04/16/2010 11:00PM

New York City OTB will remain open


The parlors and account-wagering operation run by New York City Off-Track Betting Corporation will remain open this week and for at least another year after the corporation on Saturday backed away for a second time from a plan to shut down.

The board of the corporation, meeting on Saturday morning, voted unanimously to suspend the shutdown plan indefinitely, which was set to go into effect at the close of business on Sunday. In a 10-minute address to the board following an executive session, New York City OTB's chairman, Sandy Frucher, said that shutting down would be "fundamentally unfair" to the corporation's 1,300 employees, its customers, the state's racing industries, and the governments that derive revenue from the corporation's operations while negotiations continue on a short-term rescue plan and the corporation attempts to reorganize under Chapter 9 of the bankruptcy code.

"While not necessarily irreversible, in practical effect even a brief interruption in the corporation's operations would have a profound negative impact upon the entire racing industry in the state," Frucher said.

The vote was the second by the board to suspend a shutdown plan in two weeks. New York City OTB had earlier told its 1,300 employees that it would shut down as of the close of business on April 11, but the board suspended that plan as well with a vote on April 7. The resolution passed by the board on Saturday indicates that the board is no longer going to consider a shutdown plan in the near future.

Before the vote, Frucher said that the corporation intends to file a plan with the New York State Racing and Wagering Board within two weeks that will outline how the corporation intends to reorganize its operations. The board has been pressing all sides that share in the corporation's revenues to take concessions.

Following the board meeting, Frucher said that the corporation would "manage its cash flow" to improve its financial condition while attempting to work out a long-term solution with legislators and the racing industries over the next 12 months. As part of that plan, the OTB company will delay some payments to the racing industry, he said, but it remains committed to paying all of its obligations.

"There will certainly be pain," Frucher said. "The faster we come together in a united front on something we can all live with . . . then the shorter will be the period of time of that pain."

Negotiations on a complex plan that would have cut the corporation's payments to the racing industry on out-of-state simulcast commissions by 15 percent and suspended some payments to the harness industry collapsed on Wednesday under objections from harness interests and the corporation's unionized mutuel clerks. The harness industry, which received more than $285 million in receipts from slot-machine gambling at its tracks in 2008, according to state records, have steadfastly objected to any cuts in commissions, while the union representing the mutuel clerks objected to provisions that would have affected severance and pension payments.

Despite the collapse of the talks, Frucher said he was encouraged by several developments in the negotiations, including assurances from legislators that the OTB company would not need statutory approval to install electronic betting machines already in use at upstate OTBs that would allow customers to make horse racing wagers at sports bars, as long as the OTB receives local approvals.

The OTB corporation had earlier intended to install up to 1,600 electronic gambling machines at bars and restaurants in New York as part of its plan to close up to two-thirds of its 60-plus parlors in the city's five boroughs. But Rep. Sheldon Silver, the speaker of the assembly, indicated in the negotiations this week that he will oppose any plan that would entail the installation of the type of machine that the OTB was earlier considering. Those machines would have additional functions than just horse race betting, and could be converted to offer other types of gambling.

Frucher said that OTB company will begin to close some of its parlors "soon," but he would not offer a timetable. In addition, the company plans to begin the process to gain approval for the installation of 400 to 600 of the horse race betting machines immediately, though installation of the machines would likely take anywhere from one year to 18 months, Frucher said.

The plan discussed on Wednesday would have also advanced $17 million to the New York Racing Association from revenue the association is expected to earn from slot-machine receipts once a casino at Aqueduct is up and running. The casino was approved in 2001, but the selection of an operator for the casino has been plagued by delays and false starts. It remains unclear when the state government will select an operator after its earlier selection this year of a sprawling politically connected partnership known as Aqueduct Entertainment Group collapsed under intense criticism.

NYRA has said that it is rapidly running out of cash, in part because it included revenue from the casino in its 2010 budget. NYRA and its horsemen are expected to receive approximately $90 million a year in subsidies from the casino after it opens.

Any agreement addressing OTB's statutory obligations would need to be approved by the legislature, which recessed on Wednesday afternoon and is scheduled to return to session on Monday. The legislature is grappling with a $9 billion budget deficit. The budget for New York's last fiscal year was $78.5 million.

In 2008, the last fiscal year in which numbers are available, New York City OTB took in approximately $940 million in bets, including approximately $592 million on out-of-state tracks. The corporation is the single largest bet-taker in the United States.