Nassau Regional Off-Track Betting Corp., faced with declining revenue and diminished interest in horse racing, has offered early retirement incentives to 86 employees in a move that could generate $3.5 million in gross salary savings, agency officials said Monday.

The move comes as OTB continues to look for a site to build a casino-style gambling parlor to house as many as 1,000 video lottery terminals. In January, OTB dropped a plan to put VLTs at the vacant Fortunoff building in Westbury after vocal community opposition.

The incentive would pay eligible OTB employees 1 percent of their 2014 base salary for every year of service with the agency or every year of membership in the New York State Retirement System -- whichever figure is higher -- to a maximum of 20 years.

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To be eligible, employees must be 55 or older and have worked for OTB or been in the state retirement system for a minimum of 10 years.

OTB president Joe Cairo estimates that about 40 employees -- or 18 percent of the agency's 222-person workforce -- will take the incentive.

The incentive would be paid out of the agency's operating budget and be made in 15 bimonthly installments, beginning in late May and continuing through the end of the year.

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Cairo said the cuts were needed because OTB has seen diminished revenue as the sport's popularity has waned and from a brutally cold winter that prevented racing for long stretches of time at Aqueduct Racetrack in Queens.

"It's a dying industry," said Cairo, who may also look to close some OTB branches as leases come up for renewal this year. "It was a tough winter for us and that may have expedited the need to do this incentive."

Suffolk Legis. Kevin McCaffrey (R-Lindenhurst), who serves as president of Teamsters Local 707, the labor union representing Nassau OTB employees, said the agency could likely operate with about 20 percent fewer employees.

"The racing industry is past its peak," McCaffrey said. "The handle is down and there is a need for fewer employees," referring to racetrack revenue."Suffolk OTB president Phil Nolan said they are not considering retirement incentives.

Cairo said he's looking for a new location for the VLTs but declined to identify specific sites. Multiple sources have said the focus continues to be on Belmont Park.

Nassau OTB employees have until May 14 to accept the retirement incentive.