Opinion

Why killing OTB is a losing bet

New York City Off-Track Betting Corp.’s move to seek Chapter 9 pro tection in order to re-organize has produced a shrill cacophony from critics who say OTB should shut down. But why pull the plug on an entity that’s generated more than $4 billion in revenue for New York since its inception in 1971?

It’s easier to criticize a problem than to solve it. But the solutions are clear, and we have a plan to resurrect this valuable state asset without requesting a single taxpayer dollar.

First, the Legislature must revise the unsustainable statutory formula that mandates OTB payouts to the racing industry and government based on the total amount wagered as opposed to the revenue actually collected.

OTB took in nearly $1 billion in gross wagers in 2008, with more than 75 percent of it going back to winning bettors — leaving $245 million in revenue. But because it had to distribute $129 million to the racing industry, the city and the state before paying any of its own bills, it only had $116 million left to cover $134 million in operating expenses.

And this deficit is only getting larger: OTB could run out of cash in a matter of months. Entering into Chapter 9 protection is the first step of a major overhaul whose endgame will be an OTB that New Yorkers deserve — modern, efficient and once again a big revenue source for the city, state and horseracing industry.

Revising the statute is just part of the solution. The reorganization will also significantly reduce OTB’s operating expenses by closing high-cost locations and find new sources of revenue by using modern technology.

Some say we should just let OTB die, but they ignore the far-reaching consequences. If OTB operations ceased, the city and/or state government would be on the hook for $600 million in pension obligations. Tracks around the state might close. Nearly 40,000 New Yorkers who make their livelihood on the racing industry could lose their jobs. And the upstate agricultural industry, home to generations of horse breeders and farmers, would take another serious hit.

New York can’t afford this. I was appointed as chairman to turn OTB into a sustainable economic engine for New York. Reorganization requires us to work closely with stakeholders and state officials on a plan that will put NYC OTB back on track without any taxpayer subsidy. We must cut costs, develop new ways to enhance revenue and fix the broken distribution model that has bled OTB dry.

While critics point to bloated payrolls and administrative costs, the corporation has been cutting costs across the board since 2004, for a cumulative saving of $45 million.

Under Chapter 9, and with the cooperation of the labor unions that comprise our workforce, we’ll make more cuts — reducing headcount and eliminating a number of branches.

These savings alone, however, aren’t enough to keep OTB alive. It would be impossible for any business with fixed costs to keep going if it had to make ever-growing payouts from its gross revenues. For OTB to survive, lawmakers must change the statute to allow it to cover its operating expenses and make investments before paying distributions to the racing industry and local government. This is a crucial fix to a misguided policy.

The city Off-Track Betting Corp. is an easy target for those who like to joke that it’s the only failing bookie in the world — but the fiscal challenges that face it and the state are no laughing matter. The time is now to support a plan that will revitalize this important regional economic engine and save our state from hundreds of millions in costs and potentially tens of thousands of jobs.

Letting OTB die is a gamble that just isn’t worth the risk.

MeyerSandy” Frucher is the chairman of the New York City Off-Track Betting Corp.