08/08/2008 11:00PM

New York tariff may yet be shelved


NEW YORK - Plagues and pestilence aside, two usually reliable signs of the Apocalypse are a) common ground between the New York Racing Association and the state's offtrack betting corporations, and b) New York state government rolling back an ill-conceived tax increase.

The final days must be upon us: The first sign has appeared, and there may be a chance for the second.

Last month, the state legislature hastily passed a bill approving a completely unjustified 1 percent takeout increase on races run in New York. The increase, designed to bail out New York City Off-Track Betting from its alleged financial woes, became completely unnecessary (if it ever was needed) once the state took over New York City OTB. NYRA strongly opposed the bill, but that didn't stop it from passing, since the OTBs are always game for a takeout increase and hadn't had one in almost a whole year.

That would have been bad enough, but it didn't stop there. The bill added a few words applying the 1 percent takeout increase not only to races run in New York but also to the payoffs on out-of-state simulcast races offered by New York's tracks and OTBs. The governor's budget division thought it was being clever and thorough and finding some low-hanging financial fruit. Instead, it inadvertently discovered something more rare than a talking unicorn: A takeout increase even OTB doesn't want.

At the Albany Law School's Saratoga Institute forum last Tuesday, officials of three of the state's six OTB corporations confirmed in private conversations that they oppose the simulcast increase, which was passed quickly and without scrutiny or comment from any of the affected parties. Even the Raise The Takeout crew understands what the budget office did not: You can't raise the takeout on races run outside your state without creating massive legal and contractual problems, not to mention costing yourself far more revenue to lost business than you hoped to raise by nicking defenseless horseplayers.

NYRA and the OTBs have dozens of simulcasting contracts with out-of-state tracks reflecting carefully negotiated revenue splits. Most of those contracts say that the sending track's share increases if net-pool pricing and higher takeouts are applied, and some of them actually forbid offering lower payouts on the signal. If Keeneland's fall meeting began tomorrow instead of in October, no one could bet Keeneland through NYRA or the OTBs.

New Yorkers could play Keeneland, however, by taking their business away from the state's wagering entities and opening phone or Internet accounts with any of a variety of national providers. This is what every sensible horseplayer will do anyway if this simulcast increase goes through and every $10 winner at Keeneland starts paying $9.80 at Belmont Park or through a New York City OTB phone account. The drop in handle, and thus commissions, on simulcast bets through New York outlets will utterly dwarf any gains the state might have realized.

Thousands of bettors who are perfectly happy with their NYRA or OTB betting accounts will abandon them for out-of-state providers, never to return, and the state, horsemen, and the tracks will never see even a penny on their action. NYRA officials commendably have said that if this mistake can not be corrected, they will try to offset its impact by increasing rewards and rebates to its account customers, but the state's tracks should not be put in the position of having to compensate their patrons for a simple error by state government.

New York will quickly become a national laughingstock, paying those who bet a Big Brown in the Kentucky Derby $6.60 while everyone else in America gets $6.80. And who in his right mind is going to bet the Breeders' Cup through any entity in New York when every other account-wagering provider pays full track prices? The revenue losses will mount so quickly that it will time for another takeout increase before Christmas.

It's a shame that no one explained any of this to the authors of the legislation, but it's not too late.

The bill contained a 60-day window to implement the takeout increase, now set to hit starting Sept. 15. The state has asked the tracks and OTBs to file plans to implement the simulcast increase by Aug. 14. Rather than dutifully signing the death warrants for their account-wagering operations, NYRA and the OTBs should go arm-in-arm to the state, and explain that the simulcast increase was a hastily conceived mistake that no one really wants. Just because such a show of unity and common sense would be unprecedented does not mean it's impossible.