08/12/2013 10:56AM

Jay Bergman: It's time to end surcharges on winning wagers


By most accounts, the legislation signed last week in Albany to expand casino gambling in upstate New York will, in the end, have a revenue-neutral effect on horse racing in the state. The promise of no new casinos in the New York City region for seven years ensures that no serious competition will threaten the Yonkers casino or Resorts World at Aqueduct.

However, the legislation did pave the way for as many as 2,000 video-lottery terminals to be installed within the two remaining offtrack-betting establishments in the region.

That’s right: Struggling Suffolk OTB and its more successful cousin, Nassau OTB, will have the right to offer as many as 1,000 machines each to customers on Long Island.

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Voters will weigh in this fall and get to approve the legislation that would clear the way for “legal” casinos and an amendment to the state’s constitution.

However, whether the voters approve or reject this amendment, the Nassau and Suffolk OTBs will get the machines. That’s because VLTs are already legal in the state and are operational at its racetracks.

It’s difficult to comprehend how those in power in Albany could be willing to block the expansion of casino gambling in the New York City region while at the same time providing 2,000 machines to “government-run” OTBs in the same area. Sure, it’s politics as usual in the state. Obviously, both the Nassau and Suffolk OTBs will benefit greatly from this legislation and will have the opportunity to reverse their business fortunes because of it.

But couldn’t the state have raised fortunes for education by allowing private companies to bid for the rights to the same 2,000 machines?

What impact the melding of two forms of gambling will have on existing customers and racing interests remains to be seen. It’s a concern for horsemen and horseplayers alike.

Joe Faraldo, the head of the Standardbred Owners Association of New York, the body that represents Yonkers horsemen, is concerned.

“Sure, we’re concerned about anything that would cannibalize our business,” Faraldo said. “I spoke with Bob [Galterio, Yonkers Raceway’s general manager] on the subject, and he didn’t think there would be significant damage.”

While Faraldo is concerned that Yonkers’s slot business would be affected, there’s something else that all horsemen should be mindful of. With New York City Off-Track Betting already dark forever, what will the negative impact be on Nassau and Suffolk OTB patrons when slot players invade their space?

What is of greater concern to horseplayers is how they were neglected in Albany despite the presence of a long bill that will forever affect gambling in the state. Legislators could have examined a longstanding boondoggle to the advancement of horseplayers in New York and righted a wrong when they passed this bill.

We’re speaking directly about the surcharges being taken out of winning wagers at all OTB facilities. Those surcharges somehow weren’t enough of a sweetener to the bottom line to prevent the failure of New York City OTB. They’ve been a consistent part of the Long Island OTBs’ revenue streams for years and somehow didn’t make either organization strong enough so that no “new” assistance would be required to bail them out of struggling teletheaters.

So, now that Long Island OTBs will have a new revenue stream theoretically guaranteed to bring in profits with virtually little or no additional manpower required [that’s a joke], why is there any need to continually tax horseplayers to the point of extinction?

In an era when online wagering companies have provided rebates to customers with the idea of increasing wagering, these two OTBs continue to sap winning wagers and therefore reduce the ability to add to the churn. Wouldn’t it be natural to assume that this business practice may in fact be part of the reason the two corporations have struggled?

When two people are selling the same product and one charges $2-plus per wager and the other charges $2-minus per wager, it shouldn’t come as a surprise which one succeeds.

Maybe it’s time for the leaders of Nassau OTB and Suffolk OTB to make a stand for their existing customers. Isn’t it time that some goodwill was cast in the direction of loyal and overtaxed patrons? While it’s difficult to comprehend the forces that were at work that allowed the OTBs to get this lifeline, it’s what they do with it that will be the true measure of its overall benefit.

If politicians simply make the claim that it will help education, they are missing a huge business opportunity and a chance to reclaim lost horseplayer business.

OTBs are of vital importance to the future of horse racing. Not all customers are computer savvy. Not all customers have the means or time to travel to racetracks.

There’s still a rather large population on the Island that needs a place to go, needs a place to gather with others who appreciate the nuances of racehorse gambling.

What the horseplayers have never needed was the additional tax burden placed on winning wagers.

While the fight will go on to get tracks to understand that lower takeout is good for business, the surcharges should be abandoned the minute the first slot machine hits the floor.

I already find it sad when casinos spring up inside racetracks and everything that’s “new” is casino-related, and everything that’s dated is left for horseplayers.

We can’t tolerate slot machines inside OTBs where the slot player is taxed roughly 8 percent on both winning and losing wagers and the horseplayer is at times taxed 30 percent on winning wagers.

There’s nothing legally obligating those in power at Nassau OTB or Suffolk OTB to amend their business practice, but there should be some moral concern for their customers going forward.

Ending surcharges would be the right thing to do.