UPDATE: State meets obligation to NYRA; Legislature OK's advance

[parsixfarms]

Originally Posted by pointman

Why should board members put up their own money when the State is financially obligated to float NYRA until the casino is up and running? And if the State is not living up to their obligation to NYRA, what would lead any board member to believe that their loan is secure?

NYRA is no different from any business with cash-flow problems. In this regard, it really isn't relevant who's not paying them. It's really a simple question: either NYRA and its board can be completely dependent upon the State to solve their short-term cash problem, or they can try to address their cash issues through other means. Having fought as hard as they did for the franchise, I can't believe that the only answer to their current situation is to shut it down if the State doesn't come through with the cash.

[pmacdaddy]

Originally Posted by parsixfarms

NYRA is no different from any business with cash-flow problems. In this regard, it really isn't relevant who's not paying them. It's really a simple question: either NYRA and its board can be completely dependent upon the State to solve their short-term cash problem, or they can try to address their cash issues through other means. Having fought as hard as they did for the franchise, I can't believe that the only answer to their current situation is to shut it down if the State doesn't come through with the cash.

I don't know. I would say NYRA is quite different as their business plan (assumption of VLT), ties NYRA's survival directly to the State. The State and OTB are certainly undesirable bedfellows, but the reality is that they are NYRA's business partners. If the State isn't willing to bridge the gap for now, it can't bode well for the future.

I also don't know how "short term" this need really is. If they get this $17M and OTB screws them some more and State delays VLT's another 2 years, what then?

Ultimately, I assume the State will come up with the $17M. Hopefully, getting NYS on the hook a bit motivates them a bit to get OTB/VLT on track.

[pointman]

Originally Posted by parsixfarms

NYRA is no different from any business with cash-flow problems. In this regard, it really isn't relevant who's not paying them. It's really a simple question: either NYRA and its board can be completely dependent upon the State to solve their short-term cash problem, or they can try to address their cash issues through other means. Having fought as hard as they did for the franchise, I can't believe that the only answer to their current situation is to shut it down if the State doesn't come through with the cash.

NYRA is different because they are a State entity. Unlike other businesses, I doubt NYRA can go just to a bank and take out a $17 million loan. And if they did, where in their budget will be the money to pay the interest? When I joined the board of the organization I was on, we were in serious cash flow problems for two reasons, first the County significantly delayed payments forcing the organization to take out loans which created interest which was not in the budget. They had to pay salaries somehow. Second, a creative head of the day to day operations had just been fired who had cleaverly (and legally) pilfered the organization out of money. We got the county to agree to pay the interest in return for a promise of timely payments and were forced to make severe budgetary restrictions including many layoffs that were painful for years until we righted the ship.

If the State does not give NYRA the money, they really have nowhere to get the money from. Hence, their only real option is to shut down. I can assure you owners and trainers will not race their horses with the promise that they will be paid in the next 6 months to 1 year. I fail to see where you think NYRA can drum up the money to continue operating when they are not receiving money they are entitled to from NYC OTB which would float their operations.

[parsixfarms]

Originally Posted by pointman

NYRA is different because they are a State entity. Unlike other businesses, I doubt NYRA can go just to a bank and take out a $17 million loan. And if they did, where in their budget will be the money to pay the interest?

This is not true any more. Before 2008, they were a quasi-state agency. Now, they are a not-for-profit. I do not believe there is any legal impediment to NYRA getting a loan from a private institution (subject, possibly, to any oversight boards). As for how would they pay the interest, I'm sure there are expenses that could be cut (d-barn, off-season training facilities are two that have already been discussed but not implemented).

[pmacdaddy]

Originally Posted by pointman

NYRA is different because they are a State entity. Unlike other businesses, I doubt NYRA can go just to a bank and take out a $17 million loan.

Nick,

I believe NYRA is now a Not-for-Profit organization, no longer a state entity. Accrodingly, they can certianly access working capital given collateral and cash flow. However, the current state of limbo leaves them with much on neither...

[pointman]

Originally Posted by pmacdaddy

Nick,

I believe NYRA is now a Not-for-Profit organization, no longer a state entity. Accrodingly, they can certianly access working capital given collateral and cash flow. However, the current state of limbo leaves them with much on neither...

I am not positive, I believe they are still a municipal not for profit corporation. And yes, when they deeded $1 billion worth of land to NY State they certainly compromised their collateral, not to mention having just come out of bancruptcy does not help either. Regardless, as a not for profit there is no room in the budget for interest. I still don't know where the money to pay that is supposed to come from.

[pmacdaddy]

Originally Posted by pointman

Regardless, as a not for profit there is no room in the budget for interest. I still don't know where the money to pay that is supposed to come from.

This is survival, not a balanced budget excercise. Not to say things are sustainable without VLT's coming to fruition or some other changes to the current situation.

[Cannon Shell]

Originally Posted by pmacdaddy

Nick,

I believe NYRA is now a Not-for-Profit organization, no longer a state entity. Accrodingly, they can certianly access working capital given collateral and cash flow. However, the current state of limbo leaves them with much on neither...

