NYCOTB Bailout Deal Goes Up in Smoke

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An effort to bail out New York City Off-Track Betting Corp. collapsed April 14, leaving uncertainty over whether the betting giant will have to close its doors the weekend of April 17 or, as it did a week ago, suddenly find enough money to remain open until a final agreement is reached by state government.

A bill floated by Gov. David Paterson after days of top-level negotiations with the Legislature included a range of cuts in commissions and other revenue from the OTB corporations to racetracks. It landed with the loudest thud among Senate Democrats, who control the 62-member House.

Lawmakers said the plan didn’t have enough support to make it out of the Senate finance committee process.

“It has collapsed,” a senior Assembly Democrat said of the measure.

The maneuverings brought to the state Capitol a who’s who of industry interests, including the head of the New York Racing Association, which backed the measure because of $17 million in loans it would receive, to leaders of a union representing more than 1,000 NYCOTB workers which suddenly urged lawmakers to reject the latest set of proposals. Teams of lobbyists representing tracks, other OTB corporations, and horsemen’s groups also worked the hallways.

Lawmakers will not return to Albany until April 19, a day after officials have threatened to shut down money-hemorrhaging NYCOTB. A week ago, the operation was slated to shut down, but its board said it was encouraged by the negotiations in Albany and voted to keep it open until April 18.

“We think that this is the best we can come up with in a difficult situation,” Paterson said of his legislation, which was opposed by tracks, except NYRA, and an assortment of industry players.

Assembly Racing Committee Chairman Gary Pretlow said he expects NYCOTB to shut down April 18. “Monday is the slowest betting day, so maybe they do something to show they can do it,” Pretlow said. “But we’ll be back (April 19).”

Pretlow said he was surprised at the level of opposition by the racing industry. NYCOTB handle about $1 billion each year.

“(The industry) opposed saving OTB, which I don’t know why, since they are their lifeblood,” Pretlow said. “I think eventually, they will see the handwriting.”

NYRA was in line to get $17 million to help with its cash-flow problems—it has talked of running out of money this summer—an an advance from a larger, $250 million borrowing tied to future casino construction at Aqueduct.

Other tracks, though, opposed the bill, saying they couldn’t afford to lose the revenue to keep NYCOTB propped up for another year while a longer-term solution to the problems facing NYCOTB, as well as the other OTB corporations in the state, are considered.

Another blow came when District Council 37, which represents more than 1,000 NYCOTB workers, opposed the measure at the last minute. A source said the union had been made a number of promises by NYCOTB, including about $20 million or so in payments for back raises, an early retirement plan, and severance payments, including for per diem workers.

The union, in turn, was agreeing to job cuts of more than 500 positions. But legislators balked at several provisions, including using money for the union workers from a $250 million borrowing proposed by NYCOTB.

The possible ramifications were many: NYCOTB could find a way to stay open until a new deal is worked out after lawmakers return the week of April 19, or it could close, perhaps temporarily, either putting pressure on Paterson and lawmakers to strike a deal or consider other options.

Some lawmakers were privately pushing a shutdown scenario as a way to re-tool NYCOTB and force through certain cost savings they say management and the union have refused to back. There has also been a proposal to let NYRA take over its Internet and phone wagering platforms.

Another possibility is that Paterson and legislative leaders announce a “tentative” deal in the coming hours or days, giving some breathing room to negotiate final details before lawmakers return.

"Obviously, we’re extremely disappointed,’’ NYRA president Charles Hayward said. He said the measure would have provided "critical" cash for NYRA that would have kept its cash flow positive until the first quarter of 2011, during which time NYRA officials are hopeful a casino deal for Aqueduct will be in place to start providing other revenues for its operations and purses.

While the bill would have cut OTB payments to NYRA by 15% – worth about $4 million over the year – NYRA was in line for the $17 million from a borrowing program.

With a state deficit of about $9.2 billion, NYRA officials know they cannot turn to Albany for a direct cash bailout as they have in the past. The borrowing option was seen by lawmakers as a more politically sellable way to keep NYRA afloat until an Aqueduct casino deal can be reached.

"It’s a huge disappointment," he said of the scuttled deal, though he added the sides appear to be committed to working on an alternative plan in the coming days.

Hayward said the measure that died in Albany would have pushed through some needed, money-saving changes at NYCOTB. "This would have saved jobs, reduced or continued payments to the industry, provided clarity for racing and NYRA and provided the first step towards improving the New York City OTB’s business model, which then could be transferred to some of the other OTBs," Hayward said.

NYCOTB officials declined immediate comment.

In a statement, Paterson called his plan "an interim solution’’ to keep NYCOTB open. He noted the board of the NYCOTB, which is a state government entity, voted a week ago to shut down by the end of business on April 18 if no deal is reached.

"Given that stakeholder disagreement prevented this legislative action, I expect the board will carry out its planned shutdown as reflected in its resolution," Paterson said. He added he is "deeply saddened’’ no deal could be reached, but that he would work with the sides "to keep racing viable in New York state.’’