DiNapoli: OTB corporations in danger of insolvency
DINAPOLI
Off Track Betting corporations are at risk of financial insolvency according to an audit by state Comptroller Thomas DiNapoli.
OTB wagering is down $1.2 billion, or 24 percent, from 2009 to 2013 compared to five years prior, according to the audit.
“The viability of OTBs is in financial jeopardy,” said DiNapoli. “Statutory payment requirements, a downturn in racing interest and major fee increases have each contributed to this plight. As competition for gambling dollars intensifies in New York, the state must reexamine the roles of OTBs. Some localities rely on this revenue to help balance their budgets and already feel the effects of this decline.”
DiNapoli called upon state policymakers to review a number of regulations governing OTBs, including the formula used to calculate the corporations’ payments to harness tracks. The Comptroller said the decline in OTB revenue has had a notable impact on distributions to municipalities, which declined from $17.6 million in 2009 to $10.2 million in 2013, a decrease of 42 percent.
All five of the state;s regional OTBs – Capital, Catskill, Nassau, Suffolk and Western – are facing financial problems, according to DiNapoli.
Auditors found the total amount wagered on horse racing, also known as the handle, for these OTBs was $3.7 billion from 2009 through 2013, a 24 percent drop from the $4.9 billion that was wagered from 2004-2008.
The annual handle collected by the OTBs fell from $817 million in 2009 to $664 million in 2013, a decrease of $153 million. Suffolk OTB experienced the greatest drop, 29 percent, during this time.
If the trends were to continue through 2018, DiNapoli said, local government distributions would likely fall even further to $5.1 million. However, this projection does not take into account potentially negative effects of the new casinos that will be opening throughout the state.
Since the previous audit, issued in 2010, that regional OTBs have implemented several recommendations including closing 33 branches and expanding online and remote wagering. As a result, four of the five OTBs managed to cut their operating expenses during the audit period – Suffolk by $7.7 million, Capital by $3.5 million, Nassau by over $3.2 million and Catskill by nearly $800,000.
The main reason for the decline in the OTB handle is competition within the shrinking horse racing industry and an increase in other gambling venues.
The report found that from 2009-2013 the total amount bet on horse racing nationwide fell 11.4 percent, from $12.3 billion in 2009 to $10.9 billion in 2013. Accordingly, net operating revenues for OTBs declined by $12.4 million during this period.
OTBs are also competing with Internet-based gambling, state-sponsored lotteries, nine racing tracks in the state offering video lottery terminals, five Native American casinos offering slot machines and table games, casinos in neighboring Connecticut, New Jersey and Pennsylvania, and a racino in Massachusetts.
In response to the audit Capital OTB issued a statement that reads, in part: “Reduce payments OTB Corporations make to New York racetracks (both harness and thoroughbred). New York tracks have been operating as casinos for many years and have generated tens, if not hundreds, of millions of dollars in revenues from their VLT operations. OTB monies that go to tracks, in our view, should be redirected to help fund county budgets and help county taxpayers. Legislature action should be taken to reduce or eliminate these payments to New York tracks/casinos.”
OTBs can expect some relief. Specifically, the 2013 Upstate New York Gaming Economic Development Act allowed the Nassau and Suffolk OTBs to operate VLT parlors, the first at non-racing facilities. The impact of these facilities could mirror the influx Western OTB received when it opened VLT operations. In 2013, the Western OTB’s VLTs brought in $566 million.
Tags: DiNapoli
