By Steven Crist
The worst part of the New York takeout fiasco revealed last
week is not the failure of so many agencies to catch an honest mistake, but
that a short-term remedy to the situation may pre-empt a more serious and
overdue discussion about takeout reduction.
A routine audit of
the state breeding fund in early December turned up the colossal “oops” – that
the New York Racing Association had been erroneously paying out 74 percent
rather than 75 percent of its “super-exotic” (three or more horses) betting
pools for the last 15 months. Every single racing and regulatory body in the
state, not to mention those in the dozens of other states and foreign countries
that bet into these NYRA pools, flat out forgot that the takeout rate on these
bets was supposed to revert from 26 to 25 percent in September 2010. That was
when a one-point takeout increase, hurriedly added to the 2008 NYRA
franchise-renewal legislation as a sop to the state’s offtrack betting
corporations, was supposed to expire.
You would think
someone – anyone – would have had the expiration date circled on his calendar,
but no one did. NYRA can be blamed for the oversight but no more so than the
state Racing and Wagering Board, the Franchise Oversight Board, the state
Department of Taxation and Finance, and anyone else charged with enforcing the
racing laws of the state, or at least figuring out the current status of those
laws. Takeout increases don’t usually have sunset provisions; this one did, but
everyone forgot about it until the breeding-fund auditors stumbled on it.
At that point. FOB
and SRWB officials angrily wagged their fingers at NYRA while neglecting to
address why regulators had been equally negligent in overlooking the statute,
and early reaction accused NYRA of knowingly keeping the extra money for
itself. Then cooler heads pointed out that the primary beneficiary of the
mistake was not NYRA, which only benefits from a higher takeout on the 15
percent of the handle bet directly through it ontrack or through its NYRA
Rewards account-wagering system. For the 85 percent of the handle that is bet
through OTB’s, simulcast outlets, and national-account wagering companies, NYRA
gets the same negotiated percentage of handle regardless of the takeout rate.
NYRA itself kept about $1 million more than the correct statutory rate, but
over $7 million went straight into the profit margins of other bet-takers .
Few of those outlets
have addressed whether they will try to track down and compensate the
shortchanged bettors, whereas NYRA at least has agreed to make up the shortfall
to NYRA Rewards customers, whose bets can be tracked. It also agreed to make up
for the 15 months of overcharging with a remedial 15 months of undercharging –
since the rate was applied at 26 rather than 25 percent, it will now be charged
at 24 rather than 25 percent for at least an equal period of time.
This is a makeup,
however, not the sort of forward-thinking takeout reform NYRA portrayed it as
when it first addressed the issue with a press release misleadingly titled
“NYRA Announces Takeout Reduction.” This was a little bit like someone being
fined and sentenced to perform community service and then announcing that he
has decided to take a more active role in community affairs.
NYRA also erred in
saying it would not make up the overcharging on pick-six bets, citing an
obscure statutory provision that actually allows takeout of as high as 36
percent in that pool. But no one had ever proposed or applied for such a rate,
and it seems clear that the increase from 25 to 26 percent in the pick six was
supposed to expire in September 2010 along with the increase on other
announced it will continue the new 24 percent rate past the 15-month makeup
period, a positive gesture but still not enough. A 24 percent super-exotic rate
is still higher than in most other major jurisdictions (including 19 percent in
Kentucky). NYRA’s position has long been that it supports lower takeout, and it
has opposed previous increases, including the 2008 one. After decades of losing
that argument, however, NYRA is now positioned as never before to implement
real and meaningful takeout reform.
The new Aqueduct
racino is providing NYRA with as much as $100 million a year for purses and
capital improvements, and some slice of that should be redirected to the public
in the form of lower takeout. NYRA can finally afford it, and the crumbling of
the state’s OTB system removes a major impediment to enacting it.
A short-term remedy
to an error should not be mistaken for long-term reform.