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Thursday, October 21, 2010

"Industry Requests" in OTB Deal

As expected, the deal reached between NYC OTB and its creditors' committee includes a plan for racetracks to take over OTB's advance deposit wagering (ADW) system in return for the forgiveness of $65 million worth of debt, reductions in certain payments to the industry, a reduction in its tax payments to the state, layoffs of around 400 employees, and closure of some branch offices. In addition, as feared by standardbred horsemen, it includes perks for owners of the state's existing harness track racino owners which appear to be totally unrelated to the immediate issue of the corporation's emergence from bankruptcy.

A new corporation will be established to run the ADW operation on behalf of creditors which include NYRA, Empire Resorts/Monticello Raceway, Finger Lakes Racing Association, [and] Churchill Downs.

Shares of the account-wagering company are expected to be allotted based on the amount of pre-petition debt that is being forgiven by each entity in the transfer. [DRF]
Wagers on in-state tracks placed through the ADW will be treated as on-track bets as far as the tracks' retention percentages go; except that NYC OTB will get 2% on wagers placed on terminals at one of its 50 remaining branches. Not only will bettors be able to use, fund, and withdraw from their accounts at the remaining 50 parlors, but OTB is required to "prominently display offers to sign-up for new Track ADW accounts." So there's a change for you; OTB serving to benefit the racetracks. Whatmore, a "New York first" policy will require the parlors to show less out-of-state races, and "carry all operating in-state tracks and....feature these events on the largest screens available in the parlors" (except on Triple Crown and BC days).

The provisions that are upsetting the harness horsemen are included in a section which is labeled "Industry Requests." They would, if approved by the legislature, allow the racinos to offer tax-free "free play" credits to lure slots customers, up to 5% of the net per machine at the facility (though only half that at Yonkers and Aqueduct); eliminate a requirement for dollar-for-dollar matching when racinos tap into the state's share of VLT revenues for capital improvements; lower the minimum number of required racing dates specifically for harness racing; and, rather bizarrely, grant a variety of legal indemnifications to Yonkers and Monticello, including regarding any underfunding of purses resulting from NYC-OTB failing to meet their financial obligations to them. (An effort to also eliminate a 1% increase in the state's share of VLT revenues that was included in the recent budget seems to have failed.)

How these clauses got into the agreement seems clear. As Tom Precious reported on earlier in the month:
The source involved in the talks said the harness push is coming strongest from Jeff Gural, who owns Vernon Downs and Tioga Downs.
Gural is not on the committee because he owns those tracks; but rather because he's the chairman of Newmark Knight Frank, a real estate company which is the landlord of several buildings with OTB properties, including their headquarters at 1501 Broadway. Gural is a guy who's been praised for his efforts to promote racing at Tioga Downs, which has set takeout rates at the state's minimums. However, it seems fairly clear that he's taking advantage of the situation to try and push through provisions that don't relate to money owed on his properties, nor to the OTB bankruptcy.
“Everybody just assumes that we’re just a bunch of greedy racetrack owners who are trying to take advantage of the situation to line our pockets,’’ Gural said. “The truth is exactly the opposite. We recognize it’s good for the industry to keep OTB afloat."
It's hard to figure how these proposals would help to accomplish the latter.

Whether these proposals will get the legislative approval they need is not clear. Though the Senate Racing Committee chairman Eric Adams signed on approvingly to the press release, the Assembly Racing Committee chairman Gary Pretlow declined to do so. “I’m not in a mood to give away any of the state’s money," Pretlow said of the “free play" plan. []

We still haven't heard from the thoroughbred guys on this agreement. Though nobody is threatening to reduce their racing dates, you'd think that they might share at least some of the concerns that the harness guys expressed here. NYTHA president Richard Violette, and New York Thoroughbred Breeders Executive Director Jeffrey Cannizzo are both preparing for the Genting ceremony at Aqueduct on Friday, and are giddy no doubt about the prospects of the slots money to soon come.

- Speaking of Senator Eric Adams, he got a prominent mention in the Inspector General's scathing (for lack of a better word despite the fact that everyone else used it) report on the Aqueduct Entertainment Group selection, though the harshest criticism was reserved for John Sampson and Malcolm Smith. They should be quaking in their boots knowing that the report recommends that the matter be referred for possible criminal charges. But this matter warrants a post of its own, so stay tuned for that. I told you that this was gonna be a doozy.

- Bad Religion at Irving Plaza on Wednesday night!


Anonymous said...

"No major labels, they really suck, except for Bad Religion, can't get their sticker off my truck"

Figless said...

Great job summarizing this exciting development.

Very pleased to see that the remaining branches will allow transactions into the ADWs, without which ownership would be useless.

Still unclear to me whethar the debt forgiveness includes monies owed horsemen for purses?

If so, will the tracks fund the shortfall? If not, do the horsemen share in ownership by getting an increased percentage?

And what of the money owed the Breeding Fund, does this ever get paid?

As an owner/breeder it would be nice to get clarification from my representative, but like you said they are probably too busy getting ready for the big party with Genting and negotiating new stallion deals to worry about the small breeders.

Figless said...

Always wondered which the politically connected real estate baron reaped all of those windfall rentals. Now we know.

Why does he have so much influence on this process, operates two insignificant harness tracks and a landlord.

Any mention of whethar his leases will be or have been terminated under bankrutcy?

Or is he immune from damages due to his connections?

alan said...

>>Any mention of whethar his leases will be or have been terminated under bankrutcy?

The agreement states that their HQ at 1501 Broadway will be reduced by at least half. Other than that, I don't know.

El Angelo said...

Maybe eviscerating instead of scathing?

Anonymous said...

After he is done with this mess Greg Rayburn should be hired to trim the fat the the MTA.