Facing Deadline, New York Seeks NYCOTB Fix

Sources say solutions include having NYRA take over phone and internet wagering.

A plan quietly floated to let the New York Racing Association take over management of the internet and phone wagering business at the struggling New York City Off-Track Betting Corp. has been rejected by Gov. David Paterson.

Sources at the Capitol say talks are ongoing but the sides are still far apart, with NYCOTB threatening to send out 14-day layoff notices the afternoon of March 26 to its 1,300 employees.

A source close to the negotiations characterized a plan to let NYRA run NYCOTB’s internet and phone wagering business as "a poison pill to put NYCOTB out of business’’ by eliminating a successful stream of revenue for the OTB to give it to NYRA.

A separate source said the Assembly plan called for expanding the authority of a state board that now oversees NYRA’s finances to include NYCOTB. The oversight board would then enter into a deal with NYRA to manage NYCOTB’s phone and internet wagering business. Depending on how that deal was structured, it could produce enough money to erase much of NYRA’s cash flow problems that has raised questions about its viability to continue racing later this year.

NYCOTB was owned by the New York City government, which unloaded the money-losing operating in 2008 to the state after Mayor Michael Bloomberg threatened to shut down the nation’s biggest off-track betting corporation. Its operations continue to bleed money under state control.

NYCOTB has said it will shut down April 11. With state lawmakers due to go on an 11-day break March 26 for the Christian and Jewish holidays, a last-minute rush was on at the Capitol to try to broker a deal.

Most likely, sources say, is a bridge or extender arrangement, which would provide some sort of cash to NYCOTB to keep it running for the next month or two while talks continue. But even that plan has its problems: NYCOTB has pushed a proposal to let it delay statutory revenue sharing payments to NYRA and other tracks, as well as to the state government, while the sides negotiate a long-term solution.

The Assembly, according to one of the sources close to the talks, has opposed the cut in revenue payments to NYRA, which is already owed $15 million by the NYCOTB in past distributions.

Lawmakers have been blasting NYCOTB this week for not bending on its original plan: closure of many parlors, construction of five mega-entertainment centers in each of the boroughs, placement of non-staffed betting kiosks in places like bars, $250 million in borrowing, and a change in distribution formula that would send less money to tracks and purses.

NYCOTB is under federal Chapter 9 reorganization protection. A judge recently dismissed a bid by NYRA to get the bankruptcy case dismissed.

A government source said the Assembly was also pushing a $24 million severance package for 700 NYCOTB employees who would lose their jobs under one OTB plan. Paterson officials have told the Assembly the state, facing a $9.2 billion deficit and having to make unpopular spending cuts, is not in the position to provide a cash bailout to a gambling enterprise.

"We simply do not have the money to subsidize these kinds of operations under the current economic climate,’’ the source said.

The clock is ticking, and negotiators say a flurry of talks are expected later March 26 to try again to reach agreement. The NYCOTB matter comes as top government officials are also trying to negotiate a $136 billion state budget deal – which is proving as elusive as the OTB matter.