08/03/2010 4:32PM

Former chairman says NYC OTB's fate grim unless racing agrees to take less money

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SARATOGA SPRINGS, N.Y. – Efforts to restructure the bankrupt New York City Off-Track Betting Corporation will persistently fail unless the state’s harness and Thoroughbred industries accept cuts in the amount of money that they receive from the corporation’s betting, the former chairman of the company said on Tuesday.

Meyer “Sandy” Frucher, who resigned as chairman earlier this year after his own restructuring plan was rejected by lawmakers and attacked by the racing industry, said that the corporation’s inability to reverse years of declining revenues mandates that the racing industry accept the cuts in order to help the corporation return to solvency. If the industry does not accept the cuts, the corporation will go out of business, taking $1 billion in estimated annual wagering on horse races with it, Frucher said.

“Everyone is in the same barn stepping in the same excrement,” Frucher said, while speaking at a racing-law conference in Saratoga Springs. “There’s going to have to be a joint allocation of pain. There are no ups.”

Frucher was appointed chairman of New York City OTB by Gov. David Paterson in 2009, one year after the state took over the corporation from the city following Mayor Michael Bloomberg’s threat to shutter the company’s 60-plus locations and account-wagering business. Frucher immediately pushed the company into Chapter 9 bankruptcy, but his plan to restructure the company with massive layoffs and parlor closings never gained political traction, in part because of heavy resistance by the racing industry to statutory changes governing the corporation’s revenue distributions.

Frucher was forced to resign in early June by Paterson’s office. He was replaced by Larry Schwartz, one of Paterson’s top aides, and the state in July hired Greg Rayburn, a bankruptcy reorganization specialist, as the company’s chief executive. Rayburn said three weeks ago that he would release a reorganization plan for the company by mid-August, and that the plan will likely require the racing industry to take cuts in the revenues it receives from New York City OTB.

Although Frucher said that New York City OTB was facing critical structural and systemic problems that could not be solved easily, Frucher also said that the racing industry’s refusal to accept cuts had scuttled his reorganization plan after he had pushed the union representing a vast majority of the company’s 1,300 employees to accept hundreds of layoffs. That agreement was reached, however, after Frucher also promised costly changes to the workers’ early retirement programs, severance packages, and a retroactive pay raise that would have a significant impact on pension payments.

“The question became, ‘So, can we then line up the rest of the industry?’ ” Frucher said, referring to the harness and Thoroughbred industries. “And the answer was always ‘No,’ We could not get past this issue of statutory distributions. … I only had the union willing to give something up. ”

Even if the racing industry does accept the cuts, however, New York City OTB’s future will continue to be precarious unless the entire racing industry agrees to “comprehensive” changes to its business structure, Frucher said, citing the industry’s reliance on slot-machine subsidies and the dysfunctional structure of New York’s six off-track betting corporations.

“When is everyone going to sit down and come up with a solution that addresses the real problems?” Frucher said.