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NYRA 2010 Update

NYRA 2010 Update

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Published by: The Saratogian newspaper on Jul 19, 2010
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'. THE NEW YORK RACING ASSOCIATION, INC.

2010 UPDATE

Prepared for:

The Saratogian

Monday, July 19,2010

NYRA2010 UPDATE

TABLE OF CONTENTS

I. Franchise Agreement

II. Franchise Transactions

III. Payments to State

IV. Video Lottery Terminals (VLTs) Revenues

V. Significant Revenue Opportunities for NYRA

VI. Racing Summary 2009

VII. Saratoga 2010

VIII. Other Significant Issues

IX. Questions & Answers

- 2-

I. FRANCHISE AGREEMENT

Negotiations

With passage of legislation in February 2008, negotiations initiated for creation of franchise documents including the Franchise Agreement, leases, omnibus agreements, and settlement agreements Negotiations included representatives from offices of the Governor, Attorney General, ESOC, OOB, OGS, Racing & Wagering Board, NY Lottery, NYS Assembly, NYS Senate & NYRA, and were finalized in September 2008"

Franchise Agreement: Section 2.8

"Operational Support Payments. New NYRA and the State agree that, in the event that VL T Operations are not scheduled to commence at Aqueduct on or prior to March 31, 2009, the State and New NYRA shall negotiate in good faith to provide New NYRA with payments necessary to support racing operations and satisfaction of New NYRA operating expenses, including, without limitation, the payment of New NYRA's pension plan obligations, until the commencement of VLT Operations at Aqueduct"

Franchise Agreement: Section 2.9

"Capital Expenditures. New NYRA and the State agree that, in the event that VL T Operations are not scheduled to commence at Aqueduct on or prior to March 31, 2009, the State and New NYRA shall negotiate in good faith to provide New NYRA with payments necessary to support New NYRA's capital expenditures in maintaining and upgrading the Racetracks."

- 3-

II. FRANCHISE TRANSACTIONS

Franchise Agreement Paragraph I:

"."",NYRA irrevocably relinquished and conveyed all of Old NYRA's right, title and interest in, to and under the (i) Racetrack Properties, all improvements thereon and all physical assets appurtenant thereto, including, without limitation, the land underlying the Racetracks, each as described in the Deeds "". collectively, the "Transferred Property") to the People of the State of New York in consideration for and in reliance upon the following:" .. "

NYRA Cash & Non-Cash Consideration

NYRA Assets Transferred to State

(in millions)

(in millions)

1) Franchise Settlement Cash Consideration

$ 105.0

Aqueduct Racetrack(2) . $ 383.1
Belmont Park(2) . 512,0
Saratoga(2) "'" 105.9
Total Assets Transferred $ 1,001.0 2) Non-cash Consideration:

Thoroughbred Capital Investment Fund ("CIF,,)(1) . Chapter 11 Debtor in Possession Loan ("DIP") Urban Development Corp Loan ("UDC")

NY State Lottery Loan .

Outstanding Tickets ..

Racing & Wagering Board Tax Sub-total Non-cash Consideration

31.0 14..0 6.2 2.7 0.2

54 .. 1

3) New York State's obligation to negotiate to provide operating and capital investment funding if VL T Facility

is not opened by April 1, 2009(3)

to be negotiated

Notes:

(1) Per IRS Audit. determined thatthis liability was satisfied in 1994 with

the proceeds of two land parcel sales ($54 million)

(2) Value based on 2007 land appraisals

(3) Franchise Agreement, Paragraph 1 Section 3.:· the making of (i) payments to New NYRA during the Term necessary to support racing operations and the satisfaction of New NYRA 's operating expenses; including, without limitation, the payment of New NYRA's pension plan obligations, and (ii) capital expenditure advances by the State or VL T Operator;. as the case may be, to New NYRA over the Term of the Franchise, each as set forth in the Racing Law and the State of New York Tax Law. as modified by the Legislation and the Chapter Amendment

Total Cash & Non·Cash Consideration.

$ 159.1

-4-

II. FRANCHISE TRANSACTIONS

NEW YORK STATE & NYRA SETTLEMENT TERMS

NYRA Chapter 11 Payments to Creditors (in millions)

Franchise Settlement Cash Consideration ....

Chapter 11 Reorganization Payments:

Nassau County Real Estate Taxes " " "" ..

Pension & Other Retiree ..

Accounts Payable (Trade) ..

MGM Note / Aqueduct VLT Pre-construction Work (2003) .

New York City Real Estate Taxes i.L,. ••••••• ••• .

Legal & Restructuring Fees ..

Port Authority Note .

U.,s .. Treasury .. .

Mutuels Contract Settlement .

Sub-total Reorganization Payments ""'" .. , .. " '" .. '" .

Net Cash to Fund NYRA Operations "" .

$ 105.0

26 .. 2
25 .. 0
11 .. 9
7 .. 0
4 .. 7
2.7
1..1
1 .. 0
0.6
80.1
$ 24.9 - 5-

II. FRANCHISE TRANSACTIONS

NYRA FINANCIAL OVERVIEW

NYRA Operating Cash Flow (in millions)

SEPT·DEC

PRELIMINARY

FORECAST

2010

Had NYRA not received the $25 million loan from New York State, NYRA was projected to run out of cash (defined as less than $5 million on hand) in the June/July tlrneframe.

