01/07/2009 12:00AM

OTB says $15M payment would break bank


A recent court ruling that requires New York City Off Track Betting Corp. to make $15 million in payments to two state harness tracks is threatening the solvency of the state-owned company, officials of the OTB corporation said Wednesday.

The ruling, issued Dec. 17 by the New York Court of Appeals, concerned the interpretation of statutes governing the distribution of money from night Thoroughbred simulcasts at the state's six offtrack betting corporations. The court sided with the New York State Racing and Wagering Board, the state's harness horsemen, and the state's harness tracks in ruling that five of the six OTB corporations were in violation of the law by withholding certain fees related to the Thoroughbred simulcasts over the last five years.

New York City OTB has, by far, the biggest liability of the OTBs, with $15 million owed to harness tracks in Monticello and Yonkers. But officials of New York City OTB said on Wednesday that they have not determined how they will make the court-ordered payments to the racetracks and horsemen.

When asked whether the company intends to make the payments, Ira Block, general counsel of New York City OTB, said, "We don't know right now." He contended that the $15 million in payments would deplete the company's cash reserves.

Block said that the only recourse for New York City OTB may be to go to the legislature to seek an amendment to the racing law that would reduce the obligations of the OTB companies to the harness industry. New York City OTB, the single largest bet-taker in the country, was taken over by the state in 2008 after New York City Mayor Michael Bloomberg threatened to shutter the operation unless the company received financial help from the state.

"We will be unable to operate effectively unless and until the legislature makes an adjustment to the statute, until we are not required to pay out more than is available from our operating funds," Block said.

Legal representatives of the harness tracks and harness horsemen have already sent letters to the New York State Racing and Wagering Board asking the agency to force the OTBs to make the payments. The board has not yet responded, according to the officials.

Joe Mahoney, a spokesman for the board, said he could not comment on the matter except to say that the board members are "reviewing our options."

Joe Faraldo, the president of the Standardbred Owners Association of New York, said that his organization will ask the board to issue an enforcement order to the OTBs requiring them to comply with the ruling. The enforcement order, Faraldo said, would require the OTBs to pay or lose their license to operate in New York.

"They have an obligation under the law to make those payments," Faraldo said. "Nothing can remove those obligations. Frankly, it's quite sad to me to see a state agency say, 'We're not going to pay you.' What, exactly, do we have statutes for?"

If the board does not issue an enforcement order, Faraldo said the horsemen are prepared to go to court to seek a declaratory judgment that would force New York City OTB into bankruptcy if it continues to contend that it cannot make the payments.