Stop the red ink and privatize off-track betting in New York
The Racing Forum on Motor Parkway in Hauppauge, one of the venues operated by Suffolk OTB. Credit: Suffolk Off-Track Betting Corp. 2010
Fourth in an occasional series.
New York State and the counties that host the regional off-track betting corporations have received billions of dollars in revenue from them over the years, but the only way those governments are going to get the best of this game is to quit while they're ahead.
The state and counties should get out of the OTB businesses and let private companies run them. If taxpayers stay in the game, they will be losers.
The OTBs were created as public benefit corporations, starting in 1971, and benefit the public they did. The six entities -- New York City, Catskills, Capital, Suffolk, Nassau and Western -- had a monopoly on much of the state's legal gambling, and generated billions. Much of that money went to state and local governments, and although the corporations fostered an obscene amount of patronage for the politically connected, as long as the money flowed, complaints got little traction.
But modernity, with its casinos and Internet wagering, has intruded, even as interest in horse racing has declined.
OTB payouts to government peaked in 1988. In 2003 payouts began to decline steadily, and since 2008 they've plummeted. And thanks to aggressive lobbying and a grabby state government, the racing industry and state coffers got a greater and greater percentage of the money, while local governments got less and less.
In late 2009, New York City OTB filed for bankruptcy. It eventually left $300 million in debt and as much as $700 million in liabilities for state taxpayers to handle. Suffolk OTB has been trying to declare bankruptcy for two years. In a telling move, when Albany passed a bill that allowed Suffolk OTB to move forward on reorganization, it worded the law to allow all of the OTBs to declare bankruptcy.
Nassau OTB has suffered losses for several years. Its last two annual audits include notes questioning the corporation's ability to keep operating.
Other regional OTBs are doing poorly too. Only Western, which owns the harness track Batavia Downs, with its video lottery terminals, is faring well, no thanks to horses.
Yet no matter how much money they lose, the OTBs still find high-paying jobs for political players.
Democrat Phil Nolan lost his re-election bid for Islip supervisor in November. Now he is poised to head the Suffolk OTB at $154,000 a year. His predecessor hasn't left yet, so until the job opens up, Nolan is making $125,000 per year to "train." Nassau OTB is run by county Republican leader Joseph Cairo, who got the $200,000 job in 2010 when the GOP took over the county. When Democrats ran it, Democrat Dino Amoroso headed Nassau OTB.
The OTBs are headed for trouble, yet there's still money to be made from betting on horses. There's just no reason to believe the OTBs are the ones to do it right.
With a constitutional amendment to expand gambling being considered and a governor who wants to professionalize gambling in New York, the time for a fresh look at the OTBs is here.
Multiple privately owned racinos are already operating, and as many as seven full-blown casinos have been proposed; the idea that the private sector should run gambling in this state, and pay fair taxes from the proceeds, is clearly ripe.
Why not apply it to OTB, and award the franchise to the highest bidder? This would give state and local governments one last shot of revenue from the sale. It would also allow a private operator to focus on the aspects of gambling on horses that work, like betting machines in bars, and Internet wagering. And it would erase potential debts, like the ones the New York City OTB left.
Horse racing no longer has great odds for the OTBs. But that doesn't mean a private company couldn't turn it into a winning wager.
