Risk of Ruin

On a sunny Saturday in September, grooms use hoses to wash approximately 1,290 horses. Dirty water streams down the middle of the road, just a few feet from where manure spills out of concrete bins. Horsemen driving golf carts swerve around the piles of muck, which a tractor unsuccessfully attempts to push back into the bins.

This is the Downs at Albuquerque Racetrack and Casino, almost a year after winning a lucrative, 25-year lease to manage property adjacent to the New Mexico State Fairgrounds. Although the Downs is no longer responsible for maintaining these barnyards—the lease transferred that duty to the state—it is responsible for paying a portion of the utilities, including the water used to wash the horses that run daily races at the Downs' track.

But in many ways, the Downs isn't living up to the terms of the lease. Those close to the situation say the company hasn't paid its complete share of water and electric bills since the new lease became effective in January of this year. On top of that, the Downs has racked up more than $145,000 in interest from its failure to pay an architecture firm it hired to design a new casino. And the casino construction, slated for January 2013, has been delayed—leaving the horsemen who rely on casino earnings worried about the future.

Long before the new lease was awarded, the Downs was notorious for failing to pay its bills, leading skeptics to question whether it deserved another 25 years of running the racino [cover story, Aug. 22: "Trouble At The Ol' Racino"]. Now, some critics are wondering: If nothing's changed, was the state duped?

In a June 4 State Fair Commission meeting, the fair's general manager, Dan Mourning, admitted that the Downs was still paying its old utility rate—up to $20,000 a month for electricity. The new lease requires that the Downs take on a portion of water payments, as well.

"It's very difficult," Mourning said at the meeting. "Again, we are infrastructurally challenged…It's not something [where] you can just go and check a meter…"

"Right, but you knew that when you were writing the lease and writing the RFP," State Fair Commissioner Charlotte Rode interrupted. "You knew that."

To Rode, the Downs' continuing inability to pay the new utility rates is problematic, given that the Downs' has known about that lease requirement since January.

"Every ounce of this lease is completely enforceable from day one," she tells SFR.

The Downs faces other financial problems, too.

In January, the Downs received an invoice from NCA Architects for $388,953.17 for professional services including design development and construction documents dating from March 2009 through January 2012. In its bid for the new lease, the Downs named NCA as a primary contractor.

But on Feb. 15, NCA attorney Kevin Sexton wrote to Downs attorney Traci Wolf, demanding an answer about the outstanding balance—which according to sources familiar with the situation still hasn't been paid. (When reached by phone, Sexton said the matter was still unresolved but would not comment further. Wolf didn't return SFR's phone calls before press time.)

Many of the horsemen are also frustrated over the lack of progress in the construction of the Downs' new $15-$20 million casino, which is slated to have nearly twice as many slot machines as the current casino and to significantly increase revenues. They blame current management, which has owned the Downs for more than 25 years, for turning the property into a ghetto.

(The lease requires casino construction to start 60 days after building plans are approved and, although NCA's letter claims the plans were completed in January, whether they were ever approved remains unclear.)

Currently, the racing purses generated at the Downs—ie the amount of money paid out to horse owners, part of which comes from revenue generated in the Downs' aging casino—remain low. For fiscal year 2011, the Downs paid out just under $4.5 million in total purses, much lower than the $15 million that Hobbs-based Zia Park Casino paid out, according to the New Mexico Racing Commission.

A significant amount of the money the horsemen rely on comes from gambling revenue; $12 million of Zia's 2011 purses, for instance, came from gambling. New Mexico Horsemen's Association President Jack McGrail attributes the difference to Zia's spiffier casino.

In a voicemail to SFR, Downs General Manager Darren White says that construction is moving forward and foundation laying has begun. White also recently told the Albuquerque Journal that soil problems caused the delay, and that the casino would be ready by next year's second quarter, which begins in April. Still, that's at least four months later than the planned January opening.

For the horsemen, who represent a good chunk of the 10,000 people involved in the horse-racing industry, no additional revenue is guaranteed until the casino goes up.

View the NCA Architects demand letter and its invoices to the Downs here:

Santa Fe Reporter