State to Take Over NYCOTB

New York governor announced the state will take over operation of the NYCOTB.

The state of New York will take over the operations of the New York City Off-Track Betting Corp., Gov. David Paterson announced June 13, as part of a broader plan that could end up consolidating all of the state’s OTBs.

“The state will take over this operation," Paterson said after a series of marathon talks all week in Albany, the state capital.

The deal calls for the state to take over NYCOTB in the next 90 days with the creation of a new quasi-government board that will be controlled by Paterson appointees. It also calls for a 1% increase in the pari-mutuel takeout.

Hours after Paterson's announcement, though, New York City officials still had not publicly backed the deal. At issue is a 5% surcharge the city collects on bets--worth up to $19 million--it claims it should be able to keep getting even if it gives up NYCOTB. State law provides that half of a surcharge goes to the locality where the an OTB corporation is located, and half to the locality home to the racetrack where the bet is placed, if the track is located within New York state.

The sides were again feuding over the extent of the deal the evening of June 13. New York City Mayor Michael Bloomberg released a statement saying "substantial" legal and economic issues remain and that, unless resolved, NYCOTB would shut down June 15.

That elicited a response from the Paterson administration, which said the deal it thought was struck would save 1,500 NYCOTB jobs and keep open a vital betting link to the racing industry.

"It is distressing to hear of the city's objection to an agreement that will meet the mayor's long-stated demand for a permanent fix that would ensure that the city not have to subsidize New York City OTB," Paterson spokeswoman Risa Heller said.

Heller said host municipalities that run OTBs receive a surcharge for winning bets. "The city insists that it should keep the surcharge benefit even when they are no longer running OTB and the state has taken responsibility for all liabilities," she said. "It makes no sense for the state to take over responsibility for the operations of New York City OTB and the $201 million of outstanding liabilities on OTB's books, while allowing the city to continue to collect the roughly $18 million it currently receives from New York City OTB."

The snag means talks will likely continue over the weekend for a final agreement. Still, state officials were hearing June 13 that NYCOTB had still not rescinded the order yet to shut down the OTB operations June 15.

Bloomberg has said the city will shut down NYCOTB June 15. He originally pitched for a change in how NYCOTB shares revenue with other entities, including the New York Racing Association, the state, and the Thoroughbred breeding fund. NYRA would have lost $13 million under a proposed plan by Bloomberg.

State negotiators rejected that idea, saying they wanted to hold harmless any of the entities that now get NYCOTB revenue from wagers. The takeover plan emerged the week of June 9, and gained steam over the past two days when neither side could settle on a solution.

A NYCOTB source confirmed the shutdown order is still on for June 15, though not until the evening, which gives more time for the sides to settle the surcharge distribution issue.

It is unclear what the state’s control of NYCOTB will mean. In the short term, it would mean Paterson would have the authority to replace the NYCOTB board, and presumably most if not all of the 200 or so non-union employees. There has also been talk of having NYRA run the operation, giving it access to the NYCOTB telephone account wagering system.

Senate Majority Leader Joseph Bruno said two of the bidders vying to run the long-stalled Aqueduct video lottery terminal casino have also expressed interest in running NYCOTB if the state takes it over.

Paterson said the state will now embark on a study to “examine the entire racing and wagering industry" in New York that could include consolidating other OTB corporations scattered across the state. He said NYCOTB headquarters will move from 42nd Street in Manhattan to Aqueduct, and said the winner of the Aqueduct VLT bidding could play a role in NYCOTB operations in some sort of public/private partnership.

Paterson also used the deal to announce Sen. John Sabini, a Queens Democrat, as his choice to become the new chairman of the state Racing and Wagering Board, the chief regulatory body of the industry. The nomination requires Senate approval. Sabini said his priority will be making racing “a growth industry" for stakeholders as well as the state that relies on its revenue.

The new state-run OTB is likely to be called Empire State Off-Track Betting Corp. The current NYCOTB handles about $1.1 billion in bets each year out of a total of $2.6 billion bet in New York state.