In yet another example of the curious functioning of New York’s state government, a bill passed by both branches of the state legislature on June 21 finally reached Governor Andrew Cuomo’s desk on December 5. The legislation would allow the Catskill Off-Track Betting Corporation to open betting facilities in New York City, replacing those lost when the New York City OTB went out of business in 2010 because of its bankruptcy. It’s not apparent to me why it would take almost six months for a bill to travel the short distance between the Legislative and Executive chambers unless it is the hope that legislation of questionable merit might sneak through during the holiday season without attracting any attention.
As unusual as this process may be - although perhaps it is not so unusual for Albany - it is no more puzzling than the inability of a business accepting pari-mutuel wagers to make money. While it may be theoretically possible for a casino offering table games to lose money, the very nature of a pari-mutuel system should guarantee that the bet taker makes money. So how did the NYC OTB go bankrupt? One would suspect that the only conceivable answer is colossal mismanagement, aided and abetted by a healthy dose of patronage. This is, after all, the entity once run by Allie Sherman, the former head coach of the New York Football Giants. Prior to one year’s Kentucky Derby, Sherman was asked who he thought would win. He speculated that the prior year’s winner could repeat.
So how much better will OTB’s be managed by the Catskill operation? For starters, this is the outfit that accepted the 2002 Breeders’ Cup Pick 6 wagers that resulted in the biggest betting scandal in history. For those who may not recall, three former fraternity brothers conspired to place six wagers with the Catskill OTB, with a single horse winning each of the first four legs, followed by “all” in the fifth and sixth legs. One of the three bros worked for Autotote, and he was able to change the tickets after the fourth leg so they now had the actual winners of the first four races. Why was Catskill picked as the location for the wagers? The mastermind liked it because, as stated in Wikipedia, “its security was fairly lax … and also didn’t have a transaction history file.”
Admittedly, this was 10 years ago and that part of the Catskill operation may have been tightened up. A 2010 Audit by the State Comptroller, however, portrayed an organization with significant issues. For the period covered by the Audit, 2004 through 2008, the Comptroller determined that the OTB experienced a 15 per cent decline in net handle, and a 37 per cent decline in net operating revenues. If these trends were to continue, the Comptroller concluded that “the OTB will eventually realize a net loss at year-end.”
As is the case with many audits, it is the response of the audited that is often the most damning part of the picture. Donald Groth, President and CEO of Catskill, provided a lengthy response that was a rambling, often incoherent, polemic. Needless to say, he took no responsibility for any of the legitimate shortcomings raised by the Audit, and deflected all criticism to external sources. One of those was the introduction of VLT’s at racetracks. How a Cuomo intent on bringing casinos to New York - at least he was a year ago - will deal with Groth’s apostasy on that issue remains to be seen. In any event, one cannot read Groth’s audit response and think that this is the leader with the capability to get OTB’s up and running in an efficient and intelligent manner in New York City.
More significantly, however, is how this legislation fits with Governor Cuomo’s vision for the future of horse racing in New York. I actually do not think he has a vision, and am afraid he doesn’t even have any concrete ideas. He has obviously decided, however, that the former NYRA had to be replaced with a new entity in which state government appointed all but five of the 17-member governing Board. We do not know why he thought this was important for the very simple reason he has never said, other than to tie it to the distant possible implementation of casinos. In a logical world, one would think that placing OTB’s in New York City would be part of the comprehensive review of racing that the Governor has indicated will take place under his leadership. Since the Legislature approved Cuomo’s takeover of racing with just one dissenting vote, logic would also dictate that the Legislature thinks any significant changes in the betting landscape would await that review, and that the Catskill OTB bill could wait. Or does it just come down to the same craven political considerations with the attendant patronage that sank the former NYC OTB, with the Governor acquiescing while we do our Christmas shopping?