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EDITORIAL: City OTB's mess, and its future, have a far reach

There is a commission galloping around the state named the Future of Off-Track-Betting. The smart odds are calculating that OTB may not have one.

The state's horse racing industry, seemingly in perpetual crisis, is once again pulling up short. New York City OTB, which handles $1 billion in wagers annually, filed for bankruptcy last month with an estimated debt of at least $220 million.

The bankruptcy proceeding is nothing more than an end-run around Albany to hammer out a political compromise that the legislature is incapable of doing. The 40-year-old city venture can't make a profit because of its hopeless business model: dreary storefronts, patronage-bloated payrolls and the mandated siphoning of profits for racing's special interests.

To get in the black, the city OTB wants to use the restructuring in bankruptcy court to reduce its unionized workforce and cut its outsize payments to the breeding industry and race tracks. Gov. David A. Paterson gave the task to Meyer Frucher, an old Albany hand, who wanted to issue $250 million in bonds to cover OTB's debt. Instead of the storefronts, he envisioned betting taking place at video kiosks around the city, with 24-hour-a-day action at tracks around the world and virtual racing.

Frucher's imaginative plan got scratched by racetrack operators, unions and legitimate concerns about expanding the state's gambling operation, enabling it to compete with the more successful state lottery for dwindling bettor dollars.

But what's the alternative? A legislative hearing on Friday in Manhattan accomplished the goal of getting all the parties in one room and on the record. But economically and politically feasible plans to downsize the industry have yet to emerge.

The city's OTB currently sends about 11.5 cents of every dollar in revenue, before operating costs are deducted, to the horse racing industry. Its head says the industry can't survive unless the formula to calculate the sum comes from its profits, not its gross. It also wants to stop payments to harness tracks for the days they don't operate.

The pushback from the horse-breeding industry has been intense. At the hearing, a representative of the thoroughbred breeders group showed up with a 4-foot headstone to make his point that such a change would be the death of that industry.

The New York Racing Association, the city OTB's largest creditor with a $14.7-million claim, is the loudest voice against any reorganization. Instead NYRA, which operates Belmont, Aqueduct and Saratoga as a franchise, said on Friday that it will deliver a plan in 10 days to take over the operation of its longtime adversary.

If Frucher can overcome the high hurdles and come up with a plan that satisfies everyone, the legislature is likely to bless it. Otherwise, the biggest of the state's OTBs shuts down this spring, sticking taxpayers with a $600-million bill to cover health care and pension costs.

The Nassau and Suffolk county OTB operations do turn over modest revenues to local governments, despite their better-known reputations for providing jobs to the politically connected. The resolution of the city OTB bankruptcy, however, is very likely to determine the future of the state's other OTBs.

Gambling not tied to horses isn't directly involved in the OTB mess, but there is always the risk Albany can throw it into the pot. While NYRA is fighting fiercely to take over the OTBs, it is also asking the state for another lifeline.

Outrageously, it has threatened to cancel the Belmont Stakes, the third leg of the Triple Crown, if it doesn't get $30 million by this spring. NYRA argues that it deserves this money because it hasn't received its promised cut from the newest proposed public trough: video lottery terminals at Aqueduct Racetrack.

After it made this threat, NYRA audaciously refused to allow its books to be audited by New York State Comptroller Tom DiNapoli, even though it had signed an agreement to do so. Now it has backed down and the records are to be turned over soon. This episode should make the state think twice about giving it any new funding.

Bowing to NYRA's demand for a rushed approval of VLTs at Aqueduct is a mistake. Since that deal was struck with NYRA, there's been a new entry in the race for betting dollars. The likely federal recognition of the Shinnecock Indians of Southampton opens the possibility that the tribe will start operating a full casino. Since Belmont is one of the obvious locations, the future of Aqueduct should be determined as part of an overall gaming strategy.

New York is considering an expansion of its bookie operation and further subsidies of the horse racing industry. The economic reality, however, is that betting on the ponies is dying, along with those who spent their days handicapping the daily double. Unless an OTB plan emerges that provides the state with a significant revenue stream and no further liabilities, it might want to stop beating this dead horse and instead give it a decent burial.hN