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Andrew Cuomo budget: OTBs could shed horse racing operations

Patrons bet on horse races at The Racing

Patrons bet on horse races at The Racing Forum in Hauppauge operated by Suffolk OTB on Friday. Credit: Barry Sloan

Off-Track Betting agencies in Nassau and Suffolk counties and across New York could shed their horse racing operations – their main function for nearly 50 years, but also a source of deficits in recent years – under proposals unveiled by Gov. Andrew M. Cuomo last week.

OTBs would have greater flexibility to operate under Cuomo’s proposed 2019-2020 budget, as they contend with declining racing revenues. The budget proposal would allow OTBs to decide to get out of horse betting entirely or merge with other OTBs, officials said.

OTB officials and experts say Cuomo's proposal, which must be approved by the state Legislature, may make it possible for betting agencies to pursue bigger moneymakers, such as video lottery terminals and, perhaps eventually, sports betting.  

But at this point Cuomo's proposals are general, and do not set guidelines for what the changes would look like.

“The whole industry is on the phone, trying to figure out what does this mean,” said Phil Nolan, director of Suffolk Off Track Betting.

OTBs were established in six areas in the 1970s to pass along profits from horse betting to local governments and to reduce illegal gambling. In Nassau and Suffolk, the OTBs have significant numbers of patronage employees.

OTBs simulcast races, take telephone and internet bets and operate automated betting machines. In Batavia in Genesee County, Western OTB manages a racetrack at Batavia Downs.

But the OTBs have struggled in recent years as horse racing has declined in popularity and competition has grown from casinos in other states, officials said.

There are five OTBs, including one each in Nassau and Suffolk, after the New York City OTB closed in 2010.

Facing fiscal problems, the OTBs in Nassau and Suffolk have branched out into profitable video lottery casinos. The more than 17,000 video slot machines in the state had over $1.7 billion in gross revenues in 2018, according to the New York Gaming Association.

Suffolk OTB operates 1,000 machines at Jake's 58 Hotel & Casino in Islandia, where about $3.2 billion has been wagered since it opened in 2017, Nolan said.

Nassau OTB gets revenue from 500 dedicated video lottery terminals at Resorts World Casino at Aqueduct Racetrack. Officials expect the number of machines to double this spring.

Suffolk OTB went bankrupt in 2011 and has about $41 million in debt, Nolan said. Nassau OTB is about $8.8 million in debt, agency officials have said. 

Officials at Nassau and Suffolk OTB said they have cut expenses by selling properties, shutting down betting branches and reducing the size of the workforce.

The agencies have not turned a profit on horse betting in over a decade as racing has “become a losing proposition throughout the country,” Nassau OTB president Joe Cairo said.

At Suffolk OTB, horse racing bets declined from about $225 million in 2002 to about $85 million last year, Nolan said. In Nassau, bets were $154 million last year, compared with $257 million in 2009, officials said.

The concept of Cuomo’s proposal is to allow OTBs that do not want to focus on racing to contract those operations out to other OTBs, said Morris Peters, a spokesman for the state budget division.

However, he said in an email he could not, “speculate on what that might look like, ultimately.”

Cuomo's proposal raises questions about what the state will allow OTBs to offer instead of horse race betting, said Richard Schaffer, who chairs the Suffolk County Democratic Party and advises the county legislature on OTB appointments.

Nassau and Suffolk OTBs would need state authorization to expand their VLT operations or launch sports betting, which are more popular ventures than race betting. "That’s where you see this generation going," Schaffer said.  

Cuomo announced in his Jan. 15 budget address that he plans to legalize sports betting at four private upstate casinos. A constitutional amendment would be required to allow sports betting elsewhere, a state official said.

OTB officials have said sports betting would benefit their financially-strapped organizations, providing needed revenue for local governments and bringing in more customers. 

“The very idea of sports betting with only four isolated locations in a big, big state of millions of people is not going to cut it,” Catskills OTB president Donald Groth said. "You can't run a business on horse racing alone."

OTB officials in Nassau and Suffolk said they have no plans to merge or halt racing operations.

"We have never spoken to Suffolk about merging, and I don’t see it on the horizon for many reasons," Cairo said. 

The governor’s proposals also would also set standard financial practices for the first time. OTBs would be required to maintain financial records and allow internal auditors to review expenses. Also, OTB boards would have to meet at least quarterly.

Officials at Nassau and Suffolk OTB said they already have these financial practices.

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