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Blood Horse: NYCOTB Shuts Down After Senate Rejects Plan
by Tom Precious
The state Senate in New York Dec. 7 rejected a reorganization plan for the New York City Off-Track Betting Corp.—and the OTB proceeded with its shutdown plan on Wednesday, Dec. 8. As part of the shutdown, three parlors will remain open for six days for bettors to cash tickets or withdraw money from their ADW accounts.
A spokeswoman for New York Gov. Davd Paterson said the OTB will not re-open Wednesday morning for business.
Other OTBs wasted no time trying to grab NYCOTB business. “Attention all horse players,’’ blared a headline on the Nassau County OTB web site. “Our branches are open and thriving and account wagering is available via internet or telephone.’’
“Suffolk is open for business!’’ says the bold-faced headline across the home page of the Suffolk County OTB web site.
The measure failed by three votes after intense maneuvering throughout the day and a blistering lobbying effort by tracks and other off track betting companies.
The OTB needed the authorization bill from the Legislature in order to return to federal bankruptcy court with a plan to emerge from its Chapter 9 bankruptcy protection.
“This is really the death knell of racing in this state,’’ said Sen. Jeff Klein, a Bronx Democrat.
“A no vote on this bill … will blow up our racing industry,’’ said Sen. Eric Adams, a Brooklyn Democrat
But Republican senators blasted the reorganization plan for benefiting only the New York City-based OTB, and ignoring the fiscal plight of OTBs in other parts of the state.
“This is about politics and it’s not being done on the merits,’’ said Sen. John Flanagan, a Long Island Republican.
Senator Martin Golden, a Brooklyn Republican, said the bill was overly generous to the New York Racing Association, which is in line to get a major share of the NYCOTB’s ADW operations. He said the state should move to a public/private partnership model for the OTBs. “It’s time for the city and state of New York to start making money with the OTBs across this great state and stop losing money,’’ he said.
OTB Chairman Larry Schwartz had threatened to close the parlors and ADW operations without the Senate approval of the bill. The Assembly last week okayed the reorganization plan, which includes layoffs of hundreds of OTB workers, a cut in statutory payments by the OTB to the racing industry, spinoff of its ADW operations into a new, racetrack-owned corporation, and expansion of “free play’’ marketing at racinos.
Republicans said the OTB did not need to shut down, and that the Paterson administration used the threat merely to try to ram through the controversial bill. A whole range of possibilities emerge as a result of the OTB closing – from new efforts to reorganize how OTB wagering is conducted in New York to the NYCOTB having its more lucrative parts picked over by gambling interests.
“I think this puts the racing industry in turmoil,” said Larry Schwartz, the chairman of NYCOTB and chief of staff to Gov. David Paterson.
Schwartz said the OTB shutdown will cost nearly 1,000 jobs and means deep trouble for a racing industry that relies heavily on NYCOTB.
“I don’t want anyone to think that we’re bluffing or that this is an act. This is real. The corporation has no money,” he said.
The NYCOTB OTB handles about $750 million a year in bets–nearly 40% of the state’s pari-mutuel handle. Of the total, about $140 million is bet through its ADW operations. Schwartz said the NYCOTB also provides about 40% of the revenues of the New York Thoroughbred breeding fund.
The NYCOTB last December filed for Chapter 9 bankruptcy protection. The reorganization plan rejected by the Senate was approved earlier this fall by its lead creditors, including the New York Racing Association and other tracks.
Greg Rayburn, the NYCOTB president, said the plan will be to go back to bankruptcy court and inform the judge that its reorganization effort failed the Senate and the corporation will have to liquidate.
“Bookmakers– they’re thrilled. They’ve been monitoring it as closely as our employees…that’s where the money will go,” Rayburn said of entities seeking to capture the OTB’s ADW and parlor business. Rayburn said the OTB’s ADW business will have little cash value once the corporation closes.
Backers of the bill said the NYCOTB shutdown will be felt by tracks in New York and elsewhere that make money from bets made at the OTB’s 50 parlors and internet and phone betting operation. Rayburn said Thoroughbred breeders will feel the financial pain from losing money that is now, by law, shared by the OTB with the development fund that encourages New York-breds.
