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NYCOTB Prospects Grow Dimmer

Point of no return nears for the New York company.

New York City Off-Track Betting Corp. is just days away from “a point of no return," as officials watch bettors withdraw their final advance deposit wagering funds and the corporation prepares to make a last revenue-sharing payoff to racetracks.

Lawyers Dec. 15 plan to inform a federal bankruptcy judge overseeing NYCOTB’s Chapter 9 case that they are formally withdrawing the reorganization petition—which failed to get approval in the New York state Senate.

Greg Rayburn, the NYCOTB president, said Dec. 14 that half of the entity's ADW account-holders have withdrawn their funds, taking its balance down from about $1.5 million a week ago to $700,000. By Dec. 20, any remaining ADW account money will be mailed to patrons who haven’t claimed their balance funds. In addition, $14 million NYCOTB has been holding in “indirect commission" payments to racetracks will be released.

“From that point, whatever the Senate does from there is irrelevant. We’ll be way past the point of return at that point," Rayburn told The Blood-Horse.
The comments by Rayburn came as a group of industry stakeholders -- including OTB corporation chiefs and representatives from the New York Racing Association and other tracks -- met privately with state Racing and Wagering Board chairman John Sabini. Sources said the sides are close to agreeing on a deal to permit video streaming over the Internet -- a step that needs approval from the various sides in order to take effect. Long sought by NYRA and OTB operatos, the measure is seen as a way to lure NYCOTB patrons, and others, to racetrack and ADW outlets.
Racing board spokesman Joe Mahoney declined to comment on the session, other than to say the sides were making some progress.
The meeting also sought, sources said, to determine how to try to keep money flowing from the largest source of NYCOTB's handle -- the OTB parlor gamblers. But officials reported no deal other than to keep negotiating.
NYRA, meanwhile, is pushing to get NYCOTB's cable television channel back on the air, though harness industry officials are said to be concerned that it could be a Thoroughbred-only channel.
The Assembly racing committee, meanwhile, is set to hold a public hearing Dec. 15 to hear from various industry officials about post-NYCOTB options.
Some industry officials, though, say that point has already been reached because the corporation's value to its bankruptcy creditors has been so diminished that the original terms of any deal to get it out from Chapter 9 protection have been fatally changed.
Rayburn's comments came as a Senate Republican floated an idea to have the state unilaterally reopen 30 of 50 betting parlors, with the operations run by other OTB corporations in the state and NYRA.
However, the plan by Sen. Martin Golden was quickly shot down by Senate Democrats, who control the Senate for another few weeks before the GOP likely assumes back the chamber’s majority, as well as Rayburn.
Rayburn said the Golden plan includes a “number of misunderstandings of facts.”
Chief among them is that the proposal does nothing to satisfy the creditors in bankruptcy court. The creditors previously approved a reorganization effort—which called for layoffs of NYCOTB workers, cuts in statutory payments to tracks, and a new track-led company to assume its ADW operations. But the measure was rejected by Senate Republicans who said it did nothing to address financial problems facing other OTB corporations in the state.
“Just reopening the parlors doesn’t satisfy the creditors,” Rayburn said. “The other thing he’s ignoring is we’re out of cash. We can’t do anything without money.”
Rayburn said the plans now are to go back to the bankruptcy judge in a few weeks and ask to have the case dismissed, thereby avoiding the need for a formal liquidation of NYCOTB. Rayburn earlier warned that once NYCOTB shut down its ADW operations the entity would be all but worthless after bettors fled to other bookmakers. That threat appears to be coming true with each day the ADW account is drawn down.
The new plan by Golden was portrayed as a stop-gap measure to get NYCOTB employees, nearly 1,000 of whom were laid off the week of Dec. 6, back on the job while the state negotiates a long-term solution to NYCOTB and racetrack dispute that has plagued the industry for decades in the state.
“This is a realistic and fiscally sound plan to immediately reopen the betting parlors and put people back to work tomorrow. The governor should immediately bring all the parties together to finalize this short-term solution to keep NYCOTB running as we develop long-term improvements to ensure the viability of the racing industry in New York State,’’ Golden said.
But Democrats dismissed the idea as political cover by Republicans who last week rejected a NYCOTB reorganization measure, pushing the shutdown its operations.
“The bill they voted down was a carefully negotiated package agreed to by all of the relevant parties—OTB, NYRA, the bankruptcy creditors, and the actual workers,’’ said Austin Shafran, a spokesman for the Senate Democrats. He called the Golden idea a “fictional, non-existent process."
There is also a procedural problem with any reorganization bill. Though clear the measure was about to fail, Senate Democrats in control of the chamber let the full vote occur. It lost by three votes. Three days later, the bill, by Senate rules, became formally dead because there was no motion made to reconsider it.
That means, sources said, that unless both sides unanimously agreed in the Senate to reconsider the same bill, it would require the calling of a special session by the governor to get the bill back on the floor. That, too, would require the Assembly to return to take back up a bill it already approved; Assembly officials have said they have no intention of coming back to Albany before January.
But there is another more significant issue, sources said. Even if the Senate were to come back and pass the first NYCOTB reorganization bill, it would require the approval again of the bankruptcy petition’s creditors committee, which includes a range of industry stakeholders, including NYRA, other New York tracks, and Churchill Downs Inc.
That approval by the creditors committee is no longer certain, though, because the value of the NYCOTB has dropped in the past week since the shutdown. The ADW operation, for example, handled about $140 million in bets the past year out of the total handle by NYCOTB of $750 million. NYCOTB handled about 40% of all pari-mutuel wagers in the state before its closure.
Another question remaining is how the state, given its own fiscal problems, can afford to pay some $500 million in health and pension benefits for former NYCOTB workers. The state took over ownership of the OTB two years ago, when the New York City government threatened to shut down an operation officials insisted was unworkable because of statutory revenue-sharing payment requirements by the state.