Selling OTB is a Smart Bet
By Mayor Rudy Giuliani
Last week I announced the sale of New York City's Off-Track Betting
Corporation. This long-sought after transaction fulfils a campaign
promise and represents a significant step forward for increasing the
efficiency of government in New York City. This is one of the largest
and most profitable privatizations in New York City history.
The transfer of OTB to private management will bring nearly $400
million dollars into the City and allow us to retain a sizable stake
in the future success of the operation. The offer includes an immediate
payment of up to $260 million, and an ongoing annual cash flow that
will bring millions of dollars more to the City each year. The offer
was approximately $113 million more than the runner-up bid. In addition,
the offer provides for $50 million in capital improvements to OTB
locations throughout the five boroughs of New York City. Completion
of the sale requires approval from the State Legislature.
The New York City OTB used to be known as "the only bookie in
the world that lost money." It was formed in 1970 to allow the
City to profit from New York's popular horse-racing industry, but
over time OTB was frequently the source of controversy because of
mismanagement and profit shortfalls. By the time I first took office
in 1994, the steady decline at OTB had resulted in a $5.3 million
dollar deficit and a sub-par racing experience for horse-racing fans.
It's no surprise that when I first proposed selling OTB, very few
investors were interested in taking over the organization. Now that
our management reforms and emphasis on accountability have turned
this money-losing operation into a profitable business venture - with
$35 million dollars net to the City last year - OTB has a market value
that justifies the duration of our 31-year investment.
I am very pleased to be able to make good on my promise to privatize
OTB. But the real winners are the people of the City, who will see
an immediate profit of hundreds of millions of dollars as well as
a percentage of annual earnings in perpetuity.
This is a great example of how privatizing non-essential services
can bring both short-term and long-term benefits to the City of New
York. The simple fact is that running a betting parlor is outside
the essential responsibilities of government. We would be better off
focusing our energies and capital on improving the delivery of essential
services that provide a safe and clean environment in which New Yorkers
can conduct business, raise a family, and enjoy life in our City.
Selling OTB will generate an immediate profit of more than a quarter
billion dollars. It will also ensure that the City keeps a stake in
the future success of the business. In addition, OTB's service to
its customers will improve dramatically under new private ownership
that has extensive experience in running this type of operation. This
is a win-win situation for the people of New York and horse-racing
fans alike.
