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NYC OTB Approves Closure Plan

February 23, 2008

New York City Off Track Betting has ratified a closure plan, which if carried out could have a drastic impact on the racing industry. About 1,500 jobs are at stake and the state, New York City and racetracks would lose tens of millions of dollars annually.

NYC OTB handles $1.1 billion in wagering, making it the nation’s largest legal off-track betting operation. But it’s facing a roughly $1.1 million cash shortfall because state mandated pay-outs exceed profits. New York Mayor Michael Bloomberg says the city won’t bail out OTB, leaving the state Legislature to come up with a solution.

“It’s a sad day, it’s a sin that it’s come to this,” NYC OTB President Raymond Casey said.

Bloomberg, who personally attended Tuesday’s OTB board meeting, criticized the state for not dealing with OTB in last week’s legislation that saw New York Racing Association get a new 25-year franchise. Layoff notices are scheduled to start going out in April.

“If we did nothing, by the end of June, OTB would be running a cash-negative operation for the first time in its history,” Bloomberg said.

“I believe that if OTB is not able to operate without taxpayer subsidies then it should not operate — period. The city simply cannot take tax dollars away from schools and hospitals to pay for a gambling operation. We have no business subsidizing betting parlors at the expense of city taxpayers, particularly at a time when we’re asking all agencies to cut their budgets,” said Bloomberg. “OTB has made every effort to remain profitable.”

But the Spitzer Administration on Tuesday challenged OTB’s projections and said the governor has directed a racing Oversight Board to “facilitate discussions and voluntary agreements between (NYRA) and off-track betting corporations to streamline operations, decrease operating costs and maximize opportunities pertaining to costs and revenues.”

Empire State Development Downstate Chairman Patrick Foye, in a letter to Bloomberg’s office and OTB, called for structural changes and described current OTB operations as “an ill-suited business model for the 21st century.”

“It sounds like a band-aid. The mayor doesn’t want band-aids,” Casey said. “The letter appears to be void of any specific plan or recommendation.”

Tuesday’s vote included plans to immediately shut down two OTB outlets that generate about $30 million annually.

“There are probably others that will be closing down as we get closer,” Casey said. “We will start eroding the amount of money that’s available for stakeholders, the breeders. We’re sort of being forced into this. Nobody wins here.”

OTB wants the state Legislature to change the distributions formulas that it’s forced to abide by.

“We make money, that’s not the issue,” said Dan Wray, OTB’s director for legislative affairs. “It’s just that we’re being asked to distribute more than we’re making.”

NYC OTB alone provides 37 percent ($6 million) of the New York State Breeding and Development Fund’s annual revenues. Board member Joe McMahon of Saratoga Springs has said a shutdown would be “catastrophic” for the breeding industry.

“They’re serious about going this path unless they get some legislative help,” said Breeding Fund Executive Director Martin Kinsella of Clifton Park. “I just hope the Legislature tackles this with the same vigor that they approached the racing franchise, hopefully sooner rather than later. That’s just too much money to let die in the mine.”

NYC OTB is one of six regional OTBs formed in the early 1970s as a way to eliminate illegal betting and raise funds for local government, the state and racetracks. In fiscal year 2007, NYC OTB paid the city and state $17.5 million and $16.8 million, respectively. Like Gov. Eliot Spitzer, other state leaders say OTB should be changed, but like Spitzer they haven’t made specific recommendations.

“We are aware of the plight of New York City OTBs, and, in fact, Senator Bruno had proposed that a solution be part of the comprehensive framework on the future of racing that was approved last week,” said Scott Reif, a spokesman for Senate Majority Leader Joseph L. Bruno, R-Brunswick. “However, in the absence of consensus on this issue, we agreed to work with the governor's office and the Assembly in an effort to find a realistic solution before the legislative session ends in June.”

Sisa Moyo, a spokeswoman for Assembly Speaker Sheldon Silver, D-Manhattan, said, “Our goal is to make sure that OTB doesn’t close. We need to get to the bottom of why they’re not working. We’ll be examining the issues to see how we can best resolve them.”