Ogden Mills Phipps: I think it's safe to say that Tim Smith is a man who loves the next challenge. He showed us back in 1998 when he accepted the position as the first commissioner and CEO of the NTRA and he proved it again when he took on the task of spearheading Friends of New York Racing project almost one year ago. He's here wearing a different hat, telling us about something else, and we thank you for being here today, Tim.
Tim Smith: Thank you. Thanks, Dinny.
Good morning, everyone. Friends of New York Racing started with seed money from The Jockey Club, and funding from other non-profit groups, many of whom are represented in the room today, like Keeneland, Oak Tree, Breeders' Cup, and others. It was then joined by the New York Thoroughbred owners, breeders, and many others. We recently concluded six months of pretty intensive work that ended up with this report…
Most of attention on the report is focused on four main recommendations:
- The current business model for the NYRA tracks, and also for New York OTBs, is outdated and should be replaced.
- With strong protection of racing interests, the new structure should include a for-profit operating entity, the better to attract capital…
- OTBs should be permitted to join this consolidated new business entity.
- VLTs should be seriously considered for Belmont Park.
The report also suggests that this and any other proposals for the future of New York racing be evaluated based on some common criteria - six that we listed:
- Access to badly needed new capital
- Customer experience - What are the impacts of proposed changes there?
- Quality of racing
- What does it do for jobs, retention and hopefully growth?
- What does it do to for revenue to government?
- What will it do for the prospects of future solvency, with solvency of New York racing being a recurring problem due to its structure?
Needless to say, these issues have profound impact for the national industry as a whole. The $3 billion wagered on New York racing each year represents fully 20 percent of the North American total. So if New York racing were to falter seriously, then the ripple effects would harm every other racing state and every other racing stakeholder.
If you're a student of industry history, you realize that ours is hardly the first group to study NYRA, to study the New York pari-mutuel business and suggest the need for fundamental change.
Just a few of the past studies, and believe me this is a small sample, are shown here. What's most amazing to me was how many of them reached virtually identical conclusions, including:
- NYRA as currently structured will continue to have serious, long-term financial problems.
- The disconnect between racetracks and OTB ownership and operations - unique to New York state - now makes no sense for either group.
- While NYRA has done an unparalleled job on racing quality, it cannot match revenues with expenses on a consistent basis.
- Major structural and strategic changes are needed, not just tinkering with current law. There've been 80 amendments since 1954 and the New York racing law, and none of them have dealt with fundamental structural or strategic issues.
And yet here we are in 2005 - very little done about any of the proposals and recommendations you've seen - great racing and great history, to be sure, but a failing business model and a flawed statute. How did we get here? How could this happen? Why haven't the necessary changes been made before? And most importantly, what's going to happen next?
If I had to answer with just one word, like that character in The Graduate, instead of saying "plastics," like he did, my one word would be "politics." With the rest of my time, I'd like to explain what I mean by that and what I hope the industry will consider doing.
Politics, as I'm using it here, is not a dirty word, not something for decent folks like us to avoid. To use Greg Avioli's phrase, I'm afraid, it's making yourself relevant. First of all, relevant to elected officials and, second, persuasive in terms of your policy interests. I think politics is the key.
Not money, not financing, since both history and logic will tell you that the necessary capital for racing revitalization can be raised - probably pretty easily - if the necessary statutory structure and regulatory changes can be made.
Not law or litigation, because even when you go to the foremost racing-law authorities in the state and ask them fundamental questions like "Who owns the land?", you get these law review-type answers back, which give you the arguments on both sides of the question and then the conclusion that the answer most likely will turn on - Guess what? - politics.
This poor person who wrote it did 36 pages of analysis of the law and concluded by saying none of these cases will probably matter in the end because they'll change the law. We know in general terms and heard again this morning how much progress the industry has made in Washington, how the NTRA PAC, lobbying budgets and Congressional Horse Caucus have grown and how crucial these efforts are to the bedrock economic survival and priorities of the industry. Lots of people in this room, starting with The Jockey Club itself, should be acknowledged for making these results possible. They just don't happen on their own. From Bill Farish and Lucy Young Hamilton in fund-raising, to D.G. [Van Clief's] steady leadership, to Greg's legislative skills and track record, the results are impressive by any measure.
Now ask yourself these questions: Has the industry made the same progress in Albany? Does it have the same capabilities? Is it any less important?
