New York City backs merger of OTB, NYRA

The City of New York would support a merger between its New York City Off Track Betting Corporation, the largest bet-taker in the U.S., and the three tracks operated by the New York Racing Association, according to a paper distributed by deputy mayor Daniel L. Doctoroff to the state legislature on Friday.

The paper states that the offtrack betting company is facing insolvency without major structural change in New York, and it recommends that the state legislature support the merger, which would require significant changes to state law.

The recommendation was released at a time when the legislature is expected to tackle reforms to the racing law next year as part of the process to award the franchise to operate Aqueduct, Belmont, Saratoga, and a casino at Aqueduct for the next 20 years. The current franchise, held by NYRA, expires at the end of 2007.

In an interview on Friday, Doctoroff said the merger is just one of several possibilities that OTB would support as part of a broader recommendation to dramatically overhaul how racing is structured as part of the legislative agenda next year.

"This is the one moment in time to do something," Doctoroff said. "What is needed in the New York racing industry is not a marginal improvement. What is needed is a dramatic restructuring to align the interests of the shareholders."

A merger between NYRA and NYCOTB has been a common topic in the past when racing officials in the state have discussed structural reform, but OTB and city officials had never before stated that they supported an alliance between the two companies.

Bill Nader, a NYRA senior vice president, said the letter was a "good first step" in recognizing that the two organizations could cooperate. However, he said it would be difficult to design the merger given the different obligations of the two companies.

"The good thing is that at the very least this letter opens the door to discussions along those lines," Nader said.

NYRA is currently required by law to supply its racing signals to the OTB company, which opened its first offtrack betting parlor in 1971. OTB pays NYRA a portion of each bet made on NYRA races, along with portions of wagers made on simulcasts.

Both NYRA and OTB are facing difficult financial circumstances. NYRA filed for bankruptcy earlier this year, and in 2005, New York City OTB lost $8.2 million, on handle of over $1 billion. OTB has lost money over the past four years.

Barring a merger, the paper states, laws governing the distribution of revenues from OTB to NYRA should be changed so that the OTB operator pays half of what it currently pays. NYRA could afford the loss due to revenues from slot machines at Aqueduct, the paper states. Slots were legalized at Aqueduct in 2001 but state officials have yet to give their approval to a casino at the track.