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SOA New York states position on OTB restructuring

March 17, 2010

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The Standardbred Owners Association of New York (SOA) has submitted the following document expressing support for the plan to restructure New York City OTB. It is being posted in its entirety.
We have reviewed the proposed New York City OTB (NYCOTB) restructuring plan released by Assembly Racing & Wagering Chairman Gary Pretlow on March 15, 2010 and would like to offer the support of the Standardbred Owners Association (SOA) for this proposal, with a few small suggestions/caveats. 
Overall, Chairman Pretlow’s plan reflects the staunch belief of our horsemen – and numerous stakeholders throughout the racing industry – that NYCOTB’s own restructuring proposal is unrealistic and would have significant negative impacts across New York’s racing, breeding and agricultural industries.
CHAIRMAN PRETLOW:  “In my view, Mr. Frucher’s plan is fatally flawed. The recommendation to have the corporation pay statutory expenses to the racing/breeding industry from net revenue remaining after the corporation covers its own expenses simply cannot work.  There would be no guarantee of any support for the industry.  Besides, the entire pari-mutuel industry is structured to operate on percentages of gross handle, as opposed to net revenue.” 
We could not agree more.  NYCOTB’s suggested elimination of legislatively required payments to the racing industry, their scheme to shift from a “gross to net” model and their apparent continued refusal to commit to supporting or promoting our own New York State racing product in a substantive way are just a few of the components that make this proposal disastrous for our industry, and thus counterproductive to New York's overall economy.
We believe that Chairman Pretlow’s decision to focus on long-needed administrative improvements and cost containment at NYCOTB – including reducing administrative payroll, shedding unnecessary leases, consolidating branches, reining in overtime, adjusting staffing levels, changing work rules and giving up vehicles – makes much more sense for the long-term well-being of New York racing than simply eliminating legislatively mandated payments to the industry (payments, it should be noted, that were deemed necessary by the Legislature as a direct result of NYCOTB’s own counterproductive decision to import competing racing signals).
Furthermore, we wholly agree that the need for such payments could be mitigated simply by requiring NYCOTB to show and promote New York’s own local racing product.
CHAIRMAN PRETLOW:  NYCOTB should reduce the usage of out-of-state tracks by at least 50% and show more in-state races. This will mitigate the eliminated payment for hold harmless and generate a net savings of $7 million.
The SOA has, in fact, proposed a comprehensive, structured initiative called NEW YORK FIRST that would address this very issue.  Therefore, while we agree with the Chairman’s goals, we would propose going further than this general suggestion and would mandate that New York State OTB operations be required to carry/display the New York State racing product first on all of its wagering outlets/vehicles (including, but not limited to, in-parlor, television broadcasts, and any and all past, present or future wagering platforms it or its agents employ), with out-of-state signals to be allowed only when not enough in-state signals are available to fulfill said programming needs.
In addition, our other caveat/suggestion in this regard is to create real, enforceable sanctions for non-compliance with this mandate.  One need only look at NYCOTB’s continued refusal to pay their existing dark day and maintenance of effort debts, and the fact that they have even thumbed their noses at a New York State Court of Appeals ruling requirement payment, to understand this need for remedy.  Therefore, we would propose that in the event that such New York First requirements are not complied with by any OTB corporation, then the law should provide that any party in interest (defined as a track, recognized horsemen's association at the aggrieved track or the breeders association that is funded by state law) should have entitlement to a judicial injunction.  Said OTB corporation would then be enjoined from taking any wagering on any out of state signals, except that no such injunction shall be granted where the OTB corporation is carrying all the New York State signals that are available.  Quite frankly, without the right to injunctive relief, any legislative pronouncement regarding such a New York First program would be rendered essentially toothless.
