VLT contract
was rejected. NYRA reduced purses for some races and laid off 12 professional
staff, for a total annual savings of $5 million. NYRA also plans to close
the Aqueduct training facility for a savings of about $3.5 million, as
well as a back stretch security barn saving another $1.2 million annually.

DiNapoli’s audit identified an additional
$1.2 million in immediate savings opportunities for NYRA. Auditors noted
that while NYRA cannot balance its books alone with cuts, there are steps
the organization must take to reduce costs long-term, including:  

• Since emerging from bankruptcy, NYRA’s overall
  payroll costs increased by $1.9 million to $69.2 million. Seven executive
  staff make from $255,000 up to $460,000. NYRA has not performed a formal
  staffing analysis to determine the optimal number of employees and salaries
  for its operations;

• NYRA spent more than $6 million on contracts
  for personal and miscellaneous services. NYRA did not justify the need
  for or price of these contracts so it is unclear whether some of these
  contracts were necessary; and

• NYRA spent $900,000 to transport horses between
  tracks at no cost to the trainers or owners. NYRA should evaluate whether,
  and to what extent, the practice of transporting horses between NYRA tracks
  at no cost is necessary for NYRA to remain competitive and, depending on
  the results of the evaluation, consider either charging a fee for the service
  or discontinuing it.

DiNapoli’s auditors will be on-site at NYRA
in the near future and will routinely issue reports on NYRA’s real-time
fiscal condition.

NYRA generally agrees with the audit findings
but cites that it reduced operating expenses by 2.2 percent between 2008
and 2010 and operating expenses for 2010 are below those projected in the
bankruptcy reorganization plan. NYRA’s full response is included in the
audit.

For a copy of the audit, click here
or visit: http://www.osc.state.ny.us/audits/allaudits/093010/09s89.pdf

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