NEW YORK, July 12 (Reuters) - The New York Racing Association could become insolvent in 2011 if it does not get revenue from a slot machine contract for Aqueduct Racetrack that looks doubtful, the state comptroller said on Monday.
New York state is counting on an upfront payment of $300 million from the winning bidder on the slots contract to help ease its cash crunch.
Last week, the Lottery Division only qualified one company, Genting New York (GENT.KL), which is part of a Malaysia-based powerhouse, to expand gambling at Aqueduct Racetrack.
Two other bidders were rejected last week for trying to negotiate improved terms. A previous winning bidder was rejected due to state and federal probes whether Democratic Governor David Paterson chose it to aid a political ally. [ID:nN06115687].
“When you start with six potential bidders and end up with only one, it begs the question of how the process was handled and whether the state can actually close the deal,” Democratic Comptroller DiNapoli said in a statement.
“The fact is that the New York Racing Association can’t make it long without significant restructuring and revenue from video lottery terminals,” said DiNapoli.
The New York Racing Association exited bankruptcy in 2008 after getting a $105 million of state aid. The state gave it another $25 million loan in May 2010 after DiNapoli’s auditors determined that by June it would not have enough cash to operate its three New York horse-racing tracks in the state.
DiNapoli, who had to use his subpoena power to get financial data from the racing association, faulted it for waiting more than a year after it emerged from bankruptcy to begin significantly slashing spending.
Intensifying his scrutiny, DiNapoli said his auditors would be posted on-site at its tracks.
Recommending several cost cuts, he also questioned the high salaries paid to seven executives, who make from $255,000 to $460,000 a year, and the association’s spending $6 million for personal and miscellaneous services.
Some of the problems facing the New York Racing Association, which hosts the Belmont Stakes, the thoroughbred race held every June that is part of the Triple Crown, are shared by other tracks that also are luring fewer gamblers.
Most of the New York Racing Association’s revenue comes from betting on horse races, which fell 13.2 percent to $2.22 billion from 2006 to 2009, DiNapoli said.
One problem, however, is unique to New York: DiNapoli found that the the association is still owed $17 million from the bankrupt New York City Off-Track Betting Corporation.
Reporting by Joan Gralla; Editing by Andrew Hay