Final Approval to New York OTB Deal
The legislation was approved the evening of June 16 – the same day New York Mayor Michael Bloomberg had threatened to close down the city’s OTB, putting 1,500 people out of jobs. The OTB handles about $1.1 billion worth of bets annually – or some 40% of wagers in the state.
The takeover legislation, which takes effect immediately, also includes the creation of a state task force to study how to possibly merge all the state’s OTBs and consolidate other racing functions that officials say could be the beginning to the end of several decades of infighting among industry stakeholders for a share of the dwindling betting dollar.
“The finalization of this agreement is a win for the state, a win for the city of New York, and a win for the people whose livelihoods depend on a well-run OTB,” Gov. David Paterson said.
As for the now-splintered OTB and racing industry, Paterson added, “I’d like to try to consolidate it as best we can.’’
How that would work is uncertain.
Sen. John Sabini, a Queens Democrat who Paterson has nominated to become the next chairman of the state Racing and Wagering Board, talked of a “holistic’’ approach. He said the tradition of the state racing agency has been to uphold the integrity of the industry. “But for too long no one has paid attention to a major stakeholder: the taxpayer.’’
Sabini talked of everything from consolidation of services now offered by the various racing and OTB entities to better marketing to improve not only the industry but also to return more money in revenue sharing to the state.
The NYCOTB deal came after several weeks of closed-door talks, which were characterized as growing increasingly bitter because of demands on the table by Bloomberg. After a deal was publicly announced by the governor June 13, for instance, the city stepped back and said it would not agree unless it were able to keep $18 million a year in annual betting surcharge payments.
The final deal has the state assuming control of NYCOTB as a new public benefit corporation. In a partial win for Bloomberg, the city will continue to get a portion of the surcharge on bets made at Aqueduct and Belmont Park, which amounted to $4.25 million last year. The city for the next three years will also get another $3.25 million a year by broadcasting racing on the city’s two cable channels now run by NYCOTB.
“Although the negotiations went down to the wire, they produced an agreement that truly belongs in the winner’s circle,” Bloomberg said in a statement. “Working with state leaders, we have put out to pasture a fiscally flawed arrangement with OTB – one that threatened to divert city funds from police and fire protection, public schools, and other essential services. Instead, the city will continue to receive a public benefit from racing that takes place in New York City.”
On June 16, Bloomberg declared the city was officially out of the “betting business.’’
“The mayor of New York had no interest in running this corporation,’’ said Assemblyman Gary Pretlow, chairman of the Assembly racing committee.
Bloomberg originally sought a major change in the way in which NYCOTB revenue is distributed between the state, the New York Racing Association, the Thoroughbred breeding fund, and other tracks. For NYRA, it would have meant a loss of at least $13 million -- an amount that may have jeopardized its attempt to emerge later this month from Chapter 11 federal bankruptcy protection. The state’s Thoroughbred breeding and development fund would have lost about $1.5 million annually under the Bloomberg plan.
The agreement also calls for a one percent takeout hike in bets on NYRA races, and one percent takeout increase on all bets made in New York state on out-of-state tracks. The takeout increase idea was originally floated as a way to try to keep NYRA whole if the city’s original plan to change the distribution formula had been adopted.
Still, negotiators kept the takeout increase as part of the final package even though the distribution formula change originally demanded by Bloomberg did not happen.
Bennett Liebman, who runs a racing industry think tank at Albany Law School, called the takeout increase a bad idea.
“This is just raising taxes in an industry where there is limited life. It’s just a silly move,’’ he said.
Still to be decided is which of three bidding groups will operate NYRA’s future video lottery terminal casino at Aqueduct. At least two of the bidders have said they would be interested in also running the operations of NYCOTB if the state takes control of the entity, which includes a telephone account wagering business and 68 betting parlors that handle about $1.1 billion in bets a year, or more than 40% of all bets made in New York each year.
The legislation approved June 16 includes a new provision that will permit the OTB to enter into “joint ventures with third parties or entities.’’ That could include everything from NYRA to one of the bidding groups being involved in running the OTB.
The new NYCOTB headquarters will move from mid-town Manhattan to Aqueduct, though it is unclear where on the track grounds it will be housed. Liebman said one concern is what the new state-run board will do with current NYCOTB executives, who he said are some of the best in the business.
Still, the industry watcher said moving to a merger of all OTBs across the state is overdue. “Overall consolidation is probably a good thing. There really is no need or reason to have six separate OTBs in New York state and there really isn’t any reason for not trying to share services between the tracks and the OTBs,’’ Liebman said.
The five-member OTB board will be run by three appointees of the governor and one appointee apiece for the leaders of the Senate and Assembly.
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