New York City OTB

New York City OTB

AP Photo

NY Assembly Approves Lower Purse Surcharge

State Senate approves measure to pick a new private company to run NYCOTB.

The state Senate in New York has approved a measure to pick a new private company to run the closed New York City Off-Track Betting Corp., while the Assembly has backed a bill lowering a surcharge imposed on purses that had been proposed by Gov. Andrew Cuomo.

The ideas are buried in the thousands of pages of bills approved March 15 as “one house” budgets--which essentially serve to highlight negotiating positions and sometimes priorities of the two houses as the sides enter serious budget discussions with Cuomo before the state’s fiscalNY Assembly  year begins on April 1.

The proposals would need the backing of both houses, and the governor, to become law, an exercise that will play out over the next two weeks at the state Capitol as lawmakers and Cuomo rush to try to get an on-time budget.

In the Senate, Republicans incorporated into their budget plan a NYCOTB bill that had been recently proposed in their house but not picked up in any meaningful way in the Assembly. Cuomo had not addressed the NYCOTB issue in his budget plan.

The Senate bill is unusual in that it would have the state tap a private operator --in a competitive bidding process-- to run the former NYCOTB operations. But it would still be overseen by a board of directors selected by the state government.

Bidders would have to show how the NYCOTB could be turned into a profitable corporation, which OTB officials have long said is impossible unless its business model for distributing revenues is drastically altered. The OTB shut down in December when the Senate failed to approve a Chapter 9 bankruptcy reorganization plan backed by former Gov. David Paterson and the Assembly. The closure has left track operators, such as the New York Racing Association, scrambling to lure NYCOTB bettors, whose wagering revenues with the shuttered OTB had been shared with New York tracks.

The Senate bill says bidders must give a “priority” to former NYCOTB workers for jobs at a re-opened business, though it does not require such hirings, and the state must create a large pot of funds to take care of certain pension and health care benefit obligations of the former workers. But the measure is silent on addressing the financial losses of NYOTB’s creditors from its bankruptcy case. NYRA, for instance, is owed some $25 million.

The Senate measure also cuts some payments other OTBs now have to make to harness tracks. And it creates a new fund to pay for such things as closing down or renovating parlor properties or funding joint ventures, a clause in the bill that is seen as potentially helping a new NYOCTB entity as well as the financially struggling Suffolk County OTB.

The NYCOTB entity would be eligible for a “vendor operator fee,” which pays out on a sliding schedule; if more than $10 million is “deposited” into the a NYCOTB fund, the operator would be paid 25% of those revenues.

Meanwhile, in the Assembly, a budget bill approved March 15 amends Cuomo’s plan to slap a 2.75% tax on purses at Thoroughbred and harness tracks. It was estimated the tax would have raised $16.1 million over the next two years for the state. The Assembly bill withholds 0.75% from purses, with an uncertain amount of proceeds going to fund the operations of the state racing board. The Assembly also imposes a surcharge – four hundred seven-five thousandths of one percent -- of the net income by video lottery terminals at racetracks to help make up for the lower purse tax.

Cuomo’s plan to permit more free play at VLT racinos-- worth about $38 million to the state in added revenue-sharing funds-- was also accepted by the Assembly.