Tuesday, January 1, 2008

The Mohegan Footprint in New York

By Ken Davison

In New York’s capital city of Albany, this year’s countdown to the approaching New Year was dominated by keeping the horses running at three of the state’s racetracks. Last Friday, an interim agreement was reached to keep the New York Racing Association in charge of the racing at these tracks past January.

NYRA’s contract to run the Aqueduct, Belmont and Saratoga racetracks ended on December 31st and the governor had been seeking the required legislative approval for NYRA to continue running the tracks for the next 30-years. Governor Eliot Spitzer and the leaders of both legislative chambers, Senate Majority Leader Joe Bruno and Assembly Speaker Sheldon Silver, had been in lengthy negotiations over the terms of NYRA’s contract throughout the final days of December to prevent a possible shutdowns of the racetracks.

The agreement will allow NYRA to run the racing until after the legislature can meet and approve a longer term deal in January. Governor Spitzer selected NYRA in September from four groups that submitted proposals, including a partnership between the Mohegan Tribe and Capital Play.

Capital Play is made up of a group of Australian horse racing executives that reportedly asked the Mohegan Tribe to join them in bidding for both the thoroughbred racing at three tracks and operating slot machines and retail, restaurant and entertainment outlets at the Aqueduct and Belmont racetracks. Capital Play would handle the racing, their specialty, while the Mohegans would operate the gaming and other components.

In 2006 and part of 2007, the four firms that bid for the combined racing-gaming franchise spent over $2 million in campaign contributions and lobbying efforts. Governor Spitzer was the major benefactor, receiving $632,000 in campaign contributions from the companies bidding on the racetracks. Excelsior Racing alone paid $403,579 in campaign contributions to the governor. Capital Play CEO Karl O’Farrell was reported saying that he’s concerned other firms spent two to three times more than his firm in contributions and lobbying.

Upon announcing NYRA as his choice to operate the racetracks, the governor said he would conduct a new round of bidding for the franchise to operate 4,500 slot machines at Aqueduct racetrack but not at Belmont, as originally proposed. Slot machines at two racetracks were included in the original bid but the governor chose to award NYRA the racing component only and he re-bid the gaming component for only the Aqueduct racetrack. After the selection of NYRA to continue running the race tracks, Governor Spitzer said, “After careful consideration, I concluded that a reconstituted NYRA is the best entity to operate thoroughbred racing in New York State. The state, in consultation with NYRA, will choose an experienced gaming operator to operate the VLT (slot machine) franchise at Aqueduct. This will ensure that we have the best possible operator for both the racing and the gaming franchise.”

Six groups, including the Mohegans (with the support of Capital Play), submitted their gaming proposals in mid-October but Sptizer has not yet made a selection. Three other tribes are also bidding: the Mashantucket Pequot, Shinnecock and Seneca Nations. The Delaware North Companies Gaming & Entertainment and their partner, Saratoga Gaming and Raceway submitted a proposal as well as Greenwood Racing Incorporated.

Senate Majority Leader Bruno battled Gov. Spitzer over his selection of NYRA, a non-profit organization that has had financial and legal troubles and is currently seeking to settle with creditors in bankruptcy court. NYRA claims ownership of the three racetracks and proposed to transfer ownership to the state if they were awarded the racing franchise. NYRA’s ownership of the tracks is disputed by others but with a value on the properties of $1 billion, it was a key element in their proposal.

NYRA issued a statement late Monday saying it reached a deal with the state oversight board to that allows racing at aqueduct to begin Tuesday and run until January 23st. The state legislature will meet before then and is expected to approve the new long-term franchise agreement for NYRA.

Gov. Spitzer’s entire first year in office was marked by highly-charged clashes with Sen. Bruno.

During the summer, aides to Gov. Spitzer leaked to the press the records of Bruno’s state-financed helicopter trips to New York City and his use of State Police drivers on trips that included attending fundraisers in what was labeled Choppergate. Then it was revealed that Spitzer aides inappropriately used State Police to re-create these travel records that were leaked to the press and Troopergate emerged. Then in August, a nasty call was made to the governor’s 83-year old father that was traced to a consultant who began working for the Senate Republicans months earlier and was later fired over the allegations.

Bruno, who has led the Senate Republicans since 1996, has long raised horses on his farm northeast of Albany. He was investigated for business dealings with Jared Abbruzzese, one of the founders of a horse racing advocacy group, Friends of New York Racing, which was formed in 2005. The group issued a 2005 report that criticized NYRA and disbanded a short while later as some of the group’s members went on to form two of the companies that bid for the racing franchise: Empire Racing Associates and Excelsior Racing Associates. Bruno attended a controversial fundraiser hosted by the advocacy group last year.

Empire Racing Associates included Mr. Abbruzzese and Mr. Smith, as well as Churchill Downs and the Magna Entertainment Corporation, owners of racetracks and founding members of the Friends of New York Racing, the former vice president of the Friends and two former members of its board of advisers.

The second group, Excelsior Racing Associates, includes casino magnate Steve Wynn, Steve Swindal, a managing general partner of the Yankees; Richard Fields, a casino developer; Tishman Speyer Properties, a developer; Bill Mulrow, a former candidate for state comptroller close to Governor-elect Eliot Spitzer, and Jerry Bilinski, a longtime veterinarian friend of Mr. Bruno, and R. Wayne Diesel, a former state budget director who was on the board of the Friends for New York Racing.

As the year was coming to a close, it was also revealed that a financial firm where Bruno worked at manages tens of millions of dollars for labor unions in and near his district. After the revelations surfaced, Bruno quit the company in December.

Ever since the Governor announced his selection of NYRA, both the Mohegan Tribe and Capital Play officials have frequently criticized the governor’s decision. Although Capital Play, whose specialty is horse racing, lost in their bid to secure the racing franchise, the Mohegan’s proposal to run the gaming at Aqueduct still remains on the governor’s desk awaiting a decision.

Capital Play even aired television ads that were part of a $250,000 media campaign in an attempt to discredit the governor's decision. It shouldn't be long before we learn if the Tribe's strategy of publically attacking Gov. Spitzer's racing decision while the Tribe's proposal to run the slot machines is sitting on the governor's desk was wise or not.

To see the Capital Play commercial, click here: