Razzle Dazzle
Bloomberg's Sin: He Gambled and Lost

By RICHARD STEIER

"The thing I don't understand," one veteran of the Albany-City Hall wars said June 17, "was what happened in negotiations and why Paterson was so angry."

He was referring to the battle over the future of the city Off-Track Betting Corporation and the aftershock caused a day earlier when New York Post state editor Fred Dicker quoted Governor Paterson lashing out at Mayor Bloomberg as possessing "the same kind of anger that reminds you of Spitzer."

Mr. Dicker's column claimed to have gotten that characterization from "a source with first-hand knowledge of Paterson's comments" about the Mayor. My source, who spoke conditioned on anonymity, believed that the Post columnist, considered by some to be the most-influential journalist in Albany, had spoken directly to the Governor.

He wasn't the only one, with several other government veterans noting the extensive and extended quotes that were supposed to reflect Mr. Paterson's "private" comments, and none of them believed Mr. Dicker had invented either them or his source.

A 'Ridiculous' Denial

NO MORE MR. NICE GUV: The caustic remarks about Mayor Bloomberg attributed to Governor Paterson following their acrimonious negotiations on the city's Off-Track Betting Corporation suggested hard feelings persist between the two most-powerful men in the state, and that the Governor was reminding his city counterpart of the pecking order.

The Governor denied having made the remarks, but he didn't demand a retraction, and Mr. Dicker called his response "ridiculous," writing in a follow-up column that "the governor knows where - as we say in the media business - the story came from."

The Governor's apparent venting may help his standing here and in Albany, reflecting an assertiveness that hasn't been obvious until now. It was also a reminder that while he may be an accidental occupant of his office whose popularity doesn't match the Mayor's, he can exercise his will over Mr. Bloomberg and make it stick.

In the final week of negotiations on OTB's future, the Mayor's posturing, both publicly and privately, spurred criticism by union officials and legislators, who used words like "petulance" and "cantankerous" to describe it.

Bill Henning, vice president of Local 1180 of the Communications Workers of America, said, "My understanding was he kept moving the goalposts. Every time the state agreed to what he was asking for, he said, 'We need something more.'''

Mr. Bloomberg had threatened to close OTB at the end of business June 15 unless the state granted long-term relief that would make the city's horse-betting agency profitable again. His disdainful comments about refusing to subsidize a "bookie operation" led one union official to claim this was Chapter 3 in a moralistic crusade against other people's bad habits that began with cigarettes and continued with trans fats. The fact that this particular war was being couched in terms of the bottom line, however, evoked the moral dilemma that was immortalized by Sky Masterson in "Guys and Dolls": "Is it a sin to gamble, or only to lose?"

Political consultant George Arzt said he believed Mr. Bloomberg viewed the matter strictly in terms of profitability, and had concluded that OTB was a losing proposition unless the formula for distributing revenues from bets placed through its parlors and phones was amended.

"The formula hasn't worked in years," Mr. Arzt said. He contended that the problem predated the miscalculation five years ago by OTB President Ray Casey that caused the current crisis because profits from being allowed to take bets on thoroughbred races at night fell far short of the greater piece of the revenue pie that OTB surrendered to harness tracks that figured to be hurt by the added competition.

'Too Little and All the Overhead'

OTB never lived up to the early predictions that it would produce enough revenue to be a boon to education statewide, Mr. Arzt said, adding that the state and the New York Racing Association "take too big a share, leaving the city with too little and all the overhead."

He was not convinced that Mr. Bloomberg had realized that forcing the issue in Albany would lead to a state takeover and welcomed that prospect. "I think if the [distribution] formula was re-jiggered, he would have strongly considered still running OTB," Mr. Arzt said. "I think he was hoping for re-formulation so he could claim victory and keep OTB."

