Calculations favored Magna

New York City used different formulas to calculate the value of the bids placed by partnerships seeking New York City Off-Track Betting Corporation, an economist said Friday. The discrepancy partially explains why Magna's winning bid appeared to be much larger than the runner-up.

The difference between the city's estimated value of the bids - $389 million by a partnership headed by Magna Entertainment and $276 million by a partnership headed by the New York Racing Association - was cited as the primary factor for the selection of Magna on Thursday as the winning bidder. The selection is subject to legislative approval, which is considered unlikely this year.

Mayor Rudolph Guiliani cited the $113 million difference when he said on Thursday the decision was a "no-brainer."

It is not clear how the city made the calculations. Both of the bidding parties pledged a nearly identical amount to the city in up-front cash payments, $260 million by Magna and $250 million by NYRA. The partnerships differed in how much they would pay to the city annually from a cut of the handle. Those differences were used to make projections that separated the bids by $113 million.

Magna has pledged to pay the city at least $2 million a year, which the city valued at $139 million, and NYRA has promised to pay the city at least $1.1 million, which was valued at only $26 million a year.

An economist with knowledge of both bids said Friday that the city could not have arrived at the projections it cited Thursday without inserting a variable that benefited the Magna partnership. The economist spoke on the condition of anonymity because of a relationship to the bidding groups.

"There is definitely something in there that is recognizing an upside to the Magna bid," the economist said.

City officials did not return phone calls on Friday. Wilbur Ross, the financial adviser hired by the city to estimate the value of the bids, did not return a phone call or respond to a fax of written questions.

Both NYRA and Magna were asked to provide a "wish list" of legislative changes to factor into the value of their bids. The variable the city used that increased the value of the Magna bid was likely affected by how each party envisioned future operation of OTB.

For example, the city could have assumed that Magna would be able to increase handle at a much faster rate than NYRA because of the importation of additional simulcast signals, the economist said. That would push handle up at a higher rate and also allow the city to benefit from larger cuts of the wagering dollar.

Handle growth has been fairly static the past several years at OTB. Last year, handle through OTB's 75 locations grew 1.25 percent, from $1.002 billion to $1.050 billion.