Can Half a Billion Dollars Save New York Horse Racing? We Spoke With the Man Who Says Yes.

ONCE A SURE BET, the massive cash prize that New York’s horse racing industry hopes to win in this year’s state budget has come under fire.

“Albany is literally burning public money to keep the NYRA alive,” read a recent New York Post editorial, citing New York Focus’s reporting on Governor Kathy Hochul’s proposal to loan $455 million to the New York Racing Association. The association, which operates the state’s three largest tracks, would use the loan to renovate the Belmont Park racetrack on Long Island. It also loses tens of millions of dollars annually, so it can’t repay the loan with business earnings. Instead, it would use some of the nearly $200 million in subsidies that the state gives it each year to replenish New York’s treasury.

For years, New York lawmakers have rubber stamped these massive public subsidies while fawning over the storied industry. But Hochul’s recent proposal is now under scrutiny, amplified by weeks of her refusal to release a study that she and the racing industry claimed proved the loan’s economic benefits. Senator Liz Krueger, chair of the chamber’s finance committee, which oversees the budget process, has said the loan “is not a good bet.” She told New York Focus last month: “I have no basis to believe that they would be able to make their payments for the life of the loan.”

The New York Racing Association finally released their study on Monday. With the full text now in hand — and state legislators preparing to vote on the final state budget in about a month — New York Focus discussed the findings with Shuprotim Bhaumik, a partner at the economic consulting firm HR&A, which NYRA hired to conduct the study. SKDK consultant Jack Sterne, who works for the racing industry, and BerlinRosen consultant Kate Treen, who works for HR&A, joined the call. During the half-hour conversation, Bhaumik said he wasn’t sure how many full-time jobs the renovation would create and noted that a proposed hotel slated to generate $43 million a year is a “hypothetical scenario.”

A transcript of the conversation follows. It has been edited for length and clarity.

Sam Mellins, Senior Reporter at New York Focus: Okay so to start off, Shuprotim, for those who haven’t been following the issue closely: What’s the case for New York making this loan based on your analysis?

Shuprotim Bhaumik, Partner at HR&A Advisors: We’re focused on several things like, how many jobs are going to be generated both during the construction period, which will obviously be temporary, as well as once the facility is up and running. What kind of taxes will be generated for New York City and Nassau County?

And then finally, a big piece of this is obviously consolidation by NYRA, and the potential for moving races from Aqueduct. [The centerpiece of the proposal is that the New York Racing Association will end racing at the Aqueduct Racetrack in Queens, which it currently leases rent-free from the state, leaving the 110-acre state-owned property open for sale and redevelopment.]

NYF: Okay, so let’s get into some of the particulars. Horse racing crowds have been shrinking for decades across the country and in New York. Attendance at Belmont and Aqueduct combined was about 1.5 million in 1999. That fell to 500,000 in 2019, the last year before the pandemic. But your study predicts that attendance will go up by 350,000 a year. So how do you know this?

SB: There are a couple of pieces on this. I think one piece is obviously the consolidation of Aqueduct and Belmont. [The study predicts the 350,000 person increase in addition to the current attendance at Aqueduct and Belmont.]

The second piece is the potential of a big event like the Breeders’ Cup being attracted to Belmont because of the new facilities. Also additional race days because we now have winterized tracks and can accommodate more races during the winter. [NYRA spokesperson Patrick McKenna said in an email that total racing days across facilities would not necessarily increase after the renovation.] And the availability of the infield space that’s going to be created, more than 45 acres of infield space and more parking spaces to accommodate future crowds.

All of this is based on a study that NYRA commissioned from Elevated Sports Consulting. Their expertise is doing projections of attendance for sporting events. We used their projections as inputs.

NYF: Got it. Are there other tracks that have reversed declining attendance numbers by renovating their facilities?

SB: I don’t know the answer to that. NYRA is not on this call, but we can refer back to NYRA and get back to you if they know of instances where tracks have reversed attendance declines.

NYF: I’ve asked their spokesperson Patrick McKenna the same question, and he pointed me to Saratoga, which saw attendance go up by about 30,000 per year after renovation. That’s far less than your study predicts.

SB: I can’t comment on that, Sam. Obviously, NYRA runs Saratoga so they will have the information. I don’t know, so I can’t comment on that.

NYF: You mentioned the Breeders’ Cup, one of horse racing’s biggest events. Your study says it could draw 120,000 new fans to Belmont per year. How did you get that number?

SB: This was information that NYRA provided to us. They believe that with a new facility and new modern amenities that they can be attractive to an event like that.

Jack Sterne, consultant for the racing industry: Sam, you’ve probably seen that there’s a letter from the organization that runs the Breeders’ Cup saying that if Belmont is modernized, they will return to New York. They haven’t been in New York since 2005, and instead they bounced around between Kentucky and California, mainly.