What collateral do they have? The state owns the land. They arent getting paid by NYCOTB (owned by the state) which is chapter 11 and are required by law to continue to send them the signal. There is a big chunk of the cashflow. Who is going to risk any money in this scenario? Sheikh Mo?

[pmacdaddy]

Originally Posted by Cannon Shell

What collateral do they have? The state owns the land. They arent getting paid by NYCOTB (owned by the state) which is chapter 11 and are required by law to continue to send them the signal. There is a big chunk of the cashflow. Who is going to risk any money in this scenario? Sheikh Mo?

That's what I am saying. The current situation leaves them without collateral or cash flow. Even though they are technically "allowed" to borrow as a NFP.

[parsixfarms]

Originally Posted by pointman

If the State does not give NYRA the money, they really have nowhere to get the money from. Hence, their only real option is to shut down. I can assure you owners and trainers will not race their horses with the promise that they will be paid in the next 6 months to 1 year. I fail to see where you think NYRA can drum up the money to continue operating when they are not receiving money they are entitled to from NYC OTB which would float their operations.

I guess I find it hard to believe that shutting down is their only option.

Purse levels are contractually dictated by agreements between NYRA and the horsemen; they are a function of handle and the amount of money that flows from handle into the purse account. Horsemen would not be "running for nothing" unless NYRA were using such funds, as they did about 7-8 years go, to cover operating expenses (and on this point, I believe that there is now complete segregation of accounts because of this prior episode).

As large as NYCOTB is, it still generates only a percentage of NYRA's total handle on a given day, so it's not as if the organization has no revenue coming in.

[Cannon Shell]

Originally Posted by parsixfarms

NYRA is no different from any business with cash-flow problems. In this regard, it really isn't relevant who's not paying them. It's really a simple question: either NYRA and its board can be completely dependent upon the State to solve their short-term cash problem, or they can try to address their cash issues through other means. Having fought as hard as they did for the franchise, I can't believe that the only answer to their current situation is to shut it down if the State doesn't come through with the cash.

NYRA is dependant on the state because the state has not honored its commitment AND the state owned OTB has not lived up to their commitment. It is different than any other business because the same people who owe them the money are the ones that regulate them! Name me another business that could fall into that quandry?

[parsixfarms]

Originally Posted by Cannon Shell

NYRA is dependant on the state because the state has not honored its commitment AND the state owned OTB has not lived up to their commitment. It is different than any other business because the same people who owe them the money are the ones that regulate them! Name me another business that could fall into that quandry?

School districts in NY, for example, are putting out budgets without knowing state aid figures. And health care facilities may see reimbursement rates cut by the state, after budgets have been prepared.

[Cannon Shell]

Originally Posted by parsixfarms

School districts in NY, for example, are putting out budgets without knowing state aid figures. And health care facilities may see reimbursement rates cut by the state, after budgets have been prepared.

Are school districts and health care facilities really comparable to the situation that we are talking about?

[parsixfarms]

Originally Posted by Cannon Shell

Are school districts and health care facilities really comparable to the situation that we are talking about?

You asked for entities that get money from the state while the state simultaneously regulates them. Hospitals certainly fall into that category (get Medicaid $$ while regulated by DOH); schools, subject to audit by the Comptroller, are probably a less perfect analogy.

[Cannon Shell]

Originally Posted by parsixfarms

You asked for entities that get money from the state while the state simultaneously regulates them. Hospitals certainly fall into that category (get Medicaid $$ while regulated by DOH); schools, subject to audit by the Comptroller, are probably a less perfect analogy.

Is what NYRA asking for considered "state aid"?

NYRA officials argue that the state--because it now owns NYCOTB--is on the hook for the money owed NYRA by the OTB giant. NYCOTB, in its Chapter 9 bankruptcy filing, acknowledges a $15 million debt to NYRA; officials at NYRA have said that amount has since grown to $17 million.

"NYRA has a good case for the money," Pretlow said. "OTB is the state and OTB owes NYRA, ergo, the state owes NYRA."

[parsixfarms]

Originally Posted by Cannon Shell

Is what NYRA asking for considered "state aid"?

It doesn't matter what it is called. Yes, NYS is contractually obliged to pay NYRA the racino "continuation" payments (and it's probably also on the hook for NYCOTB), but just because you have a contractual right to something doesn't mean you are going to get it. NYS also has contracts with the government employee unions. The governor just tried to unilaterally impose furloughs in a manner that a federal court judge concluded was in violation of those contracts. So it's not like NYRA is the only party in whom the state may be in default on its obligations.

The simple fact is, that given the tarring that it has endured in recent years, NYRA is not viewed in a particularly sympathetic light by a general public that doesn't think the state should be in the gambling business, especially when they perceive it to be losing money. At a time when hospitals are closing and teachers are being laid off, many people (I'm not one of them) believe that giving money to NYRA is a misplaced priority. Just read the many blogs on the newspaper websites, including the Times-Union and Saratogian, to get a sense of this sentiment. This is why what should be a simple thing to do contractually is proving problematic from a legislative perspective.