OTBs sue to end payments to tracks

PHOTOGRAPHER: Marlene Kennedy

New York’s five off-track betting corporations want to put an end to a decade-old subsidy — meant to protect nighttime racing revenue at harness tracks — on the days the tracks schedule afternoon cards.

Capital District Regional Off-Track Betting Corp. is among the five OTBs that brought the Article 78 petition in state Supreme Court in Schenectady County. They sued the New York State Racing and Wagering Board and six harness tracks in the state, including Saratoga Casino and Raceway.

At issue are the “maintenance of effort,” or MOE, payments that harness tracks receive to offset the OTBs’ evening simulcasting of out-of-state thoroughbred races. The trouble is, the OTBs say, many of the harness tracks now race in the afternoon, outside their “protected nighttime hours,” which the Racing and Wagering Board failed to address in September when it set the MOE payments for 2010.

Francis Smith, an attorney with the Albany law firm McNamee, Lochner, Titus & Williams P.C., which filed the Article 78 petition Nov. 4, said Monday that the OTBs have challenged the MOE payments for several years. The latest petition argues against the rates set for 2010, he said.

While the MOE payments total in the hundreds of thousands of dollars, Smith said the case was brought to raise legal issues, not for economic reasons.

But the suit comes at a time when OTBs and harness tracks alike have been struggling. The money bet last year at OTBs and harness and thoroughbred tracks in the state totaled $2.04 billion, down from $2.61 billion in 2007, according to a report issued in July by the Racing and Wagering Board. And the New York City Off-Track Betting Corp. closed abruptly last December after filing for bankruptcy, unable to secure a rescue plan from the state.

Joining Capital District OTB in the Article 78 petition were Catskill Regional Off-Track Betting Corp. in Pomona and Western Regional Off-Track Betting Corp. in Batavia, both of which also operate upstate, as well as Long Island counterparts Nassau Regional Off-Track Betting Corp. in Hempstead and Suffolk Regional Off-Track Betting Corp. in Hauppauge.

The suit contends that despite a letter from the OTBs pointing out that MOE payments “are not due to regional harness tracks … for those days that they conducted races outside of the protected nighttime hours,” the subsidy was kept in place and the Racing and Wagering Board “gave no rationale or explanation for its determination in this regard.” Six harness-track operators were named as respondents in the suit. Five of the tracks — Saratoga Raceway, Buffalo Raceway, Tioga Downs, Vernon Downs and Monticello Raceway — “held substantial numbers of their races outside the protected nighttime hours,” according to the complaint. The sixth respondent operates Yonkers Raceway.

Crystal Beauchemin, marketing media specialist at Saratoga Casino and Raceway, said Monday the harness tracks have been backed on appeal before in regard to the MOE payments, and are confident the same will occur this time.

The OTBs, public benefit corporations that date to the 1970s, offer pari-mutuel wagering on harness and thoroughbred horse races to bettors who can’t make it to a track. The races occur within New York, in other states and in foreign countries.

Money wagered on a race at a track is combined with the bets made at the OTBs to create a pari-mutuel pool. From that, payouts are made for winning tickets — less percentages specified by state racing law for “retained commissions,” according to the Article 78 complaint.

Those commissions are distributed according to a complex formula set by statute that includes New York tracks (for use in operations and to fund horsemen’s purses); the state (in taxes and fees); and state-chartered funds for the benefit of horse breeders. Lastly, the complaint states, “The balance remaining after such statutorily mandated distributions and taxes, and after payment of the OTBs’ operating expenses and debt service, is required to be paid to local governments within the regions of each of the OTBs.” New York’s OTBs also are allowed to display simulcasts of races — televised live broadcasts — and accept bets on them. As with the on-track wagers, money bet on the simulcast races also becomes part of the retained commissions that are distributed to industry and government.

It is only since 2003, though, that the OTBs have been allowed to conduct simulcasts of nighttime thoroughbred races. That was also when the harness tracks began receiving the MOE payments, which the Article 78 complaint says were designed to protect them “from competition and potential loss of market share due to the simulcasting … by preserving the then-existing levels of certain commissions received by regional harness tracks from the OTBs.” The Racing and Wagering Board, which regulates horse racing and wagering in the state, sets the harness tracks’ MOE payments, which must be “at least as much as they received in 2002 [the year before the statute was enacted] from the OTBs for nighttime harness racing,” according to the complaint.

Since 2003, though, Saratoga, Buffalo and Monticello raceways “made the business decision to conduct races during the afternoon hours and not during the protected nighttime hours,” the complaint contends. Last year, it says, those tracks, plus Tioga Downs and Vernon Downs, were scheduling afternoon races.

The Article 78 complaint also contends the MOE payments run contrary to a 2009 governor’s executive order that attempted to dial back on state mandates. No state agency is supposed to attempt any action that could become a burden on local governments “without an accounting of the impact,” according to the complaint.

MOE payments made to harness tracks that race in the afternoon are tantamount to mandates, the complaint states, because local governments get a share of the OTBs’ retained commissions. “The MOE payments reduce, dollar for dollar, payments made by the OTBs to local governments and, thus, increase property taxes of the local governments,” according to the complaint.

The OTBs want a judgment that finds the MOE program in violation of the executive order and that ends MOE payments to the tracks for days they race in the afternoon.