Of Politics and Ponies

OZONE PARK, N.Y. -- There is no glitz or glamour to be found in the day-to-day happenings of Aqueduct Race Track. On a frigid afternoon in early February, patrons brace themselves against the winter wind and hurry into the groaning old facility as snow drifts down from a slate-grey sky. The first race around 12:30 p.m. is for $15,000 claimers. By 4:30 p.m., nine races will be over.

But even in the mundane grimness of a winter race card, Aqueduct matters.

It matters because last weekend five 3-year-olds paraded postward to contest the Whirlaway Stakes, 1 1/16-miles, two turns, on the dirt, the winner of which could head on to the Gotham, and from the Gotham to the Wood Memorial, and from the Wood, full-throttle to the Kentucky Derby — maybe even the Triple Crown.

It matters because even in the dead of winter, when the quality of racing isn't as good, Aqueduct's handle still competes with those of mega tracks like Gulfstream Park in Florida and Santa Anita Race Track in California.

It matters because hundreds of hard-working men and women make their livelihood off the New York oval, whether on the backside as trainers, grooms, and exercise riders, or in the frontside offices of the New York Racing Association.

But Aqueduct matters most of all because it remains at the center of a ridiculous political merry-go-round that revolves around the push to bring Video Lottery Terminals (VLTs) to a NYRA track. Ever since the New York State Legislature legalized expanded gaming devices at the racetracks — all the way back in 2001 — the process to develop and operate a racino at Aqueduct has been delayed by one political setback after another.

Saratoga Gaming & Raceway got VLTs in 2004. Six other harness tracks and one thoroughbred track — Finger Lakes near Rochester, N.Y. — have VLTs now, too. But Aqueduct has nothing, thanks in part to a major setback in March of last year, when Delaware North, selected to obtain a 30-year operation deal by the state in October of 2008, lost its bid after failing to obtain financing to make an upfront payment of $370 million to the state.

Through the eleven months that have passed since the Delaware North deal fell through, as the state lost money to the tune of $1 million per day in revenue sharing payments, politicians dragged their feet on the selection of an operator. The process was further hindered when New York Governor David Paterson, Assembly Speaker Sheldon Silver, and Senate Democratic Conference Leader John Sampson — all of whom are required to approve the selected operator — locked horns over which of the remaining five bidders should get the contract.

It seemed like good news this year when the Governor finally named an operator, Aqueduct Entertainment Group, to set up a racino in the existing Aqueduct facility in Queens. But the Jan. 29 announcement was met with a maelstrom reaction from many, including Assembly Speaker Silver, who took issue with Paterson's seemingly shady motivations for selecting the politically-charged AEG. State lawmakers included a $200 million upfront payment from the winning bidder in the deficit reduction plan they passed in December, but Silver tacked on an additional $100 million to the upfront costs he expects to see from AEG. He also wants to ban anyone connected to the group who has been convicted of a felony within the past 15 years. That spells bad news for at least one individual connected to AEG — Darryl Greene, who was convicted of stealing half a million dollars from city agencies in 1999.

But the biggest uproar of all has been caused by AEG ties to the Rev. Floyd Flake, a politically prominent minister in Queens whose endorsement would aid Paterson's run for reelection this year. Adding to the impression that things aren't on the up-and-up is the fact that just one week before the VLT operator announcement was made, Flake made positive comments about Attorney General Andrew Cuomo, Paterson's likely opponent in the 2010 election. Consider a meeting Paterson had with Flake to solicit political support three days after the announcement was made. Ponder the fact that the Lottery Division reportedly placed AEG near the bottom of a list of bidders, although in yet another move that reeks of corruption, State government refused to publicize details of the proposals from the start and continues to do so.

In a sprawling piece written Feb. 5 for the New York Daily News, Daily News Albany Bureau Chief Kenneth Lovett wrote, "Albany's twisted and shady dealings were laid bare Thursday night as the scandal surrounding the bidding to run the Aqueduct racino mushroomed. Furious bidders who lost out to politically connected Aqueduct Entertainment Group told how a rudderless and chaotic selection system made a mockery of the course."

Caught between a rock and a hard place in the deal is NYRA. The organization, which filed Chapter 11 bankruptcy in 2006 citing the state's failure to approve the long-stalled casino project, received a $105 million payment from New York in 2008 which enabled it to partially emerge from its' drastic financial straits. But according to NYRA President and CEO Charles Hayward, the association used $80.1 million of the payment to pay off creditors while putting the rest, $24.9 million, into operating accounts. And now NYRA once again lies near the brink of insolvency due to the use of projected revenue from slot machines in its' 2010 budget. NYRA reports a negative cash flow of $15.5 million in 2009 and is projecting a negative balance of $24.3 million in 2010.

The good news lies in a contract signed between NYRA and the state in 2008. The settlement required state legislature to cover NYRA's operating costs if slot machines were not in operation at Aqueduct by April of 2009. Whether the state will turn funds over to the association remains to be seen — although NYRA has cooperated with an audit required by New York state in 2009, that may not be completed until late in 2010 — well after the association runs out of cash. NYRA also presented its' case at a Feb. 3 hearing before the senate committees on Investigations and Government Operations and Racing, Gaming, and Wagering, which the state arranged to "determine the accuracy of NYRA's declaration" and "investigate the basis for NYRA's plight.",

"It's been a whirlwind," NYRA Vice President and Chief Operating Officer Hal Handel said Saturday. "I think the senate hearing went extremely well; we were able to articulate very well for them where the money went and where we stand regarding the state's obligation to us financially."

NYRA will meet Feb. 10 with the Oversight Board that was put in place in 2008 to supervise Thoroughbred racing in New York. Handel said NYRA has not met with the board in more than a year.

"We have a pretty detailed agenda of matters that we have to get before them," he said.

"And as far as the VLTs are concerned, time isn't anyone's friend in this thing. All of these kind of processes take time — memorandums of understanding take time, definitive agreements take time, so we're sort of weathering the perfect storm right now."

The racing association, supposed to receive 3 percent of the gross revenue from VLTs for operating funds (along with 4 percent for capital expenditures), isn't the only demographic left out in the cold by the state's failure to solidify the Aqueduct deal. Horsemen are waiting for 6.5 percent of the revenue for purse increases and breeders' awards. Projected revenues from an Aqueduct racino are expected to bring in at least $500 million gross per year.

And so it is that developments at Aqueduct, that oval oft-spurned as an evil stepsister of the circuit's higher-class Belmont Park and Saratoga Race Course, may make or break the state's entire system of racing as we know it.

In 1964, Republican Congressman Paul Fino addressed reporters for Time Magazine with criticism of overblown political involvement in the industry.

"Horse racing is no longer the sport of kings — it's the sport of Governors," he said.

Today in New York, that statement rings true.

Claire Novak is an award-winning journalist whose coverage of the thoroughbred industry appears in a variety of outlets, including The Blood-Horse Magazine, The Albany Times Union and NTRA.com. She lives in Lexington, Ky.