This past week, NYC-OTB filed for Chapter 9 bankruptcy. According to NYC-OTB, they will pay their creditors what is owed to them in full. In the short term, breeders and race tracks will breathe a sigh of relief. Though the funds owed to them will be delayed in coming, it will eventually arrive. That’s the good news. As part of this filing, NYC-OTB wants to change the rules regarding payment to the tracks and breeders in the future. Currently, payments are calculated based on gross revenue. NYC-OTB is asking the state legislature to change the funding formula so payments to the tracks and breeders will be calculated on net income.
New York racing is about to get shafted big time. At the present time, the amount of money paid to the tracks and breeders is determined by legislation. In effect, the state determines the commission that the tracks will get from the various OTBs. The tracks don’t have an option to negotiate with the OTBs, but at least they are guaranteed a percentage based on the handle. Now, NYC-OTB wants to change the deal. The New York race tracks (harness and thoroughbred) will still be forced to give NYC-OTB the signal, but they won’t know what, if anything, they will get for their signal as it will depend on net profits. Being OTB is a bastion of political patronage, I think it is safe to say any profits, if any, will be minimal.
You try to go into a store and take a refrigerator from them and tell the salesperson you will pay the store at the end of the year, assuming you made money and see how far you get. Safe to say you will not be coming home with a new refrigerator. Yet, this is the deal NYC-OTB wants the tracks and breeders to take; they want to pay for the product at the end of the year and if there is no money left, the tracks will just have to do without.
This is going to hurt the New York horsemen and race tracks and the sad thing is they can’t do much about it. First of all, rest assured if the deal changes for NYC-OTB, it is going to change for the other regional OTBs. Tracks and horsemen want to complain? Be careful of how much you complain because your VLT percentage may be cut to compensate the municipalities what they used to get from OTB.
The New York OTB model is long obsolete yet it remains a part of the political fabric of New York State. It is time to kill it off once and for all or at least let the race tracks run OTB. New York race tracks and horsemen are powerless to kill the OTB corporations off but the out of state race tracks could. All it takes is for the out of state horsemen to deny their home tracks permission to send their signal to the NY OTBs. However, that won’t happen as they will not be willing to give up the commission earned on wagering from New York State gamblers. The only hope is that investors will not purchase the bonds NYC-OTB is proposing to sell as part of their reorganization.
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