New York racing and breeding represent a multi-billion dollar industry but are not organized like one. If you were to ask elected officials and key staff to describe us candidly, they would tell you about rampant industry factionalism: breed vs. breed, tracks vs. OTBs, horsemen vs. breeders, one or both vs. NYRA vs. the New York Racing and Wagering Board. For decades, these groups have used most of their resources and energy fighting each other, instead of pursuing common interests.
Someone once said that politics is about the process of addition, versus division. Think about that concept for a second in terms of the New York racing industry, how it's organized and how it actually operates. For example, have you ever wondered why state law provides for VLTs at almost every state racetrack, but expressly prohibits them from Belmont Park? Answer: the past opposition of the Nassau County OTB, along, perhaps, with some mixed signals from the NYRA side. Are there scenarios where Belmont Park, Nassau County, the horseracing industry customers and employees are all better off with a collaborative Belmont solution? Absolutely. But will they happen? The answer most likely will turn on which kind of math is used: addition or division.
I'm very proud of the work that Friends of New York Racing has done over the last eight months to help improve the industry's political prospects…The education process has been very important as you've heard it is in Washington. With rare exceptions, elected officials and their staffs and the public really don't understand much about our business. Also important have been the research and fact-finding projects. We have a much bigger business than most people realize. Also, steps like forming this business advisory council. There is so much talent in this state. That group now includes the former directors of the New York State departments of budget, labor and lottery, along with some very talented other men and women who simply want to help…
But Friends of New York Racing is not a permanent answer to the industry's political needs. Its shelf-life and current rationale end this fall when we turn in our final report and propose legislation to the industry and the state. And, subject to additional funding, perhaps another six to 12 months to help get the right kind of racing reform legislation up and running. This year, I think we helped do some additional advocacy for the industry, and that was needed, because understandably, NYRA itself was preoccupied with other matters. But the national experience will show that this kind of effort, to be successful, is multi-year, not one-shot, in nature.
So, what to do?…I think it's pretty clear we need try something different than we have tried in the past.
The New York industry badly needs an adequately funded first-rate trade association and advocacy arm for the sport and business as a whole. An organization to do in New York what now goes on in Washington through the NTRA and American Horse Council.
- credible industry research;
- effective public communications;
- crisis management when needed;
- grassroots membership development;
- a strong and growing political action committee;
- impactful legislative lobbying.
Leadership capable of speaking for the industry's thousands of workers, farms, customers, owners and yes even its horses, as opposed to representing a single company or particular segment or faction.
The new organization should be prepared for both a sprint and a marathon. The sprint would be to help craft and pass new racing legislation in 2006. This bill, I hope, will be the one that we are now working on with the Government Law Center of Albany Law School to fix the current statute, recapitalize New York racing, raise purses, save jobs, preserve farms, increase government revenues and keep New York racing quality first in the nation.
The marathon is to keep at this process of politics and public education not just for a few months but as a permanent part of promoting and protecting the industry's interests.
The sprint should be funded by those with either a non-profit or entrepreneurial interest in successful legislation. All groups should recognize that there is no investment opportunity in New York unless current law is changed.
The marathon needs a long-term funding source, and the most obvious candidate is to earmark a small percentage of VLT revenue to fund a collective non-profit research, communications and education arm. This non-profit could also logically be the focal point for racing's efforts in currently under-funded areas, such as problem gaming, backside needs, medication research, ongoing integrity initiatives and the like.
Many, many other industries organize themselves this way. The racing and breeding industries in New York ought to seriously consider it. In the bigger picture, it would be a relatively small, but uncommonly wise, investment.
I hope that once NYRA receives its clean bill of health from the federal court, there can be more collaboration and joint problem solving with our group and others, including the OTBs, including the harness industry. This was our original intent and preference all along, and I think probably Charlie [Hayward] and I both look forward to that day.
In honor of Will [Farish], I'll leave you with some Texas wisdom of the late Sam Rayburn. He's the gentleman who, when Lyndon Johnson excitedly told him about how many Harvard and Yale PhDs were going to come to Washington with the John Kennedy administration, said, "I wish just one of them had run for sheriff." But he had another great saying, which is, "Any jackass can knock a barn down, only a man can build one." I hope, as it has many time in the past, this year's Round Table will be known as a place where something worthwhile began to be built - as worthwhile as a barn.
Thanks very much.
Ogden Mills Phipps: Thank you, Tim. We at The Jockey Club have supported his organization and we agree that we need a permanent, well-funded group to raise the visibility of New York State and ultimately create a solution. New York State is important to racing. It would hurt the other areas of this country dramatically if we had problems after the franchise comes up next year.