State officials threatened to close the New York City Off-Track Betting Corp. as early as next month, creating "chaos" and costing the racing industry thousands of jobs.
The threat came 24 hours before the state legislature was set to return to Albany for a special session Nov. 29 that includes a bailout bill for NYCOTB, which is in Chapter 9 bankruptcy. The measure is facing an uphill climb in the legislature, which is getting pushback from a number of other state OTB corporations, racino operators, horsemen, and other racing interests.
Some state lawmakers have privately said they have no interest in taking up the major changes to NYCOTB just a month before Gov. David Paterson leaves office and Andrew Cuomo becomes governor. They have also heard NYCOTB shutdown threats at least three times in the past five years.
But Paterson administration officials say the bailout measure cannot wait until January. "It’s just a financial and legal fact of life that if we don’t get this kind of relief, the corporation is going to have no other choice but to shut down," said Larry Schwartz, the NYCOTB chairman who also serves as Paterson’s chief of staff.
The reorganization plan, according to legislation drafted by the Paterson administration, would also permit expansion of an existing free-play program to try to lure more bettors to racinos, permitting from 7.5 percent to 10 percent – depending on the track – of annual total wagers to be free-play wagers.
The measure would add non-voting members to the NYCOTB board of directors upon the recommendation of NYRA, the largest union representing NYCOTB employees and jointly by Monticello and Yonkers racetrack owners.
The measure would also give NYRA and Yonkers “a right of first refusal to enter into a joint venture for the purposes of financing, constructing and operating a simulcast facility or simulcast theatre that is within 30 miles of Yonkers Raceway, or Aqueduct or Belmont racetracks.”
“In the case of a joint venture in which the tracks opt not to participate, those proposed facilities beyond ten miles from the tracks, or anywhere in Manhattan, would automatically have any consent required of the tracks,’’ the draft legislation states.
The draft bill permits NYCOTB to negotiate, on behalf of all New York tracks, out-of-state simulcast deals.
Significantly, the bill permits the New York Racing Network – the consortium of New York tracks taking over the ADW operation – to take over control of NYCOTB if the OTB defaults by failing to meet commission payment schedules or failing to have a balanced budget.
Greg Rayburn, president of NYCOTB, said Nov. 28 that a closure of the betting giant would shut off $750 million in handle and trigger a slew of liabilities for the state, including $500 million in pension costs and about $100 million in Chapter 9 bankruptcy claims by its creditors, including the New York City Racing Association.
Closure notices will start going out Nov. 30 to the nearly 1,000 OTB employees, Schwartz said, if the legislature does not approve the bailout plan during the Nov. 29 special session.
The reorganization plan includes hits to a number of longtime statutory payments to tracks and off-track betting corporations, such as “maintenance of effort" and "dark day" allotments, as well as union concessions concerning OTB workers, including layoffs and an end to double-time payments for working on Sundays.
It also includes the takeover of NYCOTB’s ADW operation into a new corporation controlled by its racetrack creditors, including NYRA and Churchill Downs.
Assembly Racing and Wagering Committee chairman Gary Pretlow said the latest threat to close OTB is likely more real than past claims--including only a year ago by the former NYCOTB chairman. He said he has a number of concerns about the bill and what he called its "extraneous items," such as reducing the number of race dates at Monticello racetrack. He also said he is concerned about Churchill -- “they don’t have an interest in New York racing" -- getting a part of NYCOTB’s ADW operations.
“What happened is because Rayburn wanted unanimity on everything (from the creditors committee), people stuck their noses in to benefit themselves at the expense of other entities," said Pretlow, who believes some of the concerns can be addressed by amending the Paterson-proposed bill.
Administration officials, however, disputed Pretlow's claim, and said Churchill -- or any other out-of-state tracks -- would not have any role in NYCOTB's ADW operation under the reorganization plan proposed by the state.
Asked if the bailout bill will pass, Pretlow said the big question will come in the Senate, where there is talk of a few Democratic lawmakers not turning up Nov. 29. As for the Assembly, Pretlow said, "I don’t want to see OTB shut down. The easiest thing would be to walk away from it and let OTB fold up. The 500 jobs would get lost, but it would be taken over by somebody else. That’s not what I want to do. We can legislatively fix some of the problems we have."
Sen. Eric Adams, chairman of the Senate racing committee, was not immediately available for comment.
Rayburn said the deal being presented lawmakers is one agreed to by the unions at NYCOTB and the majority of the creditors committee. The state a year ago sought Chapter 9 bankruptcy reorganization protection. The state several years ago took over ownership of OTB from the City of New York, which had also threatened to shut down the money-losing operation. OTB’s handle is now about $750 million, down from its high several years back of about $1 billion.
Rayburn said OTB will run out of cash in December without approval of the reorganization plan. The state Racing and Wagering Board, in a Nov. 24 letter to the OTB, agreed with the December cash crunch timetable. OTB needs the backing of the Legislature in order to present a final plan to the bankruptcy judge in order to emerge from Chapter 9. If the bill passes, Rayburn and Schwartz predicted a financially healthier racing industry in New York.
“We believe the corporation will be viable for the long term and that the state will benefit for years to come from additional revenue growth," Schwartz said.
But without the bill’s approval, the industry faces a "devastating fallout," Rayburn said, that will result in job losses at everything from tracks to breeding operations.
Schwartz said a state of chaos will hit if NYCOTB bill fails. The impact will be felt, he said, on state revenues and aid for public schools, NYCOTB retirees, and the racing industry.
“This is not a threat. This is reality," Schwartz said of the closing of OTB if the legislature fails to act.
Schwartz said all stakeholders take a "haircut" in the NYCOTB reorganization plan. But, he said, "The consequences and the impact for the State of New York are going to be 100 times greater than it would be if this plan passes."
