Odds On Racing - Harness Racing

Battle for the Gambling Dollar

January 22, 2010

The president of Catskill Off-Track Betting Corp., which operates OTB locations in Broome and other counties, said Tioga Downs Casino is having a severe impact on its operations, taking gamblers and bets away.

Meanwhile, a principal of Tioga Downs said he's going to play a more active role in managing the Nichols facility as he plans forgrowth there.

Donald Groth, president of Catskill Off-Track Betting in Pomona, said his 25 OTB locations have been hurting since Tioga Downs opened in 2006. Competition from out-of-state betting operators and Internet sites, as well as the economic climate affecting consumer spending, have also been factors.

"There was an immediate 30 percent drop in sales when the racino opened," Groth said. "Catskill OTB, which handled about $150 million a year in bets, is now handling just over $100 million in 2009."

By comparison, people bet about $581 million -- or nearly six times as much as they did at OTB -- on the video gaming machines alone at Tioga Downs in fiscal 2008-09, which ended in March, according to the New York Lottery.

Horse-racing bets taken at Tioga Downs total around $10 million annually, said Jeff Gural, a principal of the racetrack and gaming center.

"If we're taking business from him, that's the free enterprise system," Gural said. "One would think we would also be creating new fans for horseracing by having a harness track right in the heart of the Southern Tier."

Where does the money go? For a person who places a $1 racing bet at OTB, 80 cents is returned to winning bettors, according to the state Racing and Wagering Board. The rest is called the takeout, which is subject to various distribution requirements.

Some of the money goes to the state as a pari-mutuel tax and Racing and Wagering Board as a regulatory fee. Money also goes to breeders and the track that ran the race.

What's left is OTB's retention, a portion of which is distributed to tracks in that OTB's region -- for Catskill OTB, that would include Tioga Downs.

Then OTB receives money to pay for its operating expenses. Whatever's left gets distributed to local governments. Specific figures vary based on the bets and region, but OTB typically ends up getting half of the takeout, the Racing and Wagering Board said.

Tioga Downs operators also distribute funds to various groups, but the facility generates additional revenue from roughly 775 video gaming machines that OTB doesn't have.

The operators get 40 percent of the first $50 million in net machine income -- or net revenues after payout of prizes to players -- for operating expenses. The rest goes to the state education fund, facility marketing, Lottery administration and capital project investments.

Both organizations contribute to local employment. Tioga Downs employs about 300 people, Gural said. Groth said his two OTB locations in Broome County -- in Westover and Nimmonsburg -- have about a dozen employees at each site.

"His problem is that his facilities are dumps," said Gural about Groth's OTB locations.

The regulars at OTB in Nimmonsburg Plaza would disagree. Around 12:30 p.m. Friday, about 20 men -- mostly seniors but also a few young adults -- were placing bets and watching Aqueduct and other races on television at the OTB.

Vending machines offering chips, candy, coffee and soda were on-site, near other machines that sell scratch-off Lottery tickets and stands holding Quick Draw forms.

Some of the regulars joked with each other as they sat watching the TVs and discussed other topics besides racing -- such as who makes the best halupki. Others wanted privacy and anonymity, preferring to stay quiet and keep their heads down for the most part.

Catskill OTB has applied to the state for permission to conduct Internet wagering, according to the Racing and Wagering Board. OTBs in the Capital, New York City and Nassau regions already have been taking bets online.

Groth said he's considering moving the OTB near The Home Depot in Westover to empty building space next to Ground Round Grill & Bar in Johnson City or to another, undisclosed location.

The lease at the Westover site will expire this year, he said. It's possible OTB could remain there, depending on the outcome of the various negotiations.

Changes: Tioga Downs has made changes to its management staff and facility, which in addition to harness racing and video gaming machines, offers concerts and player benefits, such as a points reward program and about $300,000 a month in "free play" credits for use on its VGMs.

Pete Savage, who was president and general manager of Tioga Downs, took a job in Indiana, Gural said.

Thomas Osiecki, formerly the facility's assistant general manager, was promoted to take Savage's place. A new chef at Tioga Downs has been hired to upgrade the quality of the food at its on-site buffet restaurant, Gural said. Changes in the bar area also were made to allow for bands and dancing on Friday and Saturday.

Gural said he wants to add a hotel and indoor parking facility but can't get the financing in this economy to build them, plus the sewage treatment plant that would be needed. In total, it would be a $30 million to $40 million project.

"We're learning as to what promotions work and what our customers want," Gural said. "We're going to try to bring some bigger names for the concerts and continue the programs that we have, like the buy one, get one free buffet on Sunday. Those types of promotions are very well received by the customers."