Jeffrey A. Casale is the president and chief executive of Suffolk Regional Off-Track Betting Corp.
New York's racing industry is in a constant state of crisis.
There was controversy over the awarding of the franchise to operate New York's race tracks in 2008. And the transfer of New York City's Off-Track Betting Corp. to the state. And don't forget the ongoing debacle about bringing video lottery terminals to Aqueduct, or the city OTB and New York Racing Association's current financial woes.
The state's racing problems always seem to be framed by "if we don't do xyz" then "we'll have to close our doors."
To make matters worse, the national racing industry is in free fall. National racing handle - the total amount of money wagered - is at its lowest level since 1998, falling almost 10 percent in 2009. That was after a 7 percent drop in 2008. Even Atlantic City hasn't escaped the downturn: Trump Plaza reported a drop of almost 23 percent.
NYRA tracks saw their business decline by 25 percent from 2008 to 2009. The out-of-state tracks, on which OTB branches also take wagers, witnessed more than a 20 percent drop. Statewide, net handle for all OTBs dropped an average of 10 percent.
How to break through the logjam?
The suburban OTBs have some ideas. For four years, Suffolk OTB - with input from the Capital, Catskill, Western and Nassau OTBs - has promoted a joint venture business model, which centers on two complementary goals: recognizing the important local nature of off-track wagering, and committing to the aggressive pursuit of shared services.
The mantra of consolidation aside, a joint venture cooperative addresses shared services where they make the most economic sense, as well as where they would most enhance customers' experiences. Creating a common electronic system for placing wagers, establishing a statewide Internet wagering portal, and developing a statewide marketing and branding campaign are examples of cost-efficient shared services. The Task Force on the Future of Off-Track Betting reached many of the same conclusions in its recently released report to the governor.
Suffolk OTB - along with the Capital, Catskill and Western OTBs - has drafted legislation to address the dual plagues of dysfunctional distribution formulas and unregulated out-of-state Internet wagering companies.
The current distribution formulas require that OTBs around the state pay privately owned harness tracks - as well as the Finger Lakes thoroughbred track - millions of dollars in maintenance and other fees. The payments came about because private track operators feared that 2003 legislation that allowed OTBs to carry out-of-state nighttime thoroughbred racing would cause devastating losses to their nighttime harness racing.
This never occurred, yet the state still requires OTBs to make the payments. The fees are over and above the wagers placed on races run at the host tracks. And it's worth noting that these private-enterprise tracks are already flush with millions of dollars as a result of their video lottery terminals.
Such changes to the state's racing laws have slashed the percentage of revenue that Suffolk OTB turns over to Suffolk County and its taxpayers. In 1975 it was 53 percent; now it's shrunk to 10 percent. In contrast, Suffolk OTB now distributes 71 percent of its revenue to the racing industry, as opposed to the 23 percent distributed in 1975.
The second part of the suburban OTB legislative agenda concerns out-of-state Internet wagering companies. In 2008, the state's Racing and Wagering Board issued a ruling that exempted these entities from the regulatory fees required of New York's OTBs. In addition, they don't pay statutory fees to the tracks for taking wagers on their races. As a result, the Internet wagering companies are taking New York State's OTB customers; since their cost of doing business is lower, they can offer more to customers in rewards and rebates. The state's OTBs have estimated that this 2008 decision represents a loss to New York State coffers of $20 million to $30 million annually.
It's time to get out of crisis mode. New York's suburban OTBs have a reasoned approach that can revitalize horse racing in New York State. It's a plan that takes nothing away from the backbone of the racing industry - the breeders and the horsemen. And it gives back the revenue to those we are constitutionally bound to serve: the state's taxpayers. Stay tuned.