But in daring the state to take OTB off his hands, Mr. Bloomberg made Mr. Paterson an offer he couldn't refuse. Where the Mayor was demanding a long-term solution, Albany is the land of the quick fix and the leisurely study. Sources have said that it was Mr. Bloomberg's closest ally among the three power-brokers in Albany, State Senate Majority Leader Joe Bruno, who blocked a measure proposed by the Governor that would have recalculated the distribution formula because of the protests of racing industry interests.

The only immediate bite on any of the affected parties will come at the expense of horse-players, who under last week's legislation will have the takeout on winning bets increased by 1 percent. State lawmakers believe that alone can take the city OTB operation out of the red, even before several administrative changes are made.

Mr. Paterson, in consultation with Mr. Bruno and Assembly Speaker Shelly Silver, will be appointing a new OTB board, replacing the five mayoral appointees including Mr. Casey. Even some supporters of the Mayor have questioned the OTB President's stewardship, contending that he owed his job to being Rudy Giuliani's cousin. They have also questioned whether OTB really needs all the executives currently on its payroll.

'Need Complete Overhaul'

State Sen. Marty Golden of Brooklyn, who called for "a complete overhaul of management," predicted that the state takeover of OTB would be the first step toward a merger of all six regional OTBs, which would reduce administrative staffs and cut costs by consolidating phone-betting operations, among other savings.

All those additional revenues would result without even altering the distribution formula. Mr. Arzt said, "The Paterson administration is in a much-better place to get something done in the Legislature" than Mr. Bloomberg was. But the shift in control also allows Albany leaders to revise the formula in a way that could help with the state's budget problems rather than as a means to prop up OTB, he said.

He also cited the Governor's intention to have State Sen. John Sabini become Chairman of the State Racing and Wagering Board, saying Mr. Sabini's intelligence and his understanding of the racing industry made the job "right up his alley."

One official with Bloomberg sympathies said all these factors may have made it inevitable that the state would take over OTB, and questioned whether the Mayor really wanted to retain control. But this official said the skirmishing that caused such acrimony reflected Mr. Bloomberg's general exasperation with Albany and the bickering - particularly between Mr. Silver and Mr. Bruno - that earlier this month produced a picture of Mr. Paterson at a press conference with the two men holding his head in his hands.

Feud Comes With the Jobs

"There's a million things that the city can't do without getting permission from the state, and that's frustrating," said this official, who spoke conditioned on anonymity. "And it's also been a source of tension between Mayors and Governors, and it has been going back at least to Lindsay and Rockefeller. Mike is demanding; he is tough. And Off-Track Betting wouldn't come close to making anyone's list of essential services."

But Mr. Bloomberg, in trying to make that point June 10, displayed something bordering on contempt for those who work for OTB when he told a reporter - another of those creatures that can bring his temper to the surface - that he was "not going to lay off one cop, one firefighter, one Teacher, so that we can support a bookie operation."

Lenny Allen, the generally genial president of OTB Local 2021 of District Council 37, bristled at the Mayor suggesting that any single employee in those occupations mattered more than the 1,400 whom he represents.

'A Divisive Comment'

Mr. Henning called it, "One of the most-divisive comments I've ever heard - a terrible example for the chief executive to set in talking about his workforce."

It appears Mr. Paterson, who began his June 13 press conference by noting the job losses nationwide and in the city over the previous nine months, took notice, with Mr. Dicker quoting him as saying, "It's obvious that Bloomberg has little use for the kind of people who come from Queens and Staten Island."

One past ally of the Mayor's said, "Clearly he comes up with remarks sometimes that show he's a little insensitive to the working stiffs. There is a constant pattern of him showing that he's not one of us, and you sort of scratch your head."

Normally, it is the task of the Mayor's Press Secretary to tell him when he has kicked over a fence and might want to do some mending. Unfortunately for Mr. Bloomberg, Press Secretary Stu Loeser became a father two weeks ago at about the same time that the Mayor made what Mr. Allen called his "incendiary comments," and no one else at City Hall seemed to realize what a bad taste they had left.

