OTB Votes To Scratch Itself Due to Losses; Mayor: If No Relief from Albany, Ax Falls on 1,500

By RICHARD STEIER

The head of the union representing most of the 1,500 Off-Track Betting Corp. employees said his members were "stunned" by Mayor Bloomberg's Feb. 19 move to disband operations, but expressed faith that top state officials would approve legislation that might make OTB viable again.

The Chief-Leader/Adrienne Haywood-James RIDING A HUNCH: As president of Off-Track Betting Local 2021 of District Council 37, Lenny Allen is hoping 'that the wise men in Albany' change a revenue formula that has made OTB a city financial liability so that his members keep their jobs and stay current on their mortgage and tuition payments.

"I'm still hopeful that the wise men in Albany will come up with something," said Leonard Allen, president of OTB Local 2021 of District Council 37, moments after the Mayor told reporters he was ready to close OTB by June because it was on the verge of losing money.

'No Jobs Out There'

Mr. Allen was not anxious to consider the alternative for his 1,400 members. "We're in an economy where there are no jobs, and people have invested their lives in these jobs," he said. "They're concerned about their pensions," which could be affected even if OTB remained in operation but under the control of a private entrepreneur rather than continuing as a public benefit corporation.

The Chief-Leader/Adrienne Haywood-James 'CAN'T KEEP FEEDING THE HORSES': Declaring he would not allow the city treasury 'to prop up the state's racing industry,' Mayor Bloomberg said he was ready to close the New York City Off-Track Betting Corporation because 'the government should provide essential services; this isn't one of them.'

He continued, "They don't know how they're going to pay their mortgages. Some of their children are going to have to leave school" because tuition will no longer be affordable. Layoff notices are expected to go out to all employees next month.

The Chairman of the State Senate's Racing, Gaming and Wagering Committee, William J. Larkin, said the potential loss of jobs made him determined to craft a solution prior to the April 1 deadline for adopting a new state budget. He said he and his Republican colleagues would have acted as part of the effort two weeks ago to extend the state's thoroughbred racing franchise if Governor Spitzer and the State Assembly had been amenable.

'Give OTB Bigger Slice'

"I believe that we should be working to change the formula" under which a significant share of the OTB betting handle is diverted to the racing industry, Senator Larkin said during a phone interview the day after the OTB shutdown proposal was approved. He said that 75 percent of the money wagered on horses statewide goes through the six OTB corporations and they are entitled to keep a greater share of the betting pie.

One person familiar with preliminary discussions in Albany, who spoke on condition that he not be identified, predicted OTB would continue in some form, although not necessarily under city jurisdiction. "It's going to be worked out," he said. "It's just a question of control, structure."

Mr. Allen said that was a logical surmise, since "I just can't see how you can let a billion-dollar business go back to illegal bookies. How do you throw something of value in the garbage can?"

Mayor: A Drain on City

But Mr. Bloomberg, speaking after his five appointees to the OTB Board of Directors voted unanimously to proceed with a closing plan, contended that under the current legislative formulas for distributing betting revenue, OTB had become a drain on the city treasury that it was supposed to supplement.

He acknowledged that taking the drastic step of beginning to shut it down might be what was needed to spur state action to restore OTB's profitability. "The only ways you can get Albany to function is to create a crisis," he said.

He made clear, however, he had no interest in one proposal that would have the state covering half of any losses the city incurs once its betting operation begins running a deficit, as OTB President Raymond V. Casey said it is projected to do starting in June.

"This is supposed to be subsidizing New York City; not the reverse," Mr. Bloomberg said of the City OTB, which includes 61 betting parlors, three teletheaters, and a phone-wagering operation.

'Won't Pay for Gambling'

Prior to the board vote, he had declared, "The city is not going to take dollars away from schools and hospitals to pay for a gambling operation, and that's what we're being asked to do."

His decision to disband operations - starting with the closing later this week of betting parlors on Steinway St. in Astoria, Queens and Hyland Blvd. in the New Dorp section of Staten Island - was not "made lightly: after all, jobs are on the line," Mr. Bloomberg said.

But he made clear his anger that six days earlier, state officials granted a 25-year lease extension to the New York Racing Association to operate the three major thoroughbred racetracks without addressing the financial woes afflicting OTB.

'Good Money After Bad'

Citing NYRA's need for a financial bailout and its indictment a few years ago on Federal fraud charges, Mr. Bloomberg questioned the decision to stay with it rather than choosing a for-profit operator for the potentially lucrative franchise, saying, "This is a classic example of government's tendency to throw good money after bad."

The fact that the deal was reached without involving the city in discussions or providing any relief for OTB, the Mayor said, was a signal from state lawmakers that "we have no interest in helping the people of New York City." He also predicted that the other five OTB operations throughout the state are "going to follow us as sure as night follows day" in encountering financial losses.

Donald Groth, the President of Catskill OTB, agreed, but said a key element in those problems would be the "domino effect" that would result if New York City OTB closed.

While state legislation that gave a greater share of OTB revenues to the tracks to boost racing purses and attract more high-quality horses has failed to produce a hoped-for increase in betting handle, Mr. Groth said the loss of those revenues from the city operation could have a drastic impact.

'Product to Deteriorate'

"When the product begins to deteriorate at those tracks, what will our customers be betting on?" he said outside the OTB boardroom.

Catskill OTB last year showed a profit of $8 million, Mr. Groth said, after $21 million had been siphoned to various racing entities, including horsemen's groups and harness tracks as well as NYRA. But that was a drop of about $4 million from the net profit the previous year, he said, voicing concern about the downward trend.

Tucked into the legislation extending NYRA's franchise was language that would sweeten the pot for seven state harness tracks, from Yonkers Raceway to Vernon Downs near Syracuse, which was literally rescued from closing by the improvements the bill provided in what it will keep from the revenue generated by video-lottery terminals on their premises. Under its language, more than $120 million a year in VLT revenue that previously would have gone to education will flow to the harness tracks and their horsemen, even though tracks like Yonkers and Saratoga Harness Raceway are already flourishing because of the installation of VLTs in recent years.

Opposes Consolidation

Mr. Groth echoed previous complaints by city officials that current racing legislation gives too large a portion of racing revenues to the tracks at the expense of the OTB franchises. But he also questioned the wisdom of combining the six OTBs, perhaps under the control of NYRA, which some officials believe would reduce administrative costs enough to make them profitable.

"Long Island and Buffalo are two different operations," said Mr. Groth, who originally worked at New York City OTB when it launched operations 37 years ago. "There are needs for region-to-region administration."

He called for the appointment of a special commission to study the needs of the racing industry in New York.

Senator Larkin said he believed a case could be made for consolidating the OTBs, but ruled out a proposal that has been floated in the past that they be placed under NYRA's control.

'Don't Give It to NYRA'

"That's not my goal," he said. "You could consolidate all the OTBs under one head, but I don't think it should be NYRA."

His Assembly counterpart, J. Gary Pretlow, could not be reached for his reaction to the OTB closing vote.

Senate Majority Leader Joseph L. Bruno had previously said that he wanted to study the state's OTB operations and make a decision on changes by May 2009.

One veteran OTB employee at a branch in lower Manhattan said he was uncertain that last week's action had any implications other than to force Albany to focus on the potential consequences.

"What does it mean?" said this Betting Clerk, who declined to give his name. "The Board of Directors did what the Mayor told them to do. So what happens if in March the Legislature gives him a bag of money?"