OTB closing could open door for NYRA teletheaters

If the New York City Off-Track Betting Corporation officially dissolves in the coming weeks, as many people expect, it could present a ripe opportunity for the New York Racing Association to open its own offtrack betting facilities in the city’s five boroughs.

New York City OTB plans to ask a bankruptcy judge to dismiss its financial reorganization plan this week and will distribute its remaining funds to racetrack creditors and account-wagering customers, the company’s chief executive, Greg Rayburn, said Tuesday. If there is no last-minute political maneuvering, the company will be dissolved and leave the lucrative wagering market of New York City underserved in terms of storefront wagering facilities. Under a decades-old state law, NYRA has the right to open eight such facilities in New York City, provided the state’s racing board, New York’s mayor, and the New York city council approve the facilities.

Only the legislature can save the OTB company at this point, a prospect that is considered unlikely despite strident efforts by the company’s laid-off workers to rally support to their cause. Although discussions remain ongoing, legislative leaders have yet to hint of any plan to come back into session after dismissing New York City OTB’s political efforts last week.

Rayburn said that New York City OTB will have no cash to reopen after it distributes $14 million in sequestered funds to racetrack creditors on Friday. In addition, the OTB company’s single biggest asset, its account-wagering operation, has rapidly lost value since closing its wagering operations at midnight Dec. 7 and customers abandoned the operation to open accounts with its competitors. The company is refunding account balances to its wagering customers and will ask the bankruptcy court to dismiss its filing, Rayburn said, a step that will allow the company to close down officially. Its remaining assets – some betting machines, and its fleet of cars – will be diposed of or auctioned off, Rayburn said, and the company’s other creditors will likely be unable to recover any of their losses.

“After this week, we will have taken certain steps which would make it very hard to recover from,” Rayburn said.

The exception in recoveries is the sequestered money from out-of-state simulcasts that the company began withholding earlier this year from racetracks. After the company stopped making the payments, the New York State Racing and Wagering Board prohibited the company from using the money to fund its operations while in bankruptcy. NYRA is owed $8 million of the $14 million in sequestered money, Rayburn said.

The possibility that residents of New York City will remain unable to place a legal wager at any storefront property has led to discussions about the potential of NYRA to open offtrack betting sites under a law passed in 1990. With the elimination of New York City OTB from the political scene, NYRA would appear to be in position to seek the licenses, according to officials.

Although NYRA officials did not return phone calls on Tuesday, Bennett Liebman, a NYRA board member, a former racing commissioner, and the director of the Government Law Center at Albany Law School, said that the 1990 law came up “in passing” at the association’s board meeting last week.

“One would hope that if OTB is gone that someone would say, ‘Why not allow NYRA or a consortium of racetracks to operate simulcast theaters in New York?’ The law’s already there,” Liebman said.

Under the law, NYRA could open as many as eight teletheaters, relatively upscale versions of the spartan betting parlors that had dotted the five boroughs. New York City OTB operated three teletheaters, by far the highest-handling properties among the 54 betting sites.

While New York City OTB was burdened by high cost structures because of statutorily-mandated payments to racing constituents and labor expenses, NYRA would retain a much larger share of the betting revenue than OTB. Also, the facilities would give NYRA locations where account-wagering customers could make deposits without traveling to one of its racetracks.

NYRA was capable of applying for the licenses for the past 20 years, but getting the required approvals from the New York State Racing and Wagering Board, the mayor, and the city council was impractical with New York City OTB on the scene. With that barrier removed, those approvals would likely be forthcoming – as long as the state is not interested in bidding out the OTB operation to any private interests.

But bidding out the off-track business in New York has its own complications, because of the current law’s statutory requirements.