NYF: I have seen that letter, thanks for mentioning it. Patrick McKenna told me that a renovated Belmont track would likely host the Breeders’ Cup every four to six years. Are there other events that could bring those 120,000 fans to the track in years that Belmont doesn’t host the Breeders’ Cup?

Kate Treen, consultant for HR&A: I think that’s a question for NYRA.

SB: For NYRA, yeah, I was going to say. [New York Focus asked McKenna; he didn’t name any other racing events that Belmont could host.]

NYF: You included the 120,000 per year projection in your study and said the Breeders’ Cup could bring those fans. Is that 120,000 a year number accurate if the Breeders’ Cup will only come twice a decade?

SB: We did the projections of the Breeders’ Cup, Sam, to show what the full potential of a modernized facility at Belmont would look like. And again remember, these are projections of attendance. These are economic models, which are industry standard.

NYF: You mentioned consolidation of Aqueduct and Belmont. As part of your proposal, the racing association would leave Aqueduct before its lease ends, and the state could sell the land for a billion dollars or more.

The state currently owns that land. The lease ends in 2033. Why wouldn’t it make more sense for the state to wait until the lease ends and sell the land then, without paying for a new Belmont track?

SB: Yeah, I’m gonna refer that question back to NYRA and the governor’s office. This is a matter of public policy, Sam. One thing I would say is that the estimate of $1 billion is not something that HR&A derived. It is an estimate that has been prepared by a certified appraiser.

JS: Sam, can I jump in with something?

NYF: Go ahead.

JS: Something for you to think about is that if they just wait until 2033 to sell the land at Aqueduct, there would not be the ability for winter racing that is at Aqueduct to be hosted at Belmont, because the facility wouldn’t be winterized.

We haven’t gone into breaking out the 435 jobs and specifically saying how many of the 435 are going to be full-time jobs as opposed to part-time jobs.

NYF: How do you weigh that against the money that the state could save by not paying for the renovation of Belmont, to the tune of $450 million?

JS: That’s a question of public policy that I think you should ask the governor’s office. But you also should remember it’s a loan that NYRA pays back, so it’s not the state spending money.

NYF: OK, moving on. The study promises the loan would create 435 “full-time equivalent” jobs at the racetrack. As I understand it, “full-time equivalent” means that two half-time jobs count the same as one full-time job, et cetera. Horse racing is a highly seasonal industry. How many of those 435 jobs would be full-time, year-round jobs with a salary and benefits that you could raise a family on?

SB: The answer, Sam, is that NYRA has committed to going through a construction process where they will be employing union labor, reaching out to minority businesses, and committing to certain standards.

On the operations side with the winterization, the potential is that you are going to have racing throughout the year, which doesn’t happen right now. You’re also going to have a significant amount of new amenities which will be open both during racing days, but also during some non-racing days as well.

So we haven’t gone into breaking out the 435 jobs and specifically saying how many of the 435 are going to be full-time jobs as opposed to part-time jobs. If you look at what this modern facility could potentially accommodate, in terms of both racing as well as non-racing activities, I think there is a case to be made that there are going to be many more full-time jobs in a new modern Belmont facility than what exists right now.

The hotel was a hypothetical example of what might be possible.

NYF: But you don’t know how many more?

SB: The normal accounting method calculates a full-time equivalent, and that’s the 435 number.

NYF: A 2015 study of the Saratoga track by the Saratoga County IDA found that each visitor to the track generated $15 in tax revenue. Your study projects that each new visitor will generate $36 in tax revenue. Why will Belmont generate more than twice as much tax revenue per customer?

SB: I haven’t read that study, so I can’t really comment on what the discrepancy is. All I can tell you is the methodology that we used.

As you know very well Sam, a portion of the sales tax goes to the state, a portion of the sales tax goes to Nassau County, a portion of it goes to the MTA. So we looked at individual sale items in terms of sales tax. We then looked at ticket sales and there is a handle tax on ticket sales. I believe it’s $1.50. So we looked at ticket sales based on projections. And then we looked at the labor income, the wages and salary that will be produced as a result of the new facility. And, again, we applied kind of average personal income tax rates. So we followed a robust methodology, line item by line item, to get to what our tax impacts were.

NYF: One thing I was interested to see in the full study is a proposed 350-room hotel on the Belmont property, which would bring lots of jobs and spending. What proof is there that this would in fact get built?

SB: There is about a four-acre plus portion of the grandstands that will be demolished as part of this new program. That would free up some acreage. So the hotel was a hypothetical example of what might be possible.

NYF: But there’s not necessarily any guarantee that a hotel would occupy that space.

SB: There is no guarantee, and that’s why we were very clear throughout the report that this was a hypothetical scenario that we were considering.

UPDATE: March 2, 2023 — After publication, NYRA spokesperson Patrick McKenna told New York Focus that the total number of racing days across facilities would not necessarily increase after the renovation.