11/15/2007 12:00AM

Mayor: New York City OTB may close

EmailThe New York City Off-Track Betting Company will close as early as next summer unless the state legislature grants the company relief from statutory payments to the state's racing industry and regulatory body, Mayor Michael Bloomberg said Thursday.

In a statement, Bloomberg said that the city-owned company is expected to run out of cash by June 2008 and that he has asked Ray Casey, the company's president, to present a plan to the company's board that would envision the "ceasing of wagering operations, including the closure of its branches."

"Years of state legislative schemes that favored racing interests over NYCOTB, at the expense of essential city services, have forced the city into a financially untenable situation in which city taxpayers are, in effect, asked to subsidize the state racing industry," Bloomberg said.

New York City OTB is the single largest bet-taker in the U.S., handling more than $1 billion in 2006. The fees it pays to the New York racing industry based on its handle account for a significant share of revenues for state racetracks, although that share, as a percentage of revenue, is declining markedly with the advent of subsidies from slot machines. The company operates approximately 60 parlors in all five of New York City's boroughs as well as a telephone and Internet wagering service, together employing 1,500 people.

Bloomberg, who took office in 2002, has consistently questioned whether the city should operate offtrack betting parlors. Late in October, Bloomberg said the city was exploring its options for the company, citing four straight years of operational losses.

Early in 2007, the Boston Consulting Group, which had been retained by the city to produce a report on the financial health of NYCOTB, released a report that said the racing industry's share of OTB's revenue should be cut because racetracks in the state were flush with money from slot machines, which were legalized in 2001 at every racetrack in New York except Belmont Park and Saratoga.

The Boston Consulting study said that the state legislature should consider a merger of the OTB company with the New York Racing Association, which operates Aqueduct, Belmont, and Saratoga under a franchise agreement with the state that expires at the end of this year.

The New York legislature is currently considering two plans to deal with the NYRA franchise expiration. The first, supported by Gov. Eliot Spitzer and the Assembly, would grant NYRA a 30-year extension in exchange for the association giving up its ownership claim on the tracks. The second, supported by Senate Republicans, would create a new state board that would grant contracts to run the tracks, either together or separately.

According to the 2006 annual report produced by the New York Racing and Wagering Board, the OTB company had net revenue from handle of $218 million (not including $34 million from a surcharge on winning bets). The company paid out $115 million of that revenue to tracks, breeders, and the racing and wagering board, including $54 million to NYRA.

Payments to the racing industry by offtrack betting companies are governed by an unusually complex set of rules approved by the legislature. Tinkering with the fee schedules to satisfy one OTB company would likely lead to an overhaul of the entire system, as the fees apply to all six of New York's OTB companies, which are owned by counties.

The fees were last changed in 2004, when New York City OTB lobbied for the right to import unlimited simulcast signals. The legislature approved the change but imposed a new 0.39 percent tax on handle as a regulatory fee. That fee was raised in 2005 to 0.5 percent.

Bloomberg said in his statement that the fee unfairly imposed a burden on NYCOTB, in part because it taxed the company's handle, rather than its revenue.