Dispute in sale of city OTB to Magna

SARATOGA SPRINGS, N.Y. - A disagreement between the New York City Council and Mayor Rudolph Giuliani is threatening to derail Giuliani's plans to sell the New York City Off-Track Betting Corporation to a partnership headed by Frank Stronach's Magna Entertainment.

The disagreement centers on whether the sale of OTB requires a home-rule message from the city council, which is opposed to the sale. Home-rule messages from city governments in New York State are required for legislative actions involving city issues that also require state approval. The council is arguing that a sale would require a home-rule message while the Mayor's office has responded that the state can approve the issue unilaterally.

Officials from the city council and from the mayor's office have held talks about the issue of a home-rule message, but the talks have not produced an agreement, said Jake Lynn, a spokesman for the city council. Lynn said that the council is considering filing a lawsuit to block the sale if it proceeds without a home-rule message.

"There is a very clear difference of opinion, so needless to say, the talks are not going very well," Lynn said.

Mike Hess, the city's chief counsel, did not return a phone call on Thursday.

The council's speaker, Peter Vallone, a Democrat and union supporter who is running for mayor, is opposed to the sale, and Vallone would likely use the chance for a home-rule message to kill the sale before the issue reached the legislature.

In a separate matter of concern, city council officials said this week that the council has concerns about whether the two bids for OTB were evaluated fairly by the city. The bid from the Magna partnership was valued at $389 million by the city, $113 million more than the runner-up bid from a partnership including the New York Racing Association, Churchill Downs, and Television Games Network.

Earlier this week, Hess said that the city had picked the Magna partnership over the NYRA group because of the disparity between the estimated value of the two bids.

"Being the chief lawyer for the city, I'd have to call for an investigation of the city if Magna didn't win," Hess said. "Dollars is a big factor, and in this case, the auction wasn't even close."

But even if fair values had been placed on the two bids, one council official said, the city could not justify a sale of OTB based on the Magna bid, considering that OTB contributed $35 million to the city this year. The official said that the value of that recurring revenue stream to the city approached $500 million.