August 14, 2009
DiNapoli: NYC OTB Facing Mounting Losses, Insolvency Looms
The New York City Off-Track Betting Corporation (NYC OTB) is facing financial insolvency if current financial trends continue, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. The NYC OTB’s operating expenses and accumulated losses have increased steadily in the last four years, resulting in an operating deficit of approximately $38 million. In total, the organization has an outstanding deficit of more than $228 million. DiNapoli’s audit also recommended significant management changes.
“New York City OTB is on very shaky financial ground,” DiNapoli said. “Even if cost-savings measures are implemented, it’s unlikely that it will remain financially solvent for long. This is a serious problem that needs in-depth examination. If the goal is to keep OTB viable, serious consideration must be given to changing the mandated state formulas and restructuring operations to coordinate different aspects of the racing industry.
“The off-track betting industry in New York has taken a beating in the last few years. It’s not the cash cow it used to be. The future of the industry is seriously in question, and there are jobs at risk and economic development opportunities being missed. NYC OTB provides millions of dollars in revenues to the horse racing industry, which in turn provides employment for thousands of New Yorkers. The industry is too important to fail. Something has to be done. Inaction will mean insolvency.”
NYC OTB is a public benefit corporation created in 1970 to generate revenue through pari-mutuel betting for New York City, the horse racing industry and the state. NYC OTB has 68 betting locations and accepts wagers over the phone and Internet. As of September 1, 2008, it had a total of 1,366 employees. There are six regional off-track betting corporations in the state.
In recent years, NYC OTB has been unable to cover all of its operating expenses without using surplus funds and delaying some statutory payments. Since 2004, its outside CPA firm has questioned its ability to keep operating. NYC OTB had planned to close in June 2008, but instead the state took it over on June 17, 2008.
The audit, which began after the state took over operations, examined the financial condition of NYC OTB from July 1, 2004 through October 24, 2008. Auditors reviewed current financial statements and actions taken by NYC OTB to reduce operating costs, as well as identified additional opportunities for possible cost reductions.
The review of the NYC OTB’s finances found:
To achieve potential cost savings, DiNapoli recommends that NYC OTB:
In its response to the audit, the OTB said it was re-examining all aspects of operations to identify cost saving opportunities. However, OTB officials said more significant actions such as changing the mandatory distribution system and aligning the business interests of the state’s various racing institutions were necessary to stave off ultimate insolvency.
Click here for a copy of the audit.