08/05/2002 11:00PM

No sale, more revenue in New York OTB's plans


SARATOGA SPRINGS, N.Y. - New York City Off-Track Betting Corporation is off the market for at least the next several years, according to its president, Ray Casey.

Casey, who was installed president after Michael Bloomberg was elected mayor of New York late last year, said on Tuesday at a conference in Saratoga Springs sponsored by the Saratoga Institute on Racing and Wagering Law that the city had decided to "take a breather" on any plans to sell the corporation while focusing on strategies to increase OTB's revenues.

"It's a matter of weighing the value of the revenue streams over the value of a one-time benefit," Casey said. "And believe me, Mayor Bloomberg knows the value of those revenue streams."

The city had offered the OTB corporation for sale in 2000, soliciting bids from a variety of racing companies. In late summer of 2001, the city accepted a bid from Magna Entertainment, but enabling legislation was never passed to seal the deal. Officials for the city later cited the events of Sept. 11 as compromising the city's plans.

The bidding for OTB was bitterly contested, pitting Magna Entertainment against a partnership of Churchill Downs and the New York Racing Association. Feelings were further inflamed when officials for NYRA, most notably chairman Barry Schwartz, threatened to lobby against the sale in the state capitol after Magna was tabbed in a controversial decision as the purchaser by Mayor Rudolph Giuliani's administration.

Casey's comments were timely considering that at the same conference last year, Magna chairman Frank Stronach earned the enmity of Schwartz by saying during a speech here that Magna hoped to add the racing association's three tracks to its portfolio of racetrack holdings. Magna chief executive officer Jim McAlpine attended the conference this year, and he said that Magna was still interested in New York, citing last year's comments. "About this time last year we were celebrating the fact that we thought we would be Ray [Casey]'s bosses," McAlpine said. "But for a variety of reasons that Ray described, that didn't happen. But we're not going away."

Casey said OTB officials were hoping to lift legal restrictions that prohibit OTB from taking more than two simulcast signals during the day and prevent it from offering Thoroughbred simulcasts at night. Casey said the restrictions were preventing OTB from offering products the customers want.

The issue Casey cited - getting regulators to free up restrictions on racing companies - was one of the featured topics at the conference, the second of its kind. McAlpine was one of the speakers on the topic, and he presented a wish list for Magna Entertainment, the largest racetrack operator in the U.S., which included allowing racetracks to run racing at any time they wished, the legalization of account wagering, and taxation based on takeout, not handle.

McAlpine also said that states should lift restrictions on offering rebates to customers, a touchy subject in racing. Many racetracks blame offtrack betting companies and offshore account-wagering customers for stealing high rollers through rebates, which is usually a cash reward based on levels of betting. McAlpine said that lifting the restrictions would allow Magna and other racetrack operators to better compete with the rebate shops, as they are known.

Magna has been one of the staunchest supporters of deregulation in racing. But other regulators at the conference said that racing companies needed to accept some levels of government supervision as a necessary consequence of running a gambling business.

"You're not dealing with the selling of hamburgers or the opening of a drug store," said Stanley Sadinsky, the chairman of the Ontario Racing Commission in Canada, which oversees 18 racetracks and 100 OTB's. "You're dealing with gambling, and you're stuck with regulation."

Also at the conference, proponents and critics of recent legislation allowing some racetracks in New York to operate gambling machines clashed over whether the bill was constitutional. The issue is expected to be decided later this year when an appeals court in New York rules on a lawsuit filed by opponents of the measure.

The bill legalized video-lottery terminals, a type of gambling machine that looks and plays like a slot machine. The machines are linked to a central system, a distinction that proponents of the bill said allows the state to regulate the machines as if they were lotteries.

The New York constitution explicitly prohibits slot-machine gambling. Cornelius D. Murray, an Albany lawyer who spearheaded the lawsuit, said that legislators had clearly evaded restrictions on what kind of gambling can be allowed by engaging in "linguistic gymnastics." Murray said that the court should nullify the legislation and that if the state wants to legalize gambling machines at tracks, it should do so through a constitutional amendment, a difficult legislative process in New York.

"You can't just put the constitution on the shelf and ignore it," Murray said. James Featherstenhaugh, a proponent of the machines, said the legislation was intended to fill a budget gap by raising $750 million for education, raising a legal issue of the "merits of necessity." He said legislators would be hard-pressed to hold off legalizing gambling machines in the year ahead due to a pressing budget deficit that may reach as high as $12 billion next year.