Report On Future Of Racing In NJ

On the heels of reports that surfaced on Tuesday night possibly marking an end to racing at the Meadowl

ands, Governor Chris Christie today (July 21) hailed the recommendations of the New Jersey Gaming, Sports and Entertainment Advisory Commission as a guide for creating and sustaining a healthy economic environment to support the long term viability of the State’s gaming, professional sports, and entertainment infrastructure.

“This report is a blueprint that will guide our efforts in managing and protecting our gaming, sports and entertainment resources more responsibly and reforming issues critical to New Jersey’s economic future,” said Governor Christie. “I look forward to reviewing all of the Commission’s recommendations so that we can put these industries on a solid foundation and path to long-term economic growth and prosperity.”

In examining the issues confronting New Jersey’s gaming, professional sports, and entertainment industries, the Advisory Commission placed considerable emphasis on the economic conditions facing the State, including high unemployment, the fiscal crisis and realities confronted in the FY 11 State budget, as well as privatized stadium ownership, reduced racing revenues and support of horseracing through purse supplements. The recommendations focus on six key areas:

Viability of the Sports and Exposition Authority

Stemming the financial losses at the New Jersey Sports and Exposition Authority is crucial to the organization’s continued viability. Created in 1971 to build and operate the Meadowlands Sports Complex, including Giants Stadium the Meadowlands Racetrack and later the Byrne Arena, the NJSEA is now losing approximately $30 million per year. Recommendations include:

•Offsetting operating expenses by using current cash reserves (in excess of $50 million) of the NJSEA and encouraging development of a break-even budget by September 1, 2010.
•Authorizing the State Treasurer, if necessary, to provide a revolving credit facility of no more than $15 million to assist in cash flow needs.
•Divesting the NJSEA of all responsibilities related to venue operations, including, in particular, the Meadowlands Racetrack, the IZOD Arena and Monmouth Park Racetrack.
•Postponing the proposed Bayonne OTW project until legislation can be passed that permits OTWs to function without live racing.
•Ceasing operations of the Meadowlands Racetrack and offering standard bred owners the opportunity to lease the Meadowlands Racetrack.

Creation of a Sustainable Industry Structure to Preserve Live Horseracing

In an effort to stabilize New Jersey’s ailing horse racing industry, the Commission recommends immediate implementation of an experimental short term plan in 2010, that calls for the elimination of the thoroughbred meet at the Meadowlands and the creation of a 50-day summer meet with a $1 million a day purse at Monmouth Park (the “50-day meet”). A 21-day weekend fall meet is also planned at Monmouth to supplement the 6 days of turf racing at Atlantic City Race Course. These changes were legislatively approved and signed into law by Governor Christie in May. A number of future potential options include:

•Thoroughbred racing at Monmouth and Atlantic City (a 50-71-day meet at Monmouth Park and potentially 10 days of turf racing at Atlantic City).
•Thoroughbred Racing at Monmouth and potentially 10 days at Atlantic City and 70 standard bred dates at Monmouth.
•Lease the Meadowlands Racetrack to the standardbred horsemen for $1 dollar a year for three years with early termination rights and an equity-based share of the Bayonne OTW parlor.
•Convert to a commercial use one of the standardbred farms in New Jersey that has a mile track, and build a 5,000 seat grandstand complete with all necessary amenities.

Improving the Competitiveness of the Gaming Industry

As one of New Jersey’s largest industries, casino gaming in New Jersey is currently at a critical crossroads. The industry accounts for nearly $1 billion in state and local taxes and more than $2 billion in revenues spread across more than 2,000 businesses. Since 2007, the industry has lost more than 25% of its gross revenue base with employment dipping below 40,000. The Commission recommends an economic framework that focuses on job creation, capital investment, regulatory reform and increased tax revenues. These goals include:

•Creating a “Clean and Safe” Tourism District with State oversight, with the goal of making Atlantic City clean and safe by July 1, 2011.
•Creating a Master Plan for the new Tourism District, focused on enticing new entrants to build both gaming and non-gaming attractions that will increase demand in the City. The Plan should be delivered to the Governor no later than July 1, 2011.
•Improving the financial stability of Atlantic City by attracting other world class operators to ownership of the eleven existing facilities as well as any new ones.
•Increasing the meeting and convention business in the Atlantic City market by at least 30% per year for the next five years.
•Bringing the New Jersey regulatory structure into the 21st century by reducing costs and redundancies and by supporting the attraction of operators while maintaining strict integrity.
•Increasing visitation and spending through joint marketing efforts on par with other national destination resorts.
•Improving intermodal transport to Atlantic City, including increasing air, rail and ferry options.

