FOR IMMEDIATE RELEASE
November 15, 2007
MAYOR MICHAEL R. BLOOMBERG ANNOUNCES FINANCIAL CRISIS FACING NEW YORK CITY’S OFF-TRACK BETTING CORPORATION
OTB Expects to Run Out of Cash by June 2008 – Mayor Blocks First-Ever City Taxpayer Bailout for Betting Parlors
Mayor Michael Bloomberg today announced that the New York City Off-Track Betting (NYC OTB) Corporation is facing a financial crisis and that the City will not inject additional funds into NYC OTB, particularly given the difficult economic times facing the City and the need to prioritize funding of essential city services like education, healthcare, infrastructure improvements and public safety. The Mayor acknowledged that this is likely to cause NYC OTB to cease wagering operations if the situation is not otherwise rectified and recommended that OTB take appropriate action in light of the City’s decision. This decision came after reviewing OTB’s budgetary projections for this fiscal year and next and learning that the Corporation would likely run out of cash by June of 2008. Consistent with the Mayor’s announcement, OTB Board Chairman David Cornstein asked NYC OTB President Raymond Casey to draft a plan for the ceasing of wagering operations, including the closure of its branches, and to present it to the Board of Directors.
“I have always had reservations about City government being involved in gambling,” said Mayor Michael Bloomberg. “But it is entirely wrong for the City to lose taxpayer money funding such a questionable endeavor. Years of State legislative schemes that favored racing interests over NYC OTB, at the expense of essential City services, have forced the City into a financially untenable situation in which City taxpayers are, in effect, asked to subsidize the State racing industry. Right now in Albany, the future of racing in this State is being decided and the future of NYC OTB should be a part of that conversation. The OTB Chairman and President agree with me that unless something changes, these circumstances point to only one course of action – the cessation of NYC OTB’s wagering operations.”
“While NYC OTB management has performed well under
difficult circumstances, no business can survive when its profits are stripped
away,” said Deputy Mayor Dan Doctoroff. “The City spent 6 months studying
the industry and creating a comprehensive strategic plan to rehabilitate OTB and
the state’s racing industry. The plan requires the alignment of the
economic interests of the tracks and the OTBs in order to
Currently, NYC OTB brings in over $1 billion annually in wagers and generates an annual operating profit of approximately $125 million. However, the legislative mandates imposed by Albany have forced NYC OTB to make significant and increasing distributions to the racing industry – with the amount of these distributions based not on NYC OTB’s profits, but on gross revenues. For example, since 2001 additional requirements that have negatively impacted NYC OTB have included a reduction in revenue by $5 million annually through caps on customer charges, the imposition of $5 million in new, annual “regulatory fees” and the requirement to continue to pay fees to harness tracks – even if they are not operating. As a result, last year alone, NYC OTB paid the racing industry approximately $98 million, of which $54 million went to the New York Racing Association.
Since 2004, NYC OTB has taken a number of aggressive steps to keep its operating costs under control. These have included reducing management by 15%, cutting overall employment by 14%, reducing leased space and closing six under-performing branches. Last year, the City also engaged the Boston Consulting Group to undertake a comprehensive study of NYC OTB, including an in-depth look at the racing industry in NY State. The study concluded that the financial health of NYC OTB and the broader racing industry required an alignment both structurally and economically of on-track and off-track entities and an investment by all stakeholders in the marketing, technology and presentation of the NY racing product. Furthermore, without legislative changes to the distribution formulas, operational initiatives, while helpful, would not be able to remedy NYC OTB’s financial crisis in the long-term.
“I have testified numerous times before the State Legislature about the revisions to the current statutory requirements that are needed,” said NYC OTB President Raymond Casey. “Additionally, working together with the Mayor’s office, NYC OTB has proposed State legislative solutions to resolve the funding gaps. These calls for help have not been heard.”
The Mayor has asked that the dissolution plan address the needs of NYC OTB’s roughly 1500 workers whose jobs would be at risk. Potential options include offering severance packages funded by NYC OTB and assessing whether any employees can be redeployed into the City’s workforce.
The New York City Off-Track Betting Corporation was established as a public benefit corporation in 1970 primarily in an effort to raise revenue for the support of City and State government. The NYC OTB Board of Directors is comprised of five members.
Stu Loeser/ John Gallagher (212) 788-2958