Four years ago, the State of New York passed legislation that permitted the New York Racing Association (NYRA) to install slot machines at the Aqueduct racetrack that it operates in New York City.
NYRA officials negotiated a deal with MGM MIRAGE Inc. (MGM) to build the $180 million facility that would house some 4,500 video lottery machines. Yet, because of political haggling, the slots facility still has not been started.
And the state continues to lose millions of dollars in slots revenue while the politicians sit on their hands.
MGM’s problem is simple: the company will advance the NYRA the $180 million needed to build the slots complex provided the state Lottery Division and the New York Non-Profit Oversight Board agree to place NYRA’s outstanding debts behind the $180 loan MGM has agreed to provide. Otherwise, the almost bankrupt NYRA could default on the loan.
In fact, NYRA president Charles Hayward has already requested additional funds from the oversight board to meet its current expenses through the rest of the year. NYRA has already borrowed $11 million from the board hoping to repay the money with revenues from the slot machines.
That’s the Catch-22.
The board and the Lottery Division say they want the slot facility built but say they want more assurances from NYRA that it still prepared to handle the project.
Just last week, Gary Jacobs, executive vice president and general counsel for MGM MIRAGE wrote the oversight board urging that it "expeditiously" approve the debt subordination plan.
Jacobs said that the company has been committed to the project for four years and needs only the guarantee that the debt will be recognized by whatever franchise holder is designated by the state.
The current NYRA franchise expires at the end of 2007 and a state task force is evaluating four proposals submitted by prospective franchise seekers, including the current NYRA management.