Thoroughbred Racing in New York StateJ. Patrick Barrett - Chairman, Ad Hoc Committee on the Future of Horse Racing
The Role and Work of the Ad Hoc Committee
Ogden Mills Phipps: New York state has a rich history when it comes to Thoroughbred racing. It has been home to champions and championship events for more than 100 years.
Beyond the vast enjoyment it provides to fans, the Thoroughbred racing industry contributes significantly to the economy of the state.
At this point in time, no one can accurately predict what the future will hold, but that future will be determined, in large part, by the recommendations of the Ad Hoc Committee on the Future of Racing, which was created by Governor Pataki.
In a minute, Pat Barrett, the chairman of the committee, is going to give you an overview of the committee's activities.
Before I tell you about his background and bring him up to the podium, I think it's important for you to know that all nine of the distinguished committee members are serving without compensation and that they have given generously of their time over the past several months. In fact, I believe that six of the nine are here with us today, and Rob Williams, the executive director of the committee, is also here.
We appreciate their commitment to ensuring a healthy Thoroughbred industry in New York state going forward.
Pat Barrett, a longtime resident and native of New York state, brings a wealth of business experience to the committee. He is a former chairman and CEO of Avis and a former president of Carrier International Corporation. Today, he serves as chairman and CEO of CARPAT Investments.
We're honored to have you here today, Pat. Thank you very much.
J. Patrick Barrett: Thank you, Mr. Chairman, and good morning, ladies and gentlemen.
Let me add at the outset here that Saratoga has always been a very special place to me. I was born and raised in the very upper part of New York state right near the Canadian border, but I had the privilege when I was a youngster — this was a long time ago in the late '40s — to come to Schuylerville every year to visit my uncle and my aunt. My uncle always took me to Saratoga Race Course. Those trips, ladies and gentlemen, remain some of my favorite childhood memories. It's always great to return to Saratoga.
Thank you for the opportunity to address The Jockey Club's 54th Annual Round Table Conference. As you are all likely aware, the Ad Hoc Committee on the Future of Racing is charged with bidding the state racing franchise. This morning, I'd like to give you a brief overview on the committee and how we've approached our task.
The New York State Legislature granted an initial 25-year franchise to the Greater New York Association in 1955 to conduct Thoroughbred racing and operate pari-mutuel wagering at Aqueduct Racetrack, Belmont Park, Jamaica Race Course and Saratoga Race Course.
Fifteen years later, in 1970, the Legislature extended the franchise through legislative fiat. This extension was for an additional five years, pushing the franchise expiration to 1985.
It was not until 1983 that the Legislature first formally addressed franchise succession. As part of an omnibus racing reform package that extended the franchise to 2000, the Legislature established procedures intended to govern an orderly process whereby 10-year franchises would be awarded first commencing on January 1, 2001, and for every 10 years thereafter. To address NYRA's franchise expiration set for 2000, the initial ad hoc committee was required to be established on or before September 1, 1997.
The succession process, however, was never started, as just prior to the date when the first committee was to be established, the Legislature extended NYRA's franchise to its present limit of December 31, 2007. As part of this legislative change, the date for the initial establishment of the ad hoc committee was changed to on or after December 1, 2005, but prior to July 1, 2006.
In June 2005, the Legislature passed racing reform legislation that, among other things, required the initial ad hoc committee establishment by December 1, 2005.
With respect to statutory provisions in depth, the law governing the ad hoc committee is found at Racing, Pari-Mutuel Wagering and Breeding Law section 208.11.
The Racing Law provides that the ad hoc committee consist of nine members. Three members are to be appointed by the governor, three upon the recommendation of the Senate majority leader and three upon the recommendation of the speaker of the Assembly.
The law requires the issuance of a request for proposal, or RFP as we'll refer to it, seeking bidders for the state racing franchise. There are few statutory limitations imposed on the committee, affording wide latitude in prescribing the form in which the RFP is to be made and the information to be furnished by each respondent. The committee likewise is given great discretionary power to determine what to include in any RFP. The statute similarly places little restriction on the committee's evaluation of the proposals.
