Important NYCOTB Update from NYTB
Friday, December 3rd, 2010
NYCOTB Update from NYTB Board President Barry Ostrager and NYTB Executive Director Jeff Cannizzo
Dear Breeders,
We are sure you have been following recent headlines about developments in the legislature involving the New York City Off-Track Betting Corp. (NYCOTB) bankruptcy. Even though the situation is still extremely fluid to say the least, we would like to give you an update and outline some of the contingencies.
When the New York State legislature met in special session early this week, the House approved the legislative changes included in the current NYCOTB restructuring plan (the same plan already approved by the bankruptcy court and creditors’ committee). The Senate, however, did not take any action. NYCOTB then resolved, by the unanimous vote of its board, to close down on Friday December 3.
It was then announced on Thursday that the Senate would convene for another special session on Tuesday, December 7, when it might address the issue. Initially it appeared that NYCOTB was still going to go forward with the planned shutdown, but late Friday afternoon the corporation said that it would stay open until midnight on Tuesday, December 7 to see if the Senate would pass the bill when it returned. According to Governor Paterson, in a statement also released late this afternoon, “Because such costs [of closure] far exceeded the liabilities of rent and payments to the workforce, the Board concluded that it would give the Senate one last chance to pass a restructuring plan. While the Board extended this time, it has publicly pledged that this will be the last opportunity for reorganization before the corporation will close down.” NYCOTB Chairman Larry Schwartz fully endorsed this statement in a statement of his own released this evening.
The NYTB Board, our lobbyist and the two of us have been grappling with this problem now for over a year. The issues are complex, and growing moreso by the minute, but we can outline the main implications for breeders of various contingencies.
Contingency #1: The Senate does not pass (or fails to take action) on the bill on Tuesday. NYCOTB then closes its doors next Tuesday at midnight.
•Fund Revenue. The Fund would immediately lose 40% of its revenue from its single largest revenue source. Theoretically some of the NYCOTB account holders and parlor bettors would return to the race track, which could offset the immediate loss, but the extent to which this might take place is utterly unknown.
•ADW Wagering. The single most important issue at this juncture would be for New York State to protect its ADW account holders to keep them wagering in New York. Losing NYCOTB ADW account holders to ADWs operating outside the state would be the worst case scenario for every industry shareholder. If, however, NYCOTB ADW account holders can be transitioned over to NYRA Rewards, the long-term outcome would be positive for the Fund, because the Fund participates in a larger share of the revenue from NYRA players than it does from NYCOTB players.
•NYCOTB debt. Industry creditors would receive nothing from the bankruptcy, but it is uncertain whether the city or the state would be liable for any or all of the debt.
Contingency #2: The Senate approves its own bill (S8520).
•In the Senate Republicans’ new NYCOTB bill, the Fund will be treated as in the previous bill passed by the House (Contingency # 3, below as it relates to the Fund). There will be some additional changes.
•The modified bill would, however, need to be approved by the House, which is not scheduled to come back into session this year.
Contingency #3: The Senate approves the restructuring plan “as is” and NYCOTB can remain open for business. Please note that as of this moment the Senate does not appear to have the 32 votes needed to pass the bill.
•Fund Revenue. Under the restructuring plan being considered, the Fund is protected. Going forward, the Fund would continue to receive revenue at current rates.
•ADW Wagering. ADW operations would move from NYCOTB to the track creditors. Each of those bets would be treated as an “on-track” wager based on the venue where the race is run. The Fund receives a larger percentage of revenue from on-track wagers than on wagers from NYCOTB account holders.
•NYCOTB debt. NYCOTB would pay the remaining creditors with whatever money they have left after the bankruptcy. Obligations to Fund include both pre-petition debt (i.e. debt from 2009) and 2010 “deferred” revenue. The Fund could recover anything from pennies on the dollar to nothing at all.
Contingency #4: The Senate does not pass (or fails to act on) the bill on Tuesday and NYCOTB comes up with a new restructuring plan to present to the bankruptcy court and creditors which does not involve statutory changes (and therefore would not require legislative approval). NYCOTB could petition the court to release them from their union and lease contracts or find some other strategy that would allow them to stay open, but at this point any speculation on the provisions or timeline of this plan would be pure guesswork.
It would be hard to overstate the negative impact on the Fund if NYCOTB should shut down on Tuesday. As outlined above, closure would mean the immediate loss of 40% of Fund revenue, with further ramifications down the line should in-state bettors migrate to wagering outlets in other states. I urge you to contact your NYS Senator immediately and make clear what a devastating blow it would be for breeders if they should fail to pass (or act on) the bill now before them. Please impress upon your senator that we would support any legislation that keeps NYCOTB open and does not negatively impact Thoroughbred breeders.
To locate your Senator, click here for a link to the NYS Senate contact page.
Obviously we will keep you posted on all developments.
Sincerely yours,
Barry R. Ostrager
Board President, NYTB
Jeffrey A. Cannizzo
Executive Director, NYTB