“The impact of that is going to be devastating. That’s a lot of farms that will have to go out of business,” Rayburn said, predicting smaller fields in races and lower handle as a result.
“The impact is going to be very widespread,” he said.
But Senate Republicans insist the NYCOTB does not have to close. The legislation died when not enough Democrats showed up for the special session and all but two Republicans voted against it. Republicans wanted a broader plan to help other OTBs in the state. Democrats said no other OTB is operating under bankruptcy protection, that NYCOTB needed the immediate attention, and that Senate Republicans were trying to steer more money to other OTBs without those groups giving up the same kinds of concessions as NYCOTB.
“I don’t think it has to be do or die,” said Senate Republican leader Dean Skelos. He said Republicans balked at the NYCOTB bill because they wanted “to treat all regions of the state fairly.” He said other OTBs have made financial cutbacks in recent years and should be a part of any effort to help them operate.
State Racing and Wagering Board chairman John Sabini said his agency was preparing to accept the shutdown plan by NYCOTB. He predicted the NYCOTB could see its assets divided up or could even be put out for another franchise bid to take over its operations.
Sabini said he is hopeful NYCOTB’s patrons go to other New York-regulated ADW operators and not to off-shore or other competitors. He blamed other OTBs for killing the reorganization plan.
“This defeat’s going to have a lot of parents–some of them proud parents,” Sabini said.
Sabini said his auditors have looked at NYCOTB books and determined the corporation cannot continue operating. “They are out of money,” he said.
In a written statement issued later in the evening, Sabini called for an emergency racing board meeting Dec. 8 “to consider emergency measures to allow our stakeholders to better adapt to the market realities in a post-NYCOTB environment.”
Democratic senators, who are facing going into the minority in January after the fall elections, painted a doomsday scenario. “You saw today the demise of racing throughout the state of New York,” said Sen. Eric Adams, a Brooklyn Democrat and chairman of the Senate racing committee.
“No one is going to breed in New York. They’re going to breed elsewhere,” he said. The bill’s defeat will be felt by everyone from the NYRA and other tracks to farms to restaurants.
Officials say NYCOTB’s patrons who bet through its parlors are not going to travel to other nearby OTBs on Long Island or Aqueduct to make their bets. And the betting giant’s phone and internet customers will find plenty of other options once NYCOTB shuts down, they fear.
“There’s a price we’re going to have to pay for losing that big chunk of OTB,” Adams said.
Threats of NYCOTB shutting down are nothing new. The city of New York, when it owned the OTB, two years ago said it was closing the corporation. The state then stepped in and took it over. A year ago, NYCOTB was on the verge of another closure, when officials suddenly changed their minds. The OTB was slated to close last week, but Schwartz and the board gave the Senate one last attempt to pass the bill already approved in the Assembly last week.
“Tens of thousands of jobs now have been put at risk throughout the state,” Schwartz said. “We can see harness tracks closing in this state. We can see horse farms going out of business. We can see breeders moving to other states that are more horse-friendly.”
Schwartz dismissed GOP senators who say the OTB can still survive into January when a new governor–Andrew Cuomo–takes office and new efforts on a broader racing industry plan can be developed. “It wasn’t a threat. It wasn’t a tactic of intimidation,” Schwartz said of the OTB board’s closure plan. “New York City OTB doesn’t have any money,” he added.
Schwartz predicted thousands of jobs in the industry could be lost.
Assembly officials say they already acted on the OTB plan and have no intention of returning to Albany until a new legislative session begins in January. But Senate Republicans insist that any deal made Dec. 7 changing that Assembly bill from last week would have prodded the Assembly to return sooner. “We’re not looking to extort or extract anything. We’re just looking for fairness,” Skelos, the Senate GOP leader, said of the demands for terms to also benefit other OTBs.
“Merry Christmas everybody, and I hope you have a good night’s sleep,’’ Sen. George Onorato, a Queens Democrat, told lawmakers voting against the OTB reorganization.
The OTB owes its creditors–including tracks from NYRA to Churchill Downs–nearly $100 million. The state says it could also owe more than $500 million in pension and health care expenses for current and retired NYCOTB workers.
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