OTB Bankruptcy Filing Likely to Lead to Job Cuts But No Layoffs

GOVERNOR PATERSON: 'Unprecedented but needed.'

Governor Paterson's decision to allow the New York City Off-Track Betting Corporation to file for bankruptcy reorganization is likely to result in a reduction of jobs at the agency but without layoffs, according to persons involved in the discussions.

It is not clear yet whether an earlyretirement incentive will be offered as part of an effort to trim the payroll. City OTB Chairman Meyer S. Frucher said he hoped to begin negotiations quickly with Teamsters Local 858, which represents OTB managerial personnel, and District Council 37 Local 2021, which bargains for line employees.

'Reduce Headcount Humanely'

The presidents of those locals, Barbara Reda of Local 858 and Leonard Allen of Local 2021 were in Albany for the press conference at which the announcement was made, as was DC 37 Executive Director Lillian Roberts. The Governor thanked them for their cooperation, and issued a statement in which Ms. Reda and Ms. Roberts committed themselves to working with state officials on a solution, but it is clear that little has been resolved so far.

LEONARD ALLEN: 'Won't take the brunt of cuts.'

For that reason, Mr. Allen limited his comments in a phone interview the following evening. He said he had gotten the distinct impression from the Governor and OTB officials that "they would like to reduce the headcount but they would like to do it humanely. Labor's not responsible for OTB's problem, and we're not going to take the brunt of this."

Ms. Reda did not respond to a request for comment.

Mr. Paterson called the bankruptcy reorganization process "an unprecedented move [but] a necessary move."

'Employees Get Their Benefits'

While employees' pensions are guaranteed by law, there had been some concern that the Chapter 9 bankruptcy filing could put other employee benefits at risk because of its potential impact on union contracts. Mr. Frucher said, however, "Every employee who works at OTB. . . will get the benefits that they have earned. There will be dislocation for some, but at the end of the day it is in the public interest to do this."

OTB has been losing money for the past seven years, a decline that was accelerated when it agreed to a revision in how much money from its betting handle was returned to the state in return for being allowed to accept bets on nighttime thoroughbred races. It has collected insufficient revenue from those races to make up for the additional money turned over to the state and its harness tracks, and Mr. Allen said, "The formula should've been changed a long time ago." A nationwide decline in betting on racing has been even more pronounced at OTB than at the racetracks themselves.

Key Role for NYRA?

Several persons interviewed said it was significant that among those present at the press conference was Charles Hayward, the head of the New York Racing Association, which operates the state's three major thoroughbred tracks, Aqueduct, Belmont and Saratoga. Mr. Paterson said that OTB at its inception was unintentionally "designed to fail" because it competed with the tracks rather than working with them, and there has been talk in recent years about the possibility of a statewide OTB system presided over by NYRA, which would allow consolidation in areas ranging from management posts to phone-wagering operations.

Mr. Frucher spoke of consolidation applying to betting systems and to the six OTB corporations throughout the state. "There is no reason, candidly, to have seven totes," he said, referring to the betting apparatus. He then added, "How many Presidents of OTB do you want to pay for? There's a lot of redundancies here."

'Tough for House to Lose Money'

Mr. Paterson echoed that, speaking of "all kinds of calamity and duplication" in the current structure. He said dryly, "It takes a certain level of ineptness to lose money [as the operator] in a gambling situation."

Mr. Hayward noted that the city OTB was NYRA's "biggest customer," and that 30 percent of the wagers at OTB were on NYRA-run tracks. At the same time, he said, the thoroughbred industry, whose 40,000 jobs range from the tracks themselves to breeding farms throughout the state, depends on a healthy OTB.

He offered one optimistic note, which was underscored by the successful Saratoga meeting that was concluded on Labor Day. Less than three years ago, Mr. Hayward said, NYRA was forced to file for bankruptcy protection. It emerged from that status last October, and at a time when the owners of major tracks in key states like Florida and California are beset by financial troubles, NYRA is "the best and strongest racing entity in the country today."

Facing Cash Crunch

Mr. Frucher told reporters that his talks with the unions had to proceed quickly, "because we run out of cash somewhere between the end of December and the end of March."

He made it clear that some OTB branch offices would be closed, noting that the leases "can be abrogated."

Among the ideas being considered, Mr. Frucher continued, is setting up betting terminals in "bistros" and other dining establishments beyond the few restaurants that already double as OTB parlors, complete with betting tellers. The self-service machines, which are already found in all OTB branches, would require only maintenance personnel.

He indicated that going in this direction had appeal beyond the reduction in personnel costs. OTB parlors are overwhelmingly populated by men—a distinct contrast with a racetrack like Saratoga, where a sizable part of the crowd is made up of women —and one reason is the distinctly different atmosphere of the two venues. Mr. Frucher noted that in France, 52 percent of the bettors are female; in the typical OTB parlor, women patrons are few enough to stick out.

Sees Civil Service Changes

Mr. Frucher said the changes in law would include civil service matters as well as the Racing and Wagering Law which sets the distribution formula for the money bet at OTB.

"There are opportunities here working with the employees, working with NYRA, working with the horsemen," he said.

OTB currently owes the state as much as $40 million from wagers, and $14 million to NYRA that it has yet to turn over. It will hold on to that money to sustain operations while negotiations with the unions take place and a reorganization plan is put together.