New York OTB Could End in June

The New York City Off-Track Betting Corp. could cease operations June 16.

The New York City Off-Track Betting Corp. will cease operations June 16 unless state officials provide regulatory relief before then, according to a Jan. 16 report to the corporation's board of directors.

The in-house management plan envisions laying off 1,508 workers — all but 131 are unionized — and closing 62 branches, three teletheaters, and eight restaurant betting outlets. NYCOTB has an annual payroll of $64 million.

“We run cash negative in June and it’s as serious as a heart attack,” NYCOTB president Ray Casey said in response to speculation that the betting entity is bluffing to try to move state officials to act.

New York City Mayor Michael Bloomberg last fall said the city would no longer continue to fund the operations of NYCOTB. He cited a failure by the state to fix what officials call inequities that force the corporation to lose money.

Without state legislation correcting the revenue distribution scheme under which NYCOTB must make mandatory distributions based on its gross handle, and/or a wholesale restructuring and alignment of the various racing interests in the state, the corporation would have to continue to pay out more money than it retains after payment of its operating expenses — a burden that cannot be sustained, according to the 42-page “Management’s Draft Plan for Closure of NYCOTB.”

The threat to close down in five months comes as state officials have yet to resolve the future of the franchise to operate Aqueduct, Belmont Park, and Saratoga. A temporary deal has kept the New York Racing Association running the tracks until Jan. 23. One scenario has NYRA getting another franchise, but the sides have not held substantive discussions in more than a week.

Officials with some of the state's OTB corporations, including NYCOTB, say the talks in the state capital over the Thoroughbred franchise should also include resolution of long-standing competition problems between the tracks and OTB outlets.

Casey said that for years the state “has been either unwilling or unable to resolve the structural flaws in OTB’s distribution formula.” He said NYCOTB provides more than $125 million a year to the government and racing industry in revenue.

“Sadly, this inaction will have a significant and negative impact on the roughly 1,500 hardworking OTB employees and their families as I am left with no other choice than to prepare for the immediate wind down of OTB operations,” Casey said. “Although my first priority must be to my employees, I am also painfully aware of the impact that the loss of over a hundred million dollars a year in revenue will have on breeders and horsemen around the state.”

With NYCOTB unable to get legislator's attention on several issues, some at the Capitol have theorized the Bloomberg administration is mounting the shutdown plan as a public relations move to get the state to bend its way.

“The fact is nobody knows for certain what the mayor’s intent is here,” said Bennett Liebman, who runs the racing think tank at Albany Law School. “The most likely scenario is they are trying to put significant pressure on state government, both the administration and legislature, to provide some relief to NYCOTB.”

Among the many issues, NYCOTB does not want to help fund the operations of the New York State Racing and Wagering Board or provide additional fees to harness tracks that now have extra income from video lottery terminal casinos.

Liebman said closing NYCOTB would seem a premature step. “If the OTB is unprofitable, then get rid of those parts that are unprofitable,” he said. “You have to assume account wagering functions work, so keep account wagering and the best branches. If it’s a lack of profit, then it would make more sense to trim OTB rather than simply discard it.”

The industry observer said the state franchise talks should go beyond just determining who will run the three tracks. “As long as they’re resolving the franchise issue, they should be looking at the OTB issues as well,” Liebman said.