New York OTB deal may spur changes

Updated: June 17, 2008, 1:27 PM ET
By Matt Hegarty | Daily Racing Form

The takeover of New York City Off-Track Betting Corp. by the state of New York may result in sweeping recommendations to overhaul the offtrack betting system, legislative and racing officials said Monday.

The state reached a deal to take over the company from the city of New York late on Sunday, and legislation designed to implement the takeover was expected to be passed late on Monday or on Tuesday. As part of the deal, the state will explore changes to the way the OTB corporation conducts its operations, including the possibility of merging elements of the company with similar operations in New York, according to officials.

Charles Hayward, the chief executive of the New York Racing Association, said on Monday that he expects the state takeover to result in serious discussions to resolve some of the inefficiencies created by the overlapping functions of the state's six offtrack betting corporations, such as duplicate account-wagering platforms and call centers. Hayward has consistently called for an overhaul of the state's offtrack betting system since being hired as NYRA's chief executive three years ago.

"In the discussions I've had with the OTB's, in most cases, they'd like to see a common account-wagering operation, a common tote vendor, a common account card - where anyone could use their card at any operation - a common television strategy," Hayward said. "These are all things we can agree on. Who gets what, that's a business question, but those are resolvable.'

New York City Off-Track Betting is the largest of the state's six offtrack betting corporations, which are owned by New York counties. The corporation's 60-plus parlors and its account-wagering operation typically handle just over $1 billion in bets a year. Its annual revenue exceeds $250 million.

Sen. John Sabini, who was appointed by Gov. David Paterson on Friday to be the next chairman of the New York State Racing and Wagering Board, said on Monday that Paterson has told him to take a "whole-cloth look" at offtrack betting operations over the next several months. Sabini cautioned that overhauling OTB would be difficult politically based on the entrenched positions of the corporations and their historical resistance to change.

"You can't go into it and assume you are going to achieve a total state takeover without goring a few oxes," Sabini said.

As part of the takeover, state officials are hoping that OTB's operations are stabilized over the short term by a 1 percent increase in takeout on races conducted at NYRA's three tracks. Though NYRA officials said that they do not support the takeout increase, the raise will allow NYRA and the OTB corporations to retain a larger share of the revenue from betting on NYRA's races.

In addition, the takeout increase may enable NYRA to press out-of-state betting sites for a higher simulcasting fee, since the outlets will now also be able to retain a larger share of the revenue.

The takeout increase will go into effect 90 days after the legislation implementing the takeover is passed. It will sunset after two years, legislative officials said.

Paterson announced the deal to take over New York City OTB on Friday afternoon, but New York City Mayor Michael Bloomberg challenged the announcement within hours, contending that the city was not prepared to let the state take control of the corporation unless the city received a share of the company's surcharge on winning wagers.

The resistance by the city held up the official acknowledgment of a deal until Sunday night, when both state and city officials said that they had reached a compromise that would entitle the city to about $4.5 million of the estimated $19 million in annual surcharge revenue.