Improving Cooperation and Coordination Among New Jersey’s Major Entertainment Venues

The Commission recommends the development of an integrated and cooperative policy among the four State-influenced venues (IZOD Center, PNC Center, Historic Atlantic City Convention Center and Rutgers Stadium) in addition to major entertainment or sports events held at the Prudential Center, Symphony Hall and the Meadowlands football stadium to ensure that competition among them is mutually beneficial and not counterproductive to their financial success. Other recommendations include:

•Testing the market for interest in privatizing operations of the IZOD Center and the PNC Arts Center by issuing a request for proposals.
•Establishing a single point of contact for booking concerts and other events at the taxpayer-supported facilities.
•Formalizing and developing a plan for improving communications among the IZOD Center, the PNC Arts Center, the Prudential Center, the Rutgers Arena and Stadium and the Atlantic City Boardwalk and Convention Center.

New Jersey Nets Lease at the IZOD Center

Early on, the Advisory Commission, worked to resolve the status of the New Jersey Nets’ lease at the IZOD Center in a way that served the needs of all involved. This encompassed:

•A fee of $4 million dollars to be paid to the NJSEA over the next two years for the Nets to opt out of the IZOD lease. The fee may be offset by various credits.
•The Nets will play home games for the 2010-2011 and 2011-2012 seasons in the Prudential Center in Newark and have agreed to support the potential of another NBA team locating to New Jersey, if and when the Nets leave the state.
•The Nets will share the Prudential Center with the New Jersey Devils organization which operates the facility leased from the City of Newark.

Advancement or Resolution of Xanadu Project

Located in the New Jersey Meadowlands, this three-story entertainment and retail complex was envisioned to be one of the largest entertainment and retail complexes in the United States with over 2,200,000 square feet of rentable space. Scheduled to be completed and opened in 2007, approximately $2 billion has been invested in the unfinished Xanadu project with an estimated $875 million is needed to complete it. The Commission found potential benefits of the project and recommends the State cooperate and, if needed, provide targeted assistance to bring the project to completion. Assistance should follow certain basic principles:

•Any tax exempt financing should not represent a primary funding source but should only fill a funding gap in private market sources.
•The development group should contribute cash equity consistent with present market demands and must resolve and reset the existing capital structure in a way that facilitates new financing, which may mean substantially subordinating all lenders’ and owners’ rights to those of any new lenders.
•The underlying ground lease should be amended to include, among other things, a date certain for completion and opening, with appropriate penalties for failure to comply.
•If the project can only be completed with tax exempt financing, the State must be able to reasonably expect to receive some form of upside financial return commensurate with the level of public sector involvement.

Created by Executive Order #11, the Commission was charged with developing a comprehensive policy to repair the unprecedented financial and structural challenges confronting New Jersey’s gaming, professional sports and entertainment industries

In addition to its chairman Jon Hanson, other members of the Advisory Commission included Robert E. Mulcahy III, a former president of the NJSEA and Athletic Director at Rutgers University; Finn Wentworth, principal of Normandy Partners and Founder of the YES Network; Al Leiter, the former Major League Baseball pitcher and YES Network commentator; Wes Lang, managing director of WML Partners, LLC, a New Jersey private equity investment and development company; Debra P. DiLorenzo, president and CEO of the Chamber of Commerce of Southern New Jersey; and Robert Holmes, a law professor at Rutgers School of Law in Newark, where he serves as Deputy Director of Clinical Programs and Director of the Community Law Clinic.

To view the report, click here.

(with files from the Office of Governor Chris Christie)