04/13/2010 11:00PM

New York OTB effort falls apart

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Efforts to pass legislation providing short-term rescues for New York City Off-Track Betting Corporation and the New York Racing Association collapsed on Wednesday afternoon, according to officials involved in the effort, resurrecting the possibility that the OTB company would shut down as early as Monday.

Legislators pulled their support for the bill because of concerns raised by unionized mutuel clerks over the size of severance and pension packages being offered to workers who are expected to be terminated as part of an overall restructuring of the OTB company, according to the officials.

The draft of the legislation included statutory changes that would have reduced OTB's payments to the Thoroughbred and harness racing industries by 15 percent across-the-board, according to officials. In addition, the bill would have advanced approximately $17 million to the New York Racing Association to address what the association has said is a pressing need for cash prior to the late-July start of its Saratoga meet in upstate New York.

"We're disappointed," said Charles Hayward, the chief executive officer of NYRA, who spent Tuesday and Wednesday in meetings with legislative staffers and officials of OTB to hammer out the plan. "We're going to continue to work with political leaders to find a solution to our problem, but we were hoping we could work all this out together with OTB. I don't know if that's possible right now."

OTB officials had threatened to shut down the company's parlors and account-wagering operations as early as April 11. The corporation's board, however, suspended the plan last Friday, citing the belief that the legislature would address the company's short-term problems with legislation this week. Under the vote to suspend the closing, the board said that the company would shut down "no later" than the close of business on Apr. 18, a Sunday.

As of Wednesday afternoon, the New York legislature was scheduled to recess until Monday, although Gov. Paterson had indicated over the past several days that he may force the legislature to remain in session throughout the week to address problems associated with a $9 billion budget gap. New York's total budget in fiscal year 2009 was $78.2 billion.

David Vermillion, a spokesperson for OTB, said late on Wednesday that "executives are communicating with the board to provide updates and determine what the next steps may be."

Gov. Paterson released a statement late Wednesday saying he believed OTB would shut down Monday.

"The Board of Directors of NYCOTB resolved to cease operations no later than close of business April 18, absent action by the legislature to solve the corporation's immediate cash-flow problem by making adjustments to payments to the industry," the statement read. "Given that stakeholder disagreement prevented this legislative action, I expect the board will carry out its planned shutdown as reflected in its resolution."

New York City OTB filed for Chapter 9 bankruptcy earlier this year. Company officials support a restructuring that would entail the firing of half of the company's workers, the closure of two-thirds of its 60-plus parlors, and the installation of betting kiosks in bars and restaurants. The legislation being considered this week would have been a short-term tool to address cash-flow problems while the overall restructuring is worked out, according to officials.

New York's Thoroughbred racing industry - including tracks, horsemen, and breeders - receives approximately $160,000 a day from New York City OTB, an amount that would have been cut to approximately $135,000 a day under the proposed legislation. Hayward said that NYRA and the breeders had decided to accept the cut as a way to "keep OTB afloat" and because of the assurances that NYRA would receive the $17 million advance to keep it operating without big cutbacks until Saratoga, when the company begins to operate at a cash-positive rate.

Under agreements that NYRA reached with the state that allowed the association to emerge from bankruptcy in 2008, the state agreed to fund any cash shortfalls in NYRA's budget if a slot-machine casino at Aqueduct had not opened by March 2009. The legislation that fell apart on Wednesday would have provided the advance from funds that NYRA would receive from the casino once it begins operating, according to Hayward.