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Thursday, December 22, 2011

Takeout Decrease is Leftout

§ 32. This act shall take effect immediately; provided that sections two, twenty-two, twenty-three and twenty-four of this act shall take effect on the ninetieth day after it shall have become a law and shall expire and be deemed repealed 2 years after such effective date.
That's the clause in SENATE BILL #S8549 SAME AS ASSEMBLY BILL #A11635, passed on June 17, 2008, that required that the 1% increase in the takeout rate for super exotics at NYRA tracks expire on Sept 15, 2010. NYRA's failure to revert to the lower rate has it in the hot seat again.
NYRA...will be required to pay back bettors about $8.6 million...if it can track them down through racing accounts. It will also have to help clear up IRS issues with those who won exotic bets during the period. Further, NYRA will be required to pay a $50,000 contribution to a racing-related charity. [Albany Times Union]
In a press release, NYRA cited "the complexity of the takeout provisions in the Racing Law" in explaining the oversight. Section 32 above actually isn't all that complex. In fact, it's relatively straightforward. [..deemed repealed 2 years after such effective date]. It's Section 2, which lays out the actual takeout rates, that's complex. I'm not going into it in detail because, to be quite honest, I don't understand at all how it translates into a 1% increase in the takeout rate on superexotics. NYRA did though.

Maybe obscure, though not entirely appropriate, is a better way to describe Section 32 in that the clause is tucked away at the very end of 17 pages that only a sadist would actually read through. Whatever the reason, NYRA was certainly not the only party who missed the boat, as Matt Hegarty reports in the Form.
And not even the racing board was aware of the error, since it signed off on documents throughout the past 15 months that described the superexotic rate at 26 percent. Under New York's laws, the board is required to review and approve NYRA's business plan every year, and the plan that was approved for 2012 listed the superexotic takeout rate at 26 percent rate. The board also approves NYRA's simulcast contracts, which list the takeout rates applied to all wagers. [DRF]
However, it was reported quite definitively at the time the bill was passed that the increase was indeed temporary. Hegarty wrote on June 17, 2008 that the provisions sunset after two years. Here's Paul Post's piece in Thoroughbred Times from June 18, 2008:
Scheduled to last two years, the takeout increase has the negative effect of reducing bettor winnings.

“Increasing the takeout at a time when racing is in distress is not a good idea,” said Bennett Liebman, head of Albany Law School’s Racing and Wagering Law Program. “In New York, no one can ever tell when something is temporary or not.”
That surely turned out to be a prescient comment. (I missed the clause myself, and needed Mr. Liebman to point it out to me.) And, in the same article, Charlie Hayward is quoted as saying (with respect to the state takeover of NYCOTB that the increase was related to): "The short-term pain will result in a much bigger reward, long term.” Don't know if, by 'short-term pain,' he was referring specifically to the increase being temporary and I won't put words in his mouth here. But I think one could fairly surmise that he was.

If he was however, he apparently forgot about it. As did Paul Post. And Matt Hegarty. And Bennett Liebman (who now works on racing and gaming matters for the governor). Those are all really sharp guys! The always takeout-vigilant HANA didn't seem to realize anything was amiss. It all smacks of a mass Vulcan Mind Meld.

Even no less of an authority on both the Pick Six and takeout as Steven Crist, who referred to the sunset provision (if rather skeptically) in his column of June 17, 2008, didn't seem to notice. If he missed it, then I suppose anyone could have. Still, the whole thing is really kinda weird.

[UPDATE: Pull the Pocket posts about one horseplayer who emailed the Racing and Wagering Board about the sunset provision in early 2011, several months after it should have taken effect.]

12 Comments:

steve in nc said...

It's totally weird politically & legally. Certain people say we're being suffocated by regulation, but this looks like one more case where the regulators were absent.

Does this mean I should expect a check for 1/74 of my superexotic winnings since last September? Sure hope so.

Can you start a write-in campaign to name the auditor Hoss of the Year?

jk said...

Someone should lose their job over this. I am not holding my breath.

Where did this money go? Did NYRA keep it or was it turned over to the state? Funny how this all gets cleared up when the slot money starts rolling in.

A very lazy journalistic effort by the DRF. They reported the initial story and they publish the takeout rates every day. Obviously they knew about this but did not want to rock nyra's boat.

HANA's battle cry is takeout rates and they were asleep at the switch. Nice job.

On the bright side, we have a takeout decrease and someone in charge recognizes this is the path to success......


"We're taking action to protect the betting public," said Racing Board Chairman John Sabini. He said the situation could end up being a positive because the lower takeout rate may attract more wagering in New York.

kyle said...

I don't believe The Racing and Wagering Board could have missed this. I think it was willful - a way to inject NYRA with operating cash without having to go through the nasty process of extending the legislation.

Anonymous said...

While there are no excuses, one can understand that w/ the pending closure of NYCOTB in late 2010 NYRA may have been focused on other things.

Hard to believe that the NYSRWB (THE REGULATORS) missed this. They signed off on hundreds of simulcast agreements in the past 15 months... each of them containing NYRA's takeout rates.

A lot of people goofed but the biggest goofballs of all are the folks at the NYSRWB.

Anonymous said...

You can expect more puff pieces from the DRF on this matter.

Anonymous said...

Give DiNapoli the props for discovering the "error". You're always ready to drag is name through the mud, why not a hat tip now?

alan said...

>>Give DiNapoli the props for discovering the "error".

Absolutely! Props to the Comptroller for finding an obvious error that any accounting major fresh out of college could have found. (Which is more accounting training than he actually has.)

Anonymous said...

so will the NYRA 2011 projected operating loss be substantially more than the $11 million figure being tossed around? Was the money that didn't go back to the bettors conisdered as pari-mutuel revenue on the NYRA balance sheet?

Indulto said...

This is a good time to remind Duncker and Hayward of their past statements to the effect that their product is priced too high. Why should takeout on 3+ horse exotics be .26 in NY and only .19 in KY?

Anybody complaining about HANA's "diligence" in this matter ought to be willing to join and volunteer for such duty an/or pay dues to fund such activities.

Anonymous said...

The $8.6 million should be used for something positive toward horse racing. Like creating ways to build the sport or donating it to several charities. Turn something bad into something that can be really good.

Anonymous said...

DiNapoli,the most competent of the bunch,Who would have guessed?

jk said...

Clearly HANA was caught up in the "complexity" of the NYRA legislation.

HANA incorrectly published NYRA takeout rates and used these rates to rank NYRA vs other racing circuits.

The NYRA "temporary" takeout increases was publicly reported and discussed. HANA, claiming to take a leadership position on takeout rates dropped the ball on this one. It would have been a big feather in their cap. Better luck next time.