02/22/2007 12:00AM

N.Y. bidder empirically wrong


NEW YORK - Horseplayers are understandably jaded about the battle for the New York racing franchise that expires at year's end, figuring that there's going to be a daily double to bet on Jan. 1 and that it doesn't much matter who's sitting in the executive offices when the gates open.

It turns out they have more than a little self-interest in the matter. According to the Ad Hoc Committee report on the three franchise bids that was finally released Wednesday, that daily double is going to pay off differently depending on who's in charge.

The plans and philosophies of the three bidders regarding parimutuel takeout are starkly laid out on page 91 of the 270-page report summarizing the combined 11,206 pages of bid materials submitted by Empire Racing, Excelsior Racing, and the New York Racing Association. Two of the three groups sing a tune that is music to any horseplayer's ear:

"Excelsior's take-out policy is that it should be set as low as the market will bear, but generate enough revenue to create operating monies. Excelsior stated they would seek to use takeout reductions as a marketing tool to stimulate business.

"NYRA stated their anticipated retention rates would be consistent with their current takeout structure, although they would make an effort to reduce the takeout during the new franchise term. Their general corporate takeout philosophy is to keep the quality of the racing at the highest level and the takeout structure at the lowest possible level."

The third bidder struck a radically different note:

"Empire stated they would request an increase of take-out on regular and multiple wagers to place New York on par with the national averages for such wagers. This, they stated, would be a short-term test of two years."

Empire's position is not merely wrongheaded. It is based on a familiar and deceptive characterization of New York's takeout rates that is trotted out every time someone wants to put more of the public's money into his own pockets.

The three major racing states in the country have different rates of takeout for the three different types of bets - straight (win, place and show), multiple (two-horse bets) and exotics (bets involving three or more horses). The current rates are as follows:

WPS Multi Exotic

* California 15.43 20.68 20.68

* Kentucky 16.00 19.00 19.00

* New York 15.00 17.50 25.00

Obviously, New York has slightly lower takeout rates on straight and multiple bets, but it has a much higher takeout on exotics, the fastest-growing segment of the market. If you blend the three rates equally, New York actually has the highest rate at 19.2 percent, compared with 18.9 in California and 18.0 in Kentucky. If you give more weight to the multiples, currently the largest segment of the handle, New York and California end up close together at right around 19 percent, with Kentucky still the slightly lowest rate overall.

So Empire's claim that a takeout increase on straight and multiple bets is needed to "place New York on par with national averages" is simply false. Even more disturbing, though, is the very idea that a takeout increase is necessary or even appropriate when New York racing is on the verge of swimming in money from slot machines at Aqueduct and perhaps Belmont. Excelsior and NYRA seem to understand that this is an opportunity to experiment with lower takeout rather than soaking the overtaxed betting public even further.

Horseplayers will not find any comfort in contemplating where Empire's higher grab of their payoffs would ultimately be going - to the prominent racing companies and individuals who bought ground-floor shares in the enterprise at a nominal fee and stand to make windfall profits if awarded the franchise.

For example, the report discloses that 3.6 percent of Empire is owned by Marylou Whitney, the society doyen who lent her name to Empire because she was angry that the NYRA reduced her stall allocation. Other Empire shareholders identified in the report include Churchill Downs (6.1 percent); Magna Entertainment (6.1 percent); Delaware North (6.1 percent); SL Green Realty (12.2 percent); Thomas Newkirk (3 percent), chief executive of the Saratoga National Golf Club; and Mrs. Dennis Brida (1.2 percent), wife of the executive director of the New York Thoroughbred Horsemen's Association, which has endorsed Empire's bid.

Empire's initial private offering suggested that shareholders could realize a combined annual return of about $100 million. So the public would get lower payoffs on its win bets, daily doubles, and exactas so that Mrs. Whitney can earn something like $3.6 million a year.

It is hard to believe that this sort of reallocation of public money is what anyone had in mind when this franchise was put out to bid.