As you may be aware, New York City Off-Track Betting (NYCOTB) is in the process of working with the NYCOTB Creditors Committee on the development of another reorganization plan, which we understand will be presented to the New York State Legislature, shortly.
We are grateful to the CEO of NYCOTB, Gregory Rayburn for providing us with a general briefing on the outline of the plan earlier this week, but based on that briefing we have some very serious, immediate concerns that we want to share with you.
Furthermore, subsequent to our conversation with Mr. Rayburn, we were able to review a written summary of NYCOTB’s proposal that contained several proposed legal provisions -- which was new information -- clearly designed to prevent the harness horsemen from securing the legislatively mandated funds owed us, and otherwise undermining the legislative protections that have led to the renaissance of New York harness racing and breeding (which is once again the best in the world).
While we obviously recognize that the exact parameters of many of these issues and specific legislative language are still pending, based on the severe negative impacts many of these proposals would have on the harness racing industry -- as well as the fact that the most direct proposed assault on our legal and financial claims was never even shared with us -- we thought it was important for you and your fellow New York legislators to understand the seriousness and urgency of this situation.
1. The overall plan is nothing less than a clear attack on the future viability of New York’s racing, breeding and agriculture industries
First and foremost, it needs to be pointed out that the harness horsemen and breeders -- who have a substantial interest in the debts indisputably owed by NYCOTB -- have been excluded from the development of this proposal and simply have not been at the negotiating table. Accordingly, the racing industry interests of the horsemen and breeders are nowhere to be found, and a handful of wealthy racetrack owners, comprising the majority of the “Creditors Committee,” are using this vehicle to advance their own non-racing-related interests. These interests are not representative of “the racing industry.” In fact, many of the items apparently now on the table between NYCOTB and the track owners -- ranging from forgiving legislatively mandated payments owed to horsemen and breeders, reducing future commissions paid for racing and even a shameful proposed reduction in race days at New York harness tracks -- will have immediate and negative impacts on employment in our rapidly recovering harness industry. Furthermore,since many of the issues we understand are now on the negotiating table are related solely to increasing profits to track owners from the video lottery terminals and have absolutely no connection to racing, one must question why they are even being considered as part of a supposed racing-related OTB bailout.
NOTE: It is also important to note that these changes to the VLT/lottery law would have significant, non-racing-related financial benefits for all statewide tracks, including those with absolutely no financial stake in the NYCOTB restructuring at all! It is, therefore, especially outrageous that VLT-specific benefits for tracks with no direct stake in the outcome of the NYCOTB bankruptcy are even on the table.
2. Proposed transfer of wagering platforms from NYCOTB to tracks not only has no protections for horsemen, breeders or the harness industry, but has provisions directly and proactively assaulting our interests
New York’s race tracks and horsemen and breeders are currently owed millions by NYCOTB, and the plan on the table proposes transferring NYCOTB’s phone and internet account wagering platforms to a new track-controlled entity in exchange for forgiving this debt and eliminating statutory payments to the industry moving forward. However, it should be noted that more than half of the estimated $22 million debt -- over $11 million (52 percent) in the case of Yonkers Raceway alone -- is actually owed to the horsemen, yet the horsemen would have absolutely no ownership interest in the entity nor any role in this new entity’s governance. It is outrageous that the tracks have apparently “signed off” on swapping NYCOTB’s debts to the horsemen and breeders for an account wagering system, when it is not even the track’s own money they are forgiving. (And it should be noted that this account wagering system would be wholly controlled by the racino owners, who could then sell it off at their own discretion or even just allow it to become worthless through design or benign neglect. This could result in an entity with no compelling interest in promoting or displaying New York’s harness product.)
Even more dismaying is the fact that the plan includes a proposal to enact legislation that would proactively prevent the horsemen from ever recouping any of their legally owed funds!Clearly anticipating that the horsemen have a compelling legal right to this debt, Mr. Rayburn’s proposal suggests new state legislation that would “provide maximum protection to the racetracks against claims by Breeders’ Fund and Standardbred Owners Association” and even asks the bankruptcy court to enjoin the horsemen from seeking their legal claim to this debt. This plan therefore proposes that the tracks will have their share of the money owed them by NYCOTB “made up” through the transfer of OTB’s account wagering system to them, but the horsemen would have no right to their share.
New York State’s horsemen will use all available resources and legal remedies to ensure that neither the account wagering “swap” nor the proposed “protection to the racetracks” takes place as currently proposed and we are fully confident that our position will be upheld by the courts.
The tracks simply are not in a position to trade away an asset that isn’t even theirs to negotiate with and then retain the newly acquired asset as their own property. Nor can NYCOTB, the tracks or the state legally bar the horsemen from pursuing a clear legal claim. Therefore, for such a tradeoff to make any kind of sense for the horsemen and the racing industry as a whole, the following issues must be addressed legislatively and in an enforceable manner:
A. New York State horsemen must have a legally mandated interest and role in the governance of any new “industry-based” account wagering entity, in order to protect their assets and interests.
B. Harness tracks must be barred from selling their financial stakes in this new account wagering entity -- for example, to the New York Racing Association -- because such a sale would represent a complete and total loss of any potential value of the newly created asset for the harness horsemen. With the harness industry then having absolutely no stake in the entity or its governance, there would be no compelling interest for the entity to support harness racing and the industry would potentially fatally suffer.
3. Proposed reduction in race days at New York State harness tracks has nothing to do with NYCOTB restructuring and is completely unacceptable
As noted above, it is disgraceful that the track owners have inserted numerous proposals into these negotiations that are completely unrelated to NYCOTB and beneficial only to their bottom lines, and the proposed reduction in race days at New York State harness tracks is the most egregious example. The New York State Legislature (in 2008) had the wisdom to legislatively mandate minimum race days to support agriculture and the racing industry and prevent racinos from trying to eliminate racing altogether. This new proposal represents a direct and cynical attempt by the tracks to minimize their responsibility to live racing and it undermines the Legislature’s intent to support the racing and agriculture industries across New York.
Less racing means less breeding, less horses, less mutual clerks, less farriers, less feed men and more farm managers, grooms and trainers on the state’s unemployment lines. This proposal alone should raise the level of consciousness of every legislator as to how very little this entire package has to do with “helping racing” and everything to do with helping a handful of wealthy racetrack operators.
4. New York State harness industry is threatened if legislative “bailout” for NYCOTB becomes precedent for other New York State OTBS
Finally, it should be pointed out that if the legislative “bailout” sought by NYCOTB becomes precedent for New York State’s other OTB organizations to seek similar relief, we could potentially be seeing the beginning of the end for the state’s harness racing industry. The impacts of a NYCOTB reorganization alone are likely going to be significant and damaging, and extending similar “bailout” provisions to the rest of the off track betting establishment will be potentially devastating. Therefore, any pending NYCOTB reorganization legislation must include language limiting its provisions solely to NYCOTB. The New York State Legislature has, in recent years, acknowledged the importance of a racing establishment that employs 40,000 New Yorkers, and we urge you not to let shortsighted proposals such as this threaten its long term well-being on your watch.
NYCOTB was originally formed to benefit both the racing industry and the State of New York, yet it has actually hurt both racing and the state in general. As you know so well, earlier this year, OTB’s parasitic relationship with New York racing and their ultimately hollow threat of a shutdown put the New York State Legislature in an incredibly unfortunate and untenable situation. Now that you will again be faced with this very challenging issue in the coming months, we urge you to work with the entire racing industry -- especially its major stakeholders, the horsemen and breeders -- to address the issues we’ve outlined above and protect the viability and future of our sport.