Below is the entire text of the speech given by Sandy Frucher, Chairman of the NYCOTB. Read the text and then let us know what you think.

 
 
Good morning Chairmen and committee members.  On behalf of the New York City Off-Track Betting Corporation, the NYC OTB, of which I am Chairman, I want to thank the Assembly and Senate and the respective committee chairmen and members for this opportunity to testify.

I am here to ask you to rescue NYC OTB from insolvency. We have never received tax-payer money and we are not going to ask it. That would be wrong. We are however, $95 million in debt.
 
In a few weeks over a thousand OTB employees will receive notice that they will lose their jobs.  In two months NYC OTB will run out of operating cash and close its doors.  And so the first question you have a right to ask and I have an obligation to answer is why. Why should OTB be saved?
 
Let’s begin with why NYC OTB was created in the first place.  It was set up as a public benefit
corporation—I repeat: public benefit corporation—to achieve three objectives:
 
One: To raise revenue for the state and certain local municipalities.
 
Two: To combat the hold of organized crime on horse-related gambling by providing a legal
alternative.
 
Three: To operate in a manner compatible with the well-being of the New York horse racing
industry—a venerable industry, and one with wide-ranging impact throughout the state’s
breeding and agriculture community.
 
It has succeeded at all three. Since inception, NYC OTB has consistently accomplished the mission articulated by the legislature. 
 
It has contributed more than $2 billion to the city and state, has effectively eliminated criminal control of horse-related gambling, and has provided the racing industry with some $2 billion in supporting funds.
 
But I am not seeking your help as a reward to NYC OTB for doing what the people of New York State asked it to do. Nor am I asking you simply to perpetuate what many regard as a sclerotic bureaucracy—the line everybody loves is that we are ―the only bookie in the world that loses money.

I am asking you to save NYC OTB because of the potential, profound repercussions if it is allowed to die. 

We are talking about jobs throughout the racing industry and the agricultural community of horse breeders plus jobs in the supporting infrastructure for those communities: studies have shown this industry represents at least 35,000 – 70,000 jobs, many of which would be impacted if revenue provided by NYC OTB ceased to flow.

It is worth noting here that both DC37 and the Teamsters have signed memoranda of understanding and are willing to make substantial sacrifices to save us. We sincerely thank them for their support of our efforts.
 
A shutdown of NYC OTB would also of course mean the end of the revenues that it has traditionally generated. And it would cost the state and/or city between $650 and $700 millions for shutdown cost which includes pension and employee welfare benefits.

None of this is sensible. It is why the Governor charged the Board and management of NYC OTB to find another way, and it is why we filed for protection under Chapter 9 of the Bankruptcy Code, so that we would