2008

2009

Net Cash from Franchise Settlement Cash Transferred from Old NYRA , Cash at Beginning of Period ,

24.9 16,6

$41,,5

$31.,9 $16,.4
264,6 252.2
264,,5 266,1
0.1 -13,9
8.3 10.4
7.2 10,0
-15,5 ,·34,3
$16.4 ~$17.8 Revenue,

65.7

Cash Operating Expenses,

73.1

Cash from Operations,

-7.4

CAPEX

2,.2

NYC OTB Non-payment

0,0

Change in Cash"

-9,,6

Cash at End of Period ,.,.

$31.9

- 6-

~

III. PAYMENTS TO STATE C&frM)'

NYRA PAYMENTS TO NEW YORK STATE 2000 - 2009

Statutory Payments

Total

Pari-mutuel Taxes". """ """ Breeders Fund "'"'''''''''''''''' Regulatory Fees,,,. ",.,,, ..

Uncashed Tickets ".""." ..

75,787,982.63 30,226,613.86 13,401,029.19 13,726,425.95

133,142,051.63

- 7-

IV. VIDEO LOTTERY TERMINAL (VLTs) REVENUES

ANNUAL VL T REVENUES TO NYRA AND NY THOROUGHBRED INDUSTRY Based on Statutory and Contractual Splits 1

18ased on:'

Gross Win '" $275 per day per machine 4500 machines

365 days

Total Annual Gross Win '" $451,687,500

NYRA

Capital Funds - 40/0",,,,,,,, ,, ,,,,,,,,,,,,

Operating Funds - 3% , ....... "

$18,067,500 $13,550,625

Total Annual Funds ...... ", ..... ",'

$31,618,125

Thoroughbred Industry

Purses - 6 .. 5% ... , ...... ,,,.,, .. , , ......

Breeders Funds - 1 .. 0% ,,""'"

$29,359,687 $4,516,875

Total Annual Funds ... ,,""""'" ".

$33,876,562

-8-

IV. VIDEO LOTTERY TERMINAL (VLTs) REVENUES

VLT RACINO OPERATOR COMMISSIONS 2005 - 2011

The commissions paid to the private operators of the harness tracks / Finger Lakes VL T facilities over the past 5 years and current year-to-date are as follows (State Fiscal Year = April- March)

Year

Racetrack Commission

2005-06 2006-07 2007-08 2008-09 2009-10

2010-11 (YTO)

$97,800,329 $160,889,992 $255,950,424 $338,574,180 $363,047,626

$93,984,7'71

Total

$1,310,247,322

Source: New York Lottery

- 9-

V. SIGNIFICANT REVENUE OPPORTUNITIES FOR NYRA

Capital Investments

• Build out Brooklyn Waterworks at Aqueduct - 20,000 square foot Sports Bar/Simulcast Center

• Open year-round consistent with the Racino

• Cost = $4 million renovation

• Revenue = $5 million annual net revenue

Regulatory Change

• Uncoupled Entries in races - New York was the only major racing jurisdiction where horses trained by the same trainer with different owners ran coupled (1-1a) as an entry

• Net revenue annual benefit to NYRA = $7 million / Net revenue benefit to purses = $5 million

• NYRA's request for Uncoupled Entries was approved by the NYS Racing & Wagering Board in Juiy 2010

Legislative Change

When the Internet wagering law was passed in 2006, NYRA launched an internet wagering site but we cannot video stream NYRA races live on the NYRA website" NYRA is seeking new legislation to correct this. The annual revenue increase estimated at $3 rnllllon.

Reform the NY State OTB System - Tremendous duplicative and direct competition

• Six individual phone wagering systems

• Four different internet wagering systems

• Separate tote contracts

• Statewide television and marketing strategies

NYRA receives less money from the NY State OTB System than any other racing jurisdiction.

-10 -

BEST YEAR-ROUND THOROUGHBRED RACING IN THE UNITED STATES

VI .. RACING SUMMARY 2009

• In 2009, wagers on NYRA races totaled $2..2 billion or 180/0 of the total wagers made on thoroughbred races in the United States.

• The Graded Stakes are the highest quality races in the country. In 2009, NYRA ran 113 Graded Stakes or 230/0 of all Graded Stakes run in the United States.

• Average daily purse distribution is the best indication of the quality of a race meeting.. In 2009, Saratoga Race Course led the country with an average daily purse distribution of $729,100. Belmont Park was 4th at $556,546 behind Keeneland spring and fall meetings ..

• NYRA is a strong supporter of the New York Thoroughbred breeding program" Approximately 30% of all NYRA races are for NY Breds with $30 million in purses.

- 11-

VII. SARATOGA 2010

/A\\

SARATOGA 2010 SEASON: Friday, July 23 - Monday, September 6

• Reserved Seats & Admission Prices - No Price Increase

• Live Thoroughbred Racing for 7 Weekends

• Open House: Sunday, July 18th

• Opening Day: Friday, July 23rd

• Stakes Races Adjustments & Purse Levels

• Budgeted 50/0 Decline in Handle for the Season

• Dining Reservation Policy

• Danny Meyer - Shake Shack/Blue Smoke

• New York Breeders & Breeders Fund

VIII. OTHER SIGNIFICANT ISSUES

OTHER SIGNIFICANT ISSUES:

• Monmouth Racing Plan

• NYC Off-Track Betting Corporation

• VLT Vendor S~lection

-13 -

IX. QUESTIONS & ANSWERS

QUESTIONS & ANSWERS

-14 -

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