01/17/2008 12:00AM

New York's OTB details its closing


Officials of New York City Off-Track Betting Corp. have reiterated in an internal report that the company will consider closing all of its branches this summer if the state legislature does not give the company a higher share of betting revenue.

The internal report, which was given to the company's board of directors on Wednesday, was prepared at the request of New York City Mayor Michael Bloomberg, who said in November that the city would not subsidize the OTB operation and should consider closing the company if its financial situation does not substantially improve. Bloomberg cited the company's $6 million operating deficit at the end of 2006, but that figure ignores a $17 million surcharge that the city collected from winning tickets in the same year, giving the city a net profit of $11 million.

In the internal report, OTB officials contend that the company will become cash-negative by June 15, "a burden that can not be sustained." The report said that the company should consider ceasing operations the next day, because it will not be able to meet all of its financial obligations, and that employee layoffs would begin on that date.

The report states that "because surcharge revenue collected by the corporation belongs to the city, it will not be used to fund NYCOTB operations." OTB treats the surcharge distribution to the city as an expense on its financial statements.

Like all offtrack betting companies in the state, New York City OTB's share of wagering revenues is determined by a panoply of statutory requirements. Company officials have said that the business needs to be given a larger share of the revenue, but any increase would have to come at the expense of the state or other racing-industry participants, such as racetracks, breeders, and horsemen.

New York City OTB is the largest bet-taking operation in the U.S., with $1 billion in annual handle. The company, which employs 1,508 people, according to the report, operates 65 branches in New York's five boroughs and an account-wagering platform.

The report claims that 20 percent of the company's handle is now generated through the account-wagering operation. The report, however, makes no mention of closing a portion of the company's branches, but instead says that all of the branches would be closed.

The report was prepared as lawmakers in Albany are discussing legislation that would grant a long-term extension for the New York Racing Association to operate Aqueduct, Belmont, and Saratoga. Bloomberg and OTB officials are clearly hoping that the report will put political pressure on legislators to include changes to the statutory revenue distributions within the bill granting the extension.