The committee is required to report its findings to the Legislature, the governor and the Racing and Wagering Board with recommendations for such actions as it deems necessary to implement its determinations, the legislation which should be enacted governing such grants of authority or franchises, and the responsibilities related thereto which should be assigned to the Racing and Wagering Board and to such other state agencies or officers as it deems appropriate.
In August 2005, Governor George Pataki and Senate Majority Leader Joe Bruno appointed six members to the ad hoc committee. A bit later, Assembly Speaker Sheldon Silver appointed his three members. Six of the nine members are with us this morning.
In addition to myself, Governor Pataki named Bernadette Castro and Fred Newman. Ms. Castro is the commissioner of the New York State Office of Parks, Recreation and Historic Preservation. Many of you may know her from Ocala, where she has maintained a residence for years. Fred Newman is a partner in the New York City-based law firm of Hoguet Newman & Regal.
Senate Majority Leader Joseph Bruno named Jack Knowlton, John Nigro and Ed Swyer. Jack, of course, is the managing partner of Sackatoga Stable, who campaigns the great gelding Funny Cide, winner of the Kentucky Derby and Preakness Stakes. John Nigro, an Albany-based developer, has been attending races at Saratoga for decades. Ed Swyer is also an Albany-based developer. Ed has raced horses for decades. His most notable horse was Ninepins, who romped to a 22-length victory in the 1999 Grade I Breeders' Cup Grand National. Ninepins was also the winner of the 2000 Turf Writer's Cup at Saratoga at age 13.
Assembly Speaker Sheldon Silver named Saratoga Springs Mayor Valerie Keehn, and members of the Assembly Audrey Pfeffer and Gary Pretlow to the committee. Audrey is keenly attuned to racing matters as Aqueduct Racetrack lies within her district down in Queens. Gary is probably best known as the present chairman of the Assembly Racing and Wagering Committee. Valerie, a longtime resident of Saratoga Springs, certainly understands the importance of racing to this region.
And I might add as an aside here, ladies and gentlemen, that we've had great cooperation among all members of the committee. We've been guided by our great executive director, Rob Williams, as the chairman indicated, and to date it's been a great experience.
My initial conversations with my fellow members found all were committed to a few fundamental points:
2. That the best interests of the state should be primary and that the best interests did not include award to the highest bidder; and
3. That the new franchisee should illustrate a commitment to racing and provide increased value of the assets to the state more than had been realized in the past decade.
We all started with the belief that racing was an important element to the New York economy and the New York experience and that it was, therefore, very important to preserve.
The Legislature did not leave a blueprint on how to construct an RFP, nor were we blessed with the ability to follow in the footsteps of predecessors — we had none. The committee quickly determined to conduct a series of public meetings in an effort to provide the greatest input and guidance from interested and affected parties. After due deliberation, we decided to set forth a few simple questions asking hearing participants to instruct the committee as to what should be included in any RFP, how the committee should evaluate an RFP and whether the three racetracks should be split or should remain as a circuit.
The committee scheduled two hearings, in Albany and in Manhattan. The Albany hearing was quite well attended; we almost filled the Louis A. Swyer Theater in The Egg. At this hearing, we mainly heard from New York industry participants and from a few groups that were interested in bidding on the franchise.
The Manhattan hearing was less well attended, but attracted several national industry leaders.
Following the two initial meetings, the committee scheduled two public hearings designed to receive the input of the industry's engine — the fans. The two hearings were scheduled for here in Saratoga and downstate in Kew Gardens, Queens. Both hearings were quite successful in drawing individuals who had critically thought about the franchise and ways to improve or further its success.
The committee also conducted a series of round table panel discussions at the National Museum of Racing to assist in the education of our members. The first panel sought to provide a perspective on the state of Thoroughbred racing and breeding both nationally and in New York.
A second panel addressed integrity in the industry, with an emphasis on medication. The final panel discussed the racetrack backstretch, emphasizing the challenges and the issues backstretch workers face.
At the conclusion of the hearings and round tables, committee staff reviewed the submitted materials, transcripts, and the primary and secondary research in an attempt to discern patterns of common observations and suggestions. In general, the committee heard that the present system did not work properly and needed fixing, that the off-track betting structure is not complementary to a private racing operation, and that the RFP process should underscore the importance of directing attention and money back to the racing industry. Our staff authored a memorandum that compiled suggestions and direction. That memo formed the backbone of what was to become our RFP.
