Tentative ADW Deal Reached in New York

The agreement was announced by Gov. Paterson Oct. 20.

A tentative deal has been reached to let the New York Racing Association and other tracks take over the advanced deposit wagering system now run by the giant New York City Off-Track Betting Corp.

The agreement announced by Gov. David Paterson Oct. 20, part of a deal to resolve NYCOTB’s bankruptcy case, includes keeping open the nation’s largest off-track betting entity, though on a scaled-down basis. A top lawmaker, however, said the final terms have not yet been agreed to, and much work remains before a final agreement can be announced to take to the federal bankruptcy judge overseeing the NYCOTB case.

The deal calls for NYCOTB creditors – including NYRA, Empire Resorts/Monticello Raceway, Finger Lakes Racing Association, Churchill Downs – to forgive $65 million in return for taking over its advanced deposit wagering operations. A new corporation would be created to run the system for the creditors.

"This agreement is a tremendous achievement and will help to reassure communities in New York that rely on the horse racing industry," Paterson said in a statement.

But before the ink was dry on a press release, which lacked a number of details of the agreement, officials in the state Assembly were already putting the breaks on it.

“It’s definitely not a ‘done done’ deal,’’ said Assembly Racing Committee chairman Gary Pretlow.

Much of the tentative agreement, such as permitting racetrack-based casinos to offer more “free play’’ opportunities to entice bettors, require legislative approval. “I’m not in a mood to give away any of the state’s money,’’ Pretlow said of the “free play’’ plan.

Pretlow said elimination of certain statutory payments by the NYCOTB, which is a state entity, will also face problems because other OTB’s are still being required to make those payments.

“There’s a lot of things we may or may not do,’’ Pretlow said, noting that NYCOTB chief executive Greg Rayburn has told him that all the elements must happen or the agreement will fall apart.

“I don’t think he’s going to get everything he wants,’’ he said of Rayburn.

Senator Eric Adams, chairman of the Senate Racing Committee, in a statement said he is “pleased that this agreement was reached to prevent the closure of OTB. It will support and stimulate future financial health for the racing industry.’’

Pretlow said he was asked by the Paterson administration to sign onto the press release announcing the agreement, but he refused because of what he said are still problems with the terms.

Rayburn said the deal involves “shared pain’’ across the industry. “We believe that the concessions made by all parties involved are in the best interests of the state and the racing industry,’’ Rayburn said.

The administration said the tentative agreement calls for resolving $95 million in pre- and post-bankruptcy petition debt. NYRA has said it is owed about $25 million by NYCOTB in lapsed payments.

Beyond transfer of NYCOTB's ADW operations to the creditors committee, the tentative deal calls for the off-track corporation to sever all its phone and internet betting facilities and to only offer physical betting in parlors and restaurants, a source close to the negotiations told The Blood-Horse.

The plan includes laying off 488 NYCOTB workers, 405 coming from the ranks of union members. About half the layoffs come from the transfer of the ADW operations, with a large share of the rest from the closure of 10 betting branches – leaving 48 branches open.

The OTB will also strike a deal with private partners to build a new “upscale’’ betting branch that sources describe as similar to one in Woodbridge, New Jersey. It will also start a program to better promote New York-based races.

The plan calls for severance payments to workers and a deal by the unions to end double-time payments for employees who work on Sundays.

Officials say the OTB will also have a larger board of directors, and will include representatives from the thoroughbred and harness industries, though they will not have a formal vote.

The legislation needed to implement the plan and bring NYCOTB out of bankruptcy protection would eliminate “maintenance of effort’’ and “dark day’’ payments now made by NYCOTB to tracks and lower payments to tracks on commissions on bets made on out-of-state races. A source said legislation would call for cuts in pari-mutuel taxes paid to Albany and lifting of certain restrictions that VLT operators say now discourages investments in facilities.

The “free play’’ provision would let promotional credits be given to bettors at Monticello Raceway, Tioga Downs, and Vernon Downs. Those facilities could issue promotional credits amounting to up to 10% of the total amount wagered on their VLTs. That is up from a 7.5% program now in a pilot program at Monticello and Tioga Downs.

Sources say the OTB could be forced to shut down if the Chapter 9 reorganization plan fails. They say the process could take three months to go through the various procedural steps in court.

The Legislature must okay the plan, and a source called the new deal and legislation to implement it "essentially inextricably linked."

The ADW company, NewCo, is also one of the first steps that must be completed to bring NYCOTB out of bankruptcy protection.

Sources say if the plan fails, 1,100 workers will lose their jobs, bettors will flee to other outlets, including out-of-state, and the state and New York City, the former owner of the OTB, will be left to fight over who is liable for $600 million in pension and health benefits of workers and retirees.

Closure of the OTB, which handles nearly $1 billion in bets, or nearly 40% of the amount wagered in the state, “could catalyze the complete collapse’’ of the racing industry in New York, a source close to the talks said.

NYRA officials offered no comment.

But Joe Faraldo, president of the Standardbred Owners Association of New York, called the latest plan "another government-sponsored and funded bailout of a broken system.''

Faraldo, in a statement, said the plan is geared to benefit "a few wealthy racino operators.'' He said cutting payments to horsemen and one plan to reduce the number of race dates at harness tracks will have an "immediate and negative'' impact on the industry.

"We cannot and should not forget that NYCOTB was originally formed to benefit both the New York racing industry and the state, yet it continues to actually hurt both racing and the state in general.  Simply bailing them out once again -- and in the middle of a fiscal crisis -- without enacting structural reforms to finally assist racing makes no sense, and buying the support of the cash-rich racinos – to the long term detriment of the racing and agriculture industries – tips this new bailout plan from plain old bad to potentially scandalous,'' Faraldo said.