08/02/2011 3:22PM

NYRA eyes OTB business

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SARATOGA SPRINGS, N.Y. – The New York Racing Association has begun to explore options that would allow the racetrack operator to establish off-track betting parlors in the five boroughs of New York City, the association’s chief executive, Charles Hayward, said at a conference on Tuesday.

NYRA would seek to establish the locations to fill the void created by the shutdown late last year of New York City Off-Track Betting Corporation, the mammoth state-owned company that operated 55 parlors in New York’s five boroughs. The closure created a mad scramble by NYRA and the state’s other five OTB agencies to recapture the $800 million in annual wagering that had been bet through the companies’ bricks-and-mortar locations and its account-wagering operation.

Under a decades-old state law, NYRA has the ability to open as many as eight parlors in New York City, but the association has never pursued establishing a presence there because the law required the approval of New York City OTB, which would have never agreed to cede its territory to a competitor. Now, with New York City OTB out of the way, NYRA has said that it will seek partnerships with existing restaurants and bars in the city.

“We have plenty of restaurant partners we could identify, we just have to figure out how we want to do it,” Hayward said Tuesday, during a panel discussion at a conference administered by the Saratoga Institute on Racing and Gaming Law, an offshoot of the Albany Law School.

The NYRA board had discussed establishing the parlors as early as last November, just prior to New York City OTB shuttering, according to board members. But since the closure, NYRA has been focused on recapturing the handle that was lost by the shutdown, largely by expanding the number of public-transportation options to its tracks, and by opening sections of the grandstands at Belmont and Aqueduct for simulcasting.

Those efforts have been largely successful in mitigating the financial impacts of the shutdown, according to Ellen McClain, NYRA’s chief financial officer. Though NYRA estimates that the association has recaptured only 35 percent of New York City OTB’s business, double-digit increases in wagering handle at its tracks and through its account-wagering and telephone-betting operations have made the shutdown nearly revenue-neutral because NYRA retains a far larger share of the takeout on those bets compared to the wagers that were made through New York City OTB.

According to McClain, gross wagering revenues for NYRA through the first six months of 2011 have been $98.01 million, compared to $99.6 million last year, when New York City OTB was still open. Net wagering revenues for the first six months of the year were $47.96 million, compared to $47.09 million last year, McClain said.

“It looks like we’re recovering,” McClain said.

Should NYRA attempt to enter the New York City market, it will likely have to navigate around competing efforts by the state’s other off-track betting companies to establish a presence in the city. Already, legislators have introduced bills that would allow Catskill OTB to take over off-track betting in the city, an effort that has drawn support by the unions that had represented New York City OTB’s employees.

The closure of New York City OTB – and NYRA’s success in capturing revenues from its lost customers – has reinvigorated discussions about the future of the state’s five other off-track betting companies, one of which – Suffolk OTB on Long Island – filed for bankruptcy earlier this year. Some legislators have proposed a merger of all five companies, and many legislators have supported efforts by the companies to lobby for relief by allowing the OTBs to retain a larger share of their revenue, at the expense of the state’s harness and Thoroughbred industries.

In a separate panel at the Tuesday conference, John Signor, the president of Capitol OTB, said that the problems of the OTBs could be solved by amending the statutes and “forcing” the OTB companies to cooperate on marketing and account-wagering operations. Signor also said that the state should pass laws prohibiting out-of-state companies from taking bets from New York residents.

“The OTBs don’t need to be consolidated,” Signor said. “They don’t need a dramatic overhaul.”

Ray Casey, a former president of New York City OTB, said the shutdown of the company has led to significant changes in policy that have benefited racing, citing the decision by the state racing and wagering board to relax restrictions on the live streaming of races and the ability of players to open telephone and Internet betting accounts.

“It took the dramatic trauma of the failure of New York City OTB to make that happen,” Casey said.

Steve Crist, the chairman of Daily Racing Form, said on the panel that he had “sympathy” for the hundreds of employees who lost their jobs as a result of the shutdown. But citing longstanding criticisms of New York’s OTB system and the negligible impact of the shutdown of New York City OTB on NYRA, Crist suggested that the racing industry would be better off if the system was scrapped.

“The OTB era, to my mind, is over,” Crist said.