The committee heard from countless hearing participants that a variety of laws required amendment to provide for a healthier racing industry and a more profitable racing franchise. The committee, however, was granted no legislative powers.
We determined the best manner to address potential legislative changes would be to include a variety of options within the RFP. This would require the bidder to consider the importance of each selected option and whether the inclusion of the legislative changes would make the franchise more profitable and thus increase the projects and proposals they could implement with an award of the franchise.
In the end, the committee arrived at three options, each with a permutation simply removing the restriction against video lottery gaming at Belmont Park.
The first option has the existing structure remain. No statutory changes will be made other than those necessary statutory changes to award the franchise
The second option we designated as moderate racing law changes. Here we assumed six statutory changes would be made prior to or at the time of issuance of the new franchise.
And option 3 allows all the moderate racing law changes of option 2 and addresses off-track betting by restructuring the organization, management and purpose.
I won't bore you all with the technical matters contained within the RFP. The full document is available on our website (www.ny.gov/futureofracing). Suffice to say that each bidder must address a wide-ranging variety of questions from proposed race dates to capital improvements to uses for the facilities when meets are not conducted to programs for racing and wagering integrity, equine and rider health and safety, backstretch improvements, Thoroughbred retirement and customer service. The responses to operational questions constitute 50% of the overall graded score.
The committee believed that bidder evaluation should not rest solely with operational aspects, determining that each bidder should be examined in light of several criteria, including integrity, financial viability, approach and managerial theory, experience and qualification, and a lease payment.
To evaluate integrity and responsibility, the committee basically folded the New York State Office of General Services Bidder Responsibility Form into the RFP.
To evaluate a bidder's financial viability, certain financial information is required. If a bidder has been in existence for less than three years, it must provide sufficient financial data to substantiate its financial capability and viability.
On the subject of approach and managerial theory, the committee determined that each bidder must detail their approach and plan for the operation and conduct of the franchise and management thereof during the proposed term.
To review experience and qualification, each bidder must describe relevant business experience to show that they have the experience and competence to meet the scope and magnitude of the franchise.
Finally, while concerned that the franchise not be sold to the highest bidder regardless of their operational plans and capability, the committee believed the state should realize more value from the use of the three racetrack properties beyond the pari-mutuel tax and standard business-related taxes and fees, so we required a lease payment.
The evaluation process will include a review of each of the six major elements: Proposal, Integrity, Financial Viability, Approach and Managerial Theory, Experience and Qualification, and Lease Payment. Each of the areas will be graded on a 100-point system per category with a maximum score achievable of 600 points. Then each proposal will be weighted, multiplying the raw score by the assigned percentages.
As far as recommendation is concerned, as mentioned, upon completion of the evaluation process for all proposals, the committee will recommend by formal written report to the governor, the state Senate, the Assembly, and the Racing and Wagering Board listing the preferred overall selection based upon the highest total score for each of the options that I previously enumerated.
The committee set an aggressive schedule requiring bidders identify themselves within two weeks of the RFP release. Bidder questions regarding the RFP were likewise required at the same time. The committee set a deadline of two weeks for response to the questions, then allowing bidders a full month thereafter to return their proposals. The committee then left itself a full month for the evaluation and completion of report and recommendation.
Due to some unforeseen circumstances, the committee made slight modifications to the schedule, extending the dates. The new schedule basically pushes out previous deadlines two weeks. Nine days from today is the deadline for bidder proposal submission.
Bidder Identification and Expression of Interest Forms were received initially from 16 entities. One, Western New York Gaming Associates LLC, has since withdrawn. The list, which has been widely publicized, is posted on our website.
So in conclusion, ladies and gentlemen, the committee remains committed to the legislative process set forth in Racing Law §208.11. We remain committed to doing what's good for racing and what's good for the state of New York. I am very pleased that we have a number of interested parties. I believe competition is healthy and the opening of the process to bids is a great way to get everyone, new and old to the industry, thinking about what's best for the franchise.
It is a privilege, ladies and gentlemen, to serve on the committee at such an important time for Thoroughbred racing in New York, and I assure you that the committee will make recommendations that we feel will ensure a healthy future for the sport and industry in New York state.
Thank you very much.