ALBANY - State leaders Tuesday night were finalizing a rescue of the New York City Off-Track Betting Corp. that would eliminate 700 jobs, reduce payments to horse racing tracks and aid the struggling New York Racing Association, sources said.

Agreement hadn't been reached by 8 p.m. between Gov. David A. Paterson and the legislature. But sources said a bill was being written that could be voted on as early as Wednesday. The city OTB, which is owned by the state, has threatened to shut down by Sunday night if no help is forthcoming.

With debt of $500 million, the city OTB hopes to borrow $250 million to reorganize. A shutdown would terminate 1,300 employees and imperil racing at Belmont Park and elsewhere.

However, Paterson and lawmakers are loath to be seen as bailing out a gambling operation in the midst of a recession that will likely mean cuts in state aid to schools and hospitals. An administration official who requested anonymity told Newsday the proposed legislation would sustain the city OTB and NYRA for a year while a long-term remedy is found for horse racing's ills.

The plan involves lowering the city OTB's expenses by eliminating about 60 percent of its workforce through early retirements, a voluntary severance program and, if necessary, layoffs. Managers and consultants would have to find $5 million in savings within their ranks.

Revenue sharing with NYRA, the tracks and horse farms would be cut by 15 percent. NYRA also would receive a loan of up to $17 million to cover some of its building and maintenance costs, the official said.

Assembly Speaker Sheldon Silver (D-Manhattan) was cautiously optimistic. "We have a plan to keep OTB afloat for another year," he said.

State Sen. Dean Skelos (R-Rockville Centre), the minority leader, suggested selling the city OTB. He also backs a plan to overhaul the selection of an operator for slotlike gambling machines at Aqueduct Race Course in Queens. The plan would produce an operator in 65 days who would pay a $300 million licensing fee.

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