Finally, we think it is important to note that we believe no forms of legislative “relief” for NYCTOB should be provided unless and until all past obligations are paid.  Based on past experience, it is not unthinkable that NYCOTB could receive statutory relief and continue to remain in bankruptcy and still not pay the tracks, horsemen and breeders what they are owed.  Therefore, if those back debts are not paid by any OTB corporation, then interested parties should be entitled to injunctive relief and that corporation should also be subject to having its franchise or license revoked summarily for not making statutory payments, for failing to abide by a prior judicial enforcement order of the state's highest court, and since OTBs “continued participation in the sport is inconsistent with the public convenience and necessity” (this is a phrase often used by the New York State Racing & Wagering Board in other instances where the best interests of racing are not being served).  Again, OTB’s mandate is to provide assistance to the state and the racing industry, not to cause irreparable damage to each.
We believe that two additional proposals also contained in Chairman Pretlow’s proposal – the creation of a statewide tote and a first-ever statewide OTB channel – could also benefit the industry in the long term if implemented correctly.
CHAIRMAN PRETLOW:  “I believe that the six OTB corporations, seven privately owned racetracks and the NYRA should collectively purchase or create a tote company. The cost to each entity would be less than $100,000, but the benefits to be derived are limitless.  New York State is losing over $300 million in handle to out-of-state ADW (advance deposit wagering) companies with better coordination of the racing products and control of the tote. Another recommendation, which would require legislation, would be to institute a statewide OTB channel to provide everyone in the state with the opportunity to view all races and to encourage fans and potential fans to do business with their local regional OTBs.”
In addition to these worthwhile initiatives, we would also ask that the state consider clarifying the law to allow for New York State race tracks to distribute their live racing product via live internet video streaming.  While the current statute authorizing in-home simulcasting by OTBs has been interpreted as only allowing OTBs to offer this service, the fact of the matter is that this has significantly impacted the development of new audiences and new handle.  For example, racing fans interested in wagering on a race at Yonkers – either through OTB or through Yonkers ADW – may choose not to unless they can be guaranteed of seeing the race live; which, as we know, has long been an uncertainty with NYCOTB.  Such a change would undoubtedly increase interest in our New York State product and would, at the same time, send an important message that NYCOTB simply can no longer continue to seek to control the distribution of pari-mutuel wagering in New York.
Finally, on the issue of NYCOTB’s outstanding liabilities, while we obviously would like to see the debts owed to the racing industry be paid immediately and at a rate of 100 cents on the dollar, we recognize that shared pain and sacrifice will be required across the board and that stretching out these payments over several years may be necessary in order to achieve the long-term success we all mutually desire.
CHAIRMAN PRETLOW:  “I recommend that the outstanding payments owed to racetracks be extended over a ten-year period, except for what’s owed to Monticello, which should be paid in full over a four-year period. Amounts owed to the Thoroughbred and Standardbred Breeding Funds should be spread over three years and payments due to the New York City employee benefits program and New York City employees’ retirement system should be spread over five years”
Therefore, we understand and support the need for such extended payments, but would offer the caveat/suggestion that these extended payments should include interest over said period.
We have been consistent in our communications with stakeholders throughout Albany that we believe NYCOTB has no unity of interest with New York State horse racing and the notion of being able to “fix” it – without jeopardizing the well-being of a harness racing industry that generates 40,000 jobs for New Yorkers – appears to be a challenge of the highest order.  The vast majority of NYCOTB’s problems can be linked directly to their own flawed business decisions and a demonstrated lack of support for New York’s racing product, and within such a context it has been amazingly ironic that NYCOTB has continually sought to remedy its ills on the backs of New York horsemen, breeders and farmers who are just now experiencing a long-anticipated renaissance. 
However, we also committed ourselves to keeping the door open to new ideas and discussions – as we have since the commencement of these NYC OTB discussions – and as such, we are comfortable offering our support for Chairman Pretlow’s thoughtful new approach.   Though we continue to have reservations about the long-term prospects of leaving pari-mutuel wagering in the hands of entities with the track records and histories of the New York State OTBs, the fact of the matter is that Chairman Pretlow’s plan represents the most rational, achievable, industry-friendly proposal we have seen yet.  We look forward to working with him and stakeholders throughout Albany and New York State to make it a success. (SOA/New York) 
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