03/25/2005 12:00AM

Takeout hike isn't the answer

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NEW YORK - Some New York legislators are again trying to raise the cost of playing horses in New York by socking the public with a 9 to 11 percent takeout increase. Under budget proposals and legislation supported by the State Senate's Committee on Racing, Gaming, and Wagering, the minimum takeout at Aqueduct, Belmont, and Saratoga would be increased from 14 to 15.5 percent on straight bets and from 17.5 to 19 percent on two-horse wagers.

The legislators claim that they are doing this to help out the poor old New York Racing Association.

"One of the reasons NYRA is bleeding so much red ink is because it has set its takeout percentage much too low," the Committee said in its annual report to the Governor last month. "While decreasing the takeout rate has helped to stabilize the organization's handle, it is receiving an insufficient amount of fees to cover its skyrocketing expenses."

The first tip-off that this may not be an entirely credible motive for the proposed increase comes from the fact that the supposed beneficiary wants no part of it.

"These are not takeout increases we've recommended or discussed with anyone," said Charlie Hayward, NYRA's chief executive, when the proposal surfaced 10 days ago. "We do not believe that is a prudent way to do business, and these are not any adjustments that we would support."

The Senate committee's 60-page report raises the takeout issue several times, exclusively in the context of providing more revenue to NYRA and without even mentioning that the largest windfall from such an increase would go not to NYRA but to the people whose water the legislators are actually carrying: the state's six regional Offtrack Betting Corporations.

As the Committee's own report documents, handle in New York as throughout the country has undergone an epic shift in the last 15 years. Ontrack handle on live racing went from $874 million in 1990 to $337 million in 2003 and continues to head south. Putting aside the fact that handle would probably take an even sharper dive if takeout was increased, NYRA would stand to get perhaps $3 million with a 1.5 percent takeout increase on one- and two-horse bets.

So is this proposed increase a charitable effort to give NYRA an extra $3 million? Hardly, since NYRA thinks the increase would ultimately be counterproductive by leading to a decrease in churn and handle. The biggest winners would be the OTB's, which bet $832 million on New York racing in 2003 and would reap at least $8 million from the takeout increase.

If the idea is to help NYRA, why wouldn't the proposal mandate that all additional revenue be given directly to NYRA instead of giving the OTB companies most of the money? The report clearly shows that barely 15 percent of the handle on NYRA racing is bet at the track, yet somehow fails to grasp the corollary: 85 percent of the revenue raised from a takeout increase would go to OTB's and out-of-state simulcast receivers, not to NYRA.

The problem in New York racing is not that takeout is too low but that administrative expenses are too high, largely because of the very existence of six redundant OTB companies that exist primarily to provide additional jobs for politicians to dole out. Combining these six companies into a single statewide system would save more money overnight than jumping the takeout would ever generate.

One of the OTB presidents said privately that he has personally surveyed his customers and that he believes they don't care what the takeout rates are, not that he wants his name attached to such a statement. If he really believes that, how about an alternate proposal: Let OTB increase the takeout on bets made at its facilities and through its telephone-betting systems, and leave the rates alone for on-track and non-OTB telephone bettors and out-of-state customers. If the OTB's think that takeout increases are a good thing that customers won't mind, let them try it out on their own and see what happens to their business. Of course, the OTB's and their legislative minions would never agree to such a thing.

What the OTB's are really up to here is trying to bail themselves out for a miscalculation of their own that has nothing to do with NYRA or takeout. Two years ago, they agreed to pay higher fees to subsidize the moribund harness-racing industry and fund regulatory efforts in exchange for expanded simulcasting, including nighttime Thoroughbred signals. This was not the bonanza they expected, and now they are choking on the higher fees.

The solution is to revisit that issue, not to saddle NYRA with a takeout increase it does not want and that the public certainly does not deserve.