06/08/2007 12:00AM

Separatist movement just may work


NEW YORK - Last month, when Gov. Eliot Spitzer's office floated the idea of splitting up the New York tracks and having separate operators for Belmont and Saratoga, the notion was quickly and properly scorned by every single segment of the industry and bidder for the franchise.

This past week, Spitzer was floating a different kind of split, one that makes a lot more sense and may finally signal some real progress on resolving the future of the game in New York: separating the operation of the racetracks from the operation of the slot-machine parlors scheduled to open at Aqueduct and possibly Belmont.

Spitzer's racing panel was scheduled to meet Friday with franchise bidders to get their reactions and gauge their interest. Officials who have had discussions about the proposal said before the meetings that they expected it was headed in this direction: The New York Racing Association would retain the racing franchise, continuing as a not-for-profit entity with a reconstituted board including more governmental appointees, in exchange for dropping its claim to ownership of the land beneath the tracks. The NYRA would receive a mandated revenue stream from slots at the tracks, but the management of those operations would be put out to bid, perhaps among the three competing groups that have already spent millions chasing the NYRA franchise.

Paul Larrabee, a Spitzer spokesman, said Thursday that "the landscaped changed" when MGM Grand last month pulled out of its previous agreement with NYRA to build the Aqueduct slots operations, following years of false starts and delays. That sudden vacuum led to the thought that instead of rebidding that contract, it might make more sense to separate the two operations. Resolving the land issue is also key to any decision, because the question of ownership could otherwise wind up in the courts for years.

If nothing else, proposing to separate the racing and slots operations is one way of forcing the answer to a central question: Are the bidders seeking to unseat NYRA genuinely dedicated to improving New York racing for the sake of the sport and its customers, or merely interested in the lucrative possibility of a slot-machine monopoly in New York City?

Account wagering singled out

Two weeks ago in this space, the question was posed why the New York State Racing and Wagering Board has not acted on several proposed rule changes that would benefit horseplayers, including consistent late-scratch rules, reducing required field sizes for exotic wagers, and introducing fractional-betting minimums consistent with other states.

It turns out the board has in fact been dealing with one issue dear to horseplayers - but in a destructive and unnecessary way.

The already bizarre and unfair Internal Revenue Service rules regarding racetrack winnings have an obscure provision regarding "aggregate withholding." It requires that tracks combine multiple winning $1 tickets from customers to see if identical winning wagers add up to exceed the threshholds for reporting and withholding. A customer who cashed two separate $1 tickets on a $312 trifecta would, in theory, have his proceeds reported to the IRS under this aggregation, because while $312 is under the mark, $624 just exceeds it.

Racetracks unofficially ignore the rule since it is impossible to enforce in a mutuel-window environment. Bettors have learned to buy tickets at the lowest minimums and cash them separately. Everyone understands that the IRS rules are absurd, raise no legitimate revenue since 99 percent of players do not show a net profit that should be taxed, and do nothing but take money out of circulation while driving customers to seek out illegal 10-percenters to cash their tickets. The racing industry sensibly ignores the aggregate withholding provision the way that most policemen sensibly ignore the jaywalking statutes on empty streets.

But recently someone at the New York State Racing and Wagering Board decided it would be a good idea to hold some of New York's horseplayers to the letter of a bad law that no one else enforces, by taking advantage of the paper trail provided by account wagering. NYRA was forced to send letters to its NYRA Rewards members last week, apologetically telling them that the provision would henceforth be strictly applied, and that money will be deducted from your account if identical $1 tickets combine to put you over the withholding threshhold. At exactly the time when the state and the tracks are trying to increase business, partially through expanded account-wagering with Internet access, the board is unilaterally imposing a unique penalty on people using those accounts.

A regulatory agency can't officially advocate skirting the federal tax code, but this was a case where there was no reason to raise the issue at all. It is the increasingly typical behavior of a hostile agency that seems to regard the betting public an adversary to be punished rather than as citizens to be protected.