Relates to combining the Nassau and New York city regional off-track betting corporations into the metropolitan off-track betting corporation; repealer

Summary of specific provisions

The following group of provisions will be enacted into comprehensive, amended and new, chapter 47-A legislation designed to address and resolve the following systemic problems:

1. Enabling legislation be enacted and/or amended to,

(a) Dissolve the current state-run NYC-OTB by way of reorganization;

(b) Dissolve the Nassau-OTB by way of reorganization;

(c) Create a new Metropolitan-OTB consisting of a combined NYC-OTB and Nassau-OTB; and

(d) Establish a lean, streamlined, affordable high-tech headquarters for the new Metropolitan-OTB in Freeport, NY

2. New legislation altering the system for payout of the net income ("Handle") of regional 0113 corporations pursuant to Section 527 and new subsection 519-4 to exclude the true and entire cost of functions of regional off-track betting corporations as re-defined in sections 501 and 602 of chapter 47-A, including salaries and wages, insurance, rent

and real estate taxes, payments in lieu of taxes and/or to compensate municipalities for loss of admission taxes pursuant to section 531-2 of this chapter, contributions to any post-retirement employee fund and/or pension and other post-employment expenses, the costs of acquisition, construction or equipping of branch offices and other facilities and premises of the corporation, the state tax levied pursuant to subsection section 527-1, debt service, and a capital reserve of no more than 3%, before any distributions are made in accordance with said section.

3. New legislation permitting Video Lottery Terminal locations at,

(a) Belmont Racetrack,

(b) One additional Metropolitan OTB VLT at a location in the City of New York designated by the Site Selection Committee, and

(c) One additional Metropolitan OTB VLT at a location in the County of Nassau designated by the Site Selection Committee

Justification

Despite the way in which the current economic predicament has been packaged, there is absolutely nothing wrong with the NYC-OTB corporation or the New York state OTB system, including the way in which the six regional OTB corporations operate and the revenue that most of them produce, that good management cannot cure. The system generates substantial revenue and is a major New York State employer that, if need be, could be a standalone industry. In fact, if every racetrack in New York State closed down tomorrow, the New York, state OTB industry would still generate over $100 million dollars in revenue from current betting on races held at out-of-state race tracks. The ROTBs operating deficits and solvency crises are, in major part, an artificially induced by-pro- duct of delayed statutory payments due to the horse racing industry, including their take from in-state and out-of-state simulcast revenues.

There is an immediate need to take action to rescue the NYC-OTB from its current economic crisis and bankruptcy, and to take definitive steps to avoid the same fate for the Nassau-OTB. While there is a real need to effect more efficient and streamlined operations, the systemic problem is with the non-business model that is foisted upon the ROTBs. Under the current legislative scheme, OTB corporations must distribute their income before fully paying their bills, or risk having the shortfall treated as an actionable debt that allows the racing industry to cast them into bankruptcy as creditors, rather than as business partners who must share in the vicissitudes of the marketplace. Unless and until that debilitating malady is addressed, the OTB system will not be able to effectively avail itself of modem technology, new marketplaces, or weather economic downturns and the attendant drastic reductions in "Handles" that fund their bottom lines.

NYC-OTB and Nassau-01B pump over a billion and a half dollars directly into the State's economy and supplies even more economic fuel through the more than 2000 full time workers currently employed by those enti- ties. It is estimated that approximately 70% of that work force will

lose their jobs if the NYC-OTB emerges from bankruptcy under the plan currently employed by those entities. It is estimated that approximately 70% of that work force will lose their jobs if the NYC-OTB emerges from bankruptcy under the plan currently being urged upon the legislature by its current administration, and Nassau-OTB is allowed to suffer the same fate. Although the top heavy OTB executive and management-level head- quarters staff must be consolidated and/or reduced, most of the OTB positions are middle-class jobs that are productive and have reduced, most of the OTB positions are middle-class jobs that are productive and have a significant multiplier effect. Moreover, while the OTB corpo- rations' cost of fringe a significant multiplier effect. Moreover, while the OTB corporations' cost of fringe benefits have increased since 2001 - in step with similar employees benefit package increases in every segment of the nation's workforce - off-track betting system employees and their costs have not been the problem. Salary and wage expenses for NYC-OTB workers that were $65.4 million eight years ago in 2001 actually went down to $65.3 million in 2008.

In order to save working-class jobs and ensure this reliable cash source that is such a critical element of the machine that provides needed revenues to local governments and which fuels this important segment of the State's economy, the regional off-track betting corporations must be permitted to operate pursuant to a permanent adjustment to the statutory distribution scheme that will allow them to fully pay their bills before non-tax distributions are made.

Prior legislative history

A9391

Fiscal implications

EFFECTIVE DATE: This act shall take effect immediately.