Here we go again.
The city’s Off-Track Betting Corp. is crying bankruptcy: Its chairman, David Cornstein, says it will be “out of money” come the end of the fiscal year next June 30.
Once again, it seems, New York City finds itself – in Rudy Giuliani‘s famous phrase – operating the only bookie operation in history that loses money.
This time, though, it isn’t entirely OTB’s fault. For the past four years, the agency has found itself on the short end of an onerous revenue-sharing arrangement with Albany that all but ensures that it won’t make a profit.
But the remedy remains the same: City Hall should post a “for sale” sign on OTB’s front window and find a private buyer.
Simply put, government shouldn’t be in the position of operating any commercial business – let alone one that loses money. Mayor Bloomberg, who took OTB off the market after assuming office in 2002, now seems to recognize this: He says it may be necessary to shut it down.
“The state uses it as a cash cow, and the city has been subsidizing the state,” the mayor said. “We are not going to continue to do that.”
A shutdown seems a bit precipitous – certainly without even exploring the possibility of a sale. After all, OTB does employ 1,500 people.
It may be that Bloomberg is simply engaging in a bit of political brinksmanship with Albany. If so, it’s justified.
Certainly, there’s no denying that OTB signed a bad deal with the state four years ago, in which it was forced to turn over an untenable share of its proceeds in return for the right to handle night-time thoroughbred racing.
Since then, OTB has been dipping into its reserves, which are rapidly depleting.
But if the agency can’t pay its bills – and can’t provide revenues to the city – who needs it?
Last year, OTB posted a gross profit of $125 million – but had to pay the state $134 million. The result: a $9 million hole.
Back in 1994, OTB was drowning in red ink. Then the Giuliani team cut costs, closed money-losing parlors, streamlined the operation and trimmed excess fat.
Guess what? The agency’s financial picture brightened.
Giuliani later tried to sell off OTB, but state lawmakers beholden to unions blocked him.
But how salable is OTB?
Back in 2001, three private firms vied to buy it; bidding started at $250 million, plus a percentage of future profits.
But that was before the state deal, when OTB was in a more tenable condition.
Obviously, any future sale would be contingent on renegotiating OTB’s arrangement with the state. If terms can be changed to give the agency a decent shot at a profit, it should be sold.
One way or another, it’s time for Gotham to get out of the bookie business.