To end the "destructive competition" and bolster revenues for both entities, the New York City Off-Track Betting Corp. should be merged with the New York Racing Association to create a new industry powerhouse, NYRA chairman Barry Schwartz said.
Schwartz proposed the merger idea instead of an outright sale in a recent letter to New York City Mayor Michael Bloomberg, whose government controls NYCOTB. The NYRA boss said a merger would make New York racing better able to compete against Magna Entertainment and Churchill Downs, two companies that have led the way in racetrack consolidation.
The letter was dated in late February, and The Blood-Horse obtained a copy of it in early April.
Industry officials said Schwartz' plan, though it doesn't produce immediate cash, could offer increased annual revenues for a city government still reeling from the fiscal effects of the Sept. 11, 2001, terrorist attacks. Under Schwartz' proposal, NYRA would share some revenue from 2,500 video lottery terminals at Aqueduct; Schwartz has said revenue would be minimal in the early years of the VLT program scheduled to begin this fall.
NYRA would also guarantee an annual base payment "that meets or exceeds the numbers in your current financial plan" for NYCOTB, Schwartz said in his letter to Bloomberg. "You would have no downside. The excess profit above the base we will share with you equally," Schwartz said.
Schwartz said the plan would provide "substantial budget relief to the city in the near term, and enormous potential for long-term economic development over the coming decades."
Racing insiders not connected with NYRA said the association hopes its franchise to run the state's three premier racetracks would be extended beyond the 2007 expiration date. Indeed, they said a merged NYRA/NYCOTB operation would all but guarantee NYRA's existence beyond 2007.
Schwartz wasn't available to comment on his letter, and officials in Bloomberg's office could not be reached for comment.
Under New York's previous mayor, Rudolph Giuliani, NYRA lost out to a team headed by Magna Entertainment in a bid to purchase NYCOTB. Magna offered an up-front cash payment of $250 million, but the sale withered away under political opposition, union complaints, and Giuliani's lame-duck status.
Schwartz, in his letter to the new mayor, talked of a consolidation within the racing industry. He said that, aside from seeking to dominate the marketplace, Churchill and Magna have a strategy of "driving a wedge between NYRA and NYCOTB." He cited a move by Magna to offer signals from Santa Anita Park to NYCOTB but not NYRA.
Schwartz warned Bloomberg that New York is "in grave danger of losing our leverage in the industry." By combining operations to create a single racing giant in New York, Schwartz said NYRA and NYCOTB "would become a dominant force in determining the price for which races are bought and sold in the simulcast market."
A merger would end decades of competition between NYRA and NYCOTB for a share of the betting dollar, Schwartz said. NYCOTB last year handled about $1 billion but returned only about $30 million to city government.
Schwartz' proposal also envisions costs savings for the city via pooled operations and relocation of NYCOTB's expensive Manhattan headquarters to space NYRA owns in Queens. In addition, there would be one telephone account wagering system, and totalizator expenses could be reduced.
Schwartz said unions that represent NYCOTB workers--one filed suit to stop last year's sale--would accept a merger. He talked of crafting a merger that will be "mutually satisfactory" to the city, NYRA, and the unions without the need "for massive layoffs."