06/17/2008 11:00PM

OTB bill boosts simulcast takeout


Tucked into the fine print of a bill that would transfer ownership of New York City Off-Track Betting Corp. to the state is a provision that will increase the takeout for all New York bettors when they wager on out-of-state simulcasts.

The provision is one of two takeout increases contained in the bill, which passed Monday night. The other increases the takeout by 1 percent on all wagers made on races run at the three tracks operated by the New York Racing Association. Both takeout increases will take effect 90 days after the bill is passed, or just shortly after NYRA wraps up its upstate meet at Saratoga Race Course. The provisions sunset after two years.

According to legislative staffers who spoke on the condition of anonymity, the provision will take advantage of net-pool pricing, a mathematical formula that was designed in the last decade to allow racetracks to experiment with different takeouts and enable commingled simulcasting with foreign jurisdictions. The procedure will reduce the payoff on any simulcast wager made by a resident of New York, compared to the payoff to any other bettor in the country.

The difference between the two payouts will be retained by the company that takes the bet, according to the legislative staffers.

For example, a New York bettor who makes a win bet on a race at Churchill Downs through NYRA's account-wagering operation will be paid off as if the takeout is 17 percent, instead of 16 percent, the takeout charged by Churchill. NYRA would keep the difference.

Charles Hayward, chief executive of NYRA, said the association was not aware of the takeout increase on simulcasts until the bill was in its final stages. He contended that the increase may not be logistically feasible because of complications arising from the implementation of net-pool pricing on existing simulcast contracts.

"If we have net-pool pricing, we have to get new deals," Hayward said. "And it's hard for me to believe that we're going to get the full benefit of the increase. The sites are going to want their share."

Scott Daruty, president of a simulcast-marketing partnership owned by Churchill Downs Inc. and Magna Entertainment Corp., said takeout increases or decreases usually require new contracts.

"That's normally the case, just speaking off the top of my head, because I didn't know about this New York provision," Daruty said. "Typically, the increase gets allotted among the two parties."

Regardless of whether the out-of-state increase is implemented, NYRA plans to increase rebates to customers of its NYRA Rewards Program, Hayward said, because of the 1 percent takeout bump on NYRA's races.

"Our plan is to at least make those customers whole, and we may even try to make it a little better for them," Hayward said.

The bill transferring New York City Off-Track Betting Corp. to the state came about after the city threatened to close the operation. City officials, including Mayor Michael Bloomberg, contended that the operation would need to be subsidized by taxpayers as of June 16, and they pushed the state to allow the city to retain a higher percentage of its revenue or face the possibility of a complete shutdown of the operation's 60-plus parlors and its account-wagering platform.

Any change in New York City OTB's distribution formulas would have resulted in lower distributions to racetracks and counties in the state. As a result, most racetracks opposed legislation that would have cost the facilities money, including NYRA, which is currently attempting to emerge from bankruptcy.

The two takeout increases will allow all bet-taking operations in New York to retain a higher share of any bet made in the state. Legislative staffers said the state felt compelled to put the two increases in place in order to shore up the financial stability of the racing industry. The takeout increases will expire in two years and are expected to raise an additional $21 million for bet-takers annually.

"We're not proud of it," said a staff member of a legislator who worked on the bill. "We were really in a box as far as OTB goes. We needed to get money into the OTB and we needed to do it quickly. We really didn't want to do it, and that's why we put the sunset provision in place."