It became a personal issue between Mr. Bloomberg and the Governor once Mr. Paterson called that June 13 press conference to announce an agreement. He shrugged off the absence of the Mayor and any officials from OTB at the press conference, telling reporters that Mr. Bloomberg "said he would be helpful in whatever way he could. He didn't want to see anyone lose their jobs."

The Mayor Throws Down

A couple of hours later, however, the Mayor in a statement insisted that no deal had been reached and that unless certain issues were resolved, he would have "no choice but to go forward with our plan to close the city's OTB parlors on Sunday." He added, in what was clearly a warning to the Governor not to move forward with the takeover legislation without city approval, "We will fight to prevent gambling operations in the city unless they provide a public benefit to the city."

One supporter of the Mayor suggested Mr. Paterson had made a mistake in holding the press conference without having Mr. Bloomberg on board, explaining, "Going public and saying the deal is done is not the way you deal with someone who knows the art of the deal."

City Council Finance Committee Chairman David Weprin, asked following the Governor's press conference about the Mayor's absence, said he believed there were still a few loose ends to the deal, including pension obligations for the affected employees. "I think they're still negotiating, and [mayoral officials] don't want to tie their hands that they're negotiating a fait accompli," he said.

Mr. Paterson, however, either believed that he had an agreement in principle with the Mayor or that Mr. Bloomberg was being so intransigent that it was necessary to publicly announce an accord to increase the pressure on him to be reasonable. The Mayor's statement made clear he wasn't going to be stampeded into a deal.

A Nervous Father's Day

For the affected employees, it became another twist of the knife in what had become a gut-wrenching wait to see whether they would still have jobs by the following Monday. After the Governor's announcement, Mr. Allen had emphasized the importance of his members being reassured on that score as they prepared to celebrate Father's Day; Mr. Bloomberg yanked that assurance out from under them.

Mr. Paterson's first return of fire came with the issuance of a statement from his Communications Director, Risa Heller, that suggested the Mayor wanted the state to assume OTB's $201 million in liabilities while allowing the city to retain its primary asset - the roughly $18 million it was receiving in annual revenue from OTB.

His second came with the communication of his feelings to Mr. Dicker about a Mayor "you can't trust" who "appears to be self-destructing" and seemed to be acting out of frustration because of recent setbacks ranging from a stillborn presidential candidacy to the Legislature's inaction on Mr. Bloomberg's congestion-pricing plan.

By the time the column appeared, the deal to save OTB had been hashed out. The city would retain the right to receive surcharge revenues from bets placed on races at Aqueduct and Belmont, which figured to be about $4.25 million a year, and would lease the signal on its two cable channels that broadcast horse-racing to the new Empire State Off-Track Betting Corporation for $3.25 million annually.

"They didn't do so poorly," the Bloomberg supporter said regarding that continuing revenue stream for the city.

'Took Him to the Cleaners'

One union official disagreed, contending the state had gotten the broadcasting rights cheap and adding, "I think he overplayed his hand and got taken to the cleaners. I don't think there was a larger operating strategy [on the Mayor's part]. There was just petulance at work."

Mr. Henning said that what he described as "testiness" on Mr. Bloomberg's part was a quality that had surfaced in the past, at least as far back as in the battle over the city's scuttled plan to build a stadium for the Jets on the West Side, and reflected the difficulty of getting his way when he needed the approval of other public officials.

"In the private sector, it was 'my way or the highway' for him," Mr. Henning said. "Sometimes that doesn't work so well in government."

In corporate terms, an underperforming company that the Mayor controlled became a target for a takeover by shareholders who believed a change in management would improve productivity enough to make it profitable. At some point, the takeover clearly became a hostile one.

Whether the $7.5 million a year the Mayor ultimately pried loose to surrender control was worth the bad will he incurred from the Governor and labor can't yet be known. But what is clear is that, in racetrack parlance, he and Mr. Paterson aren't gentlemen jockeys who forgot their bruising stretch battle by the time they got off their horses.