New York City Off-Track Betting Corp. officials, rebuffed by the state legislature for a temporary plan to keep the entity solvent, are preparing to seek a bankruptcy judge’s help in deferring statutory payments to racetracks and others to delay a planned April 11 shutdown of its operations.
NYCOTB, already in Chapter 9 bankruptcy reorganization protection, is planning to ask the federal judge overseeing its case to do what state officials would not do: delay certain revenue-sharing payments during April and possibly May to be able to keep enough cash to meet the payroll for its more than 1,300 employees, sources close to the matter said.
NYCOTB chairman Meyer “Sandy” Frucher declined comment on the bankruptcy court relief, but insisted NYCOTB is not bluffing in its April 11 closing unless it gets a way to raise or keep additional cash.
“It’s a ticking time bomb. Our drop-dead date is April 11,” Frucher said in a March 29 interview.
The legislature has left town until April 7 following a breakdown in state budget talks between the Assembly, Senate, and Gov. David Paterson. Included in those talks was how, or if, to provide some sort of temporary “bridge” relief to NYCOTB until a longer-term plan can be adopted, possibly before the legislature ends its 2010 session in June.
NYCOTB has floated a plan—rejected so far by the legislature—to change how it distributes money to tracks, breeding funds, and the state, as well as to shut down many of its 66 betting parlors and construct five, larger entertainment facilities in each of the city’s five boroughs. It also wants to place unstaffed betting kiosks in places like bars, and get state backing for $250 million in borrowing.
The Assembly has rejected several elements of the plan, including the kiosk proposal. Frucher said he has countered with other ideas to permit the corporation to bring in new revenue, such as offering virtual racing as permitted in Great Britain.
Frucher said NYCOTB has $6.5 million in the bank, with $8 million in planned expenses for April. He also said it would cost $12 million to shut down operations and pay for things like unemployment and accrued leave time for its workers.
Moreover, he said a new state law affecting state-owned entities, such as NYCOTB, adds new fiduciary responsibilities that mandate him and the board to, for instance, ensure he has enough money on hand to pay obligations such as accrued leave time.
Frucher dismissed talk by officials in the Assembly who said NYCOTB could take administrative actions to carry it through to avoid the April 11 shutdown.
“If there is an administrative bridge that we could use, I’m happy to do it. Just let me know what it is, because I don’t know of any,” he said.
Frucher said he has been surprised by the level of animosity encountered in the process. “You can’t have disagreements without people trying to demonize you,” he said.
Frucher said NYCOTB is not looking for a cash bailout from the state, especially at a time when the government is looking at a deficit topping $9 billion. But he said the problem won’t see structural improvements unless state government allows it to pursue new ways to raise revenue.
“I just came in as a fix-it man, a plumber,” said Frucher, who was tapped for the job by Paterson after the state took over the NYCOTB ownership in 2008 from the New York City government. “This organization has been in the hole for eight years. Who has been watching?”
Frucher dismissed criticisms that NYCOTB has not been lean enough, saying the organization has cut expenses the past several years and will cut more, including savings by reducing the parlors, management reductions, and some of the $300,000 it spends a year on vehicles—an expense he called “much ado about nothing.”
But he warned a shutdown will reveal a $700 million obligation that either New York State or New York City will be responsible for to cover 40 years’ worth of accrued pension and health-care obligations for its current and former workers.
“The breeders say, ‘Shut it down,’ ” Frucher said. “OK. Who’s going to pay that bill?”
He said officials need to agree on a plan to cover the full operating hole or some way to cover shutdown costs, or permit NYCOTB not to make statutory payments for the next couple of months while a restructuring plan is devised.
Frucher said April is a money-losing month for the operation, but it recovers in May with a big rise in handle from the Triple Crown. But June, he said, is a “very down month” for revenue.
Frucher declined to say whether he thought there was an effort, as some NYCOTB backers have claimed, by NYRA to take over operations. Assembly Democrats pushed a plan, rejected by Paterson, to permit NYRA to run the phone and Internet wagering business.
Instead, Frucher said, the entire industry in New York should consolidate a range of operations, including tote, Internet, phone, television, and marketing operations. More than the dollar savings, he said, it would also “avoid a lot of the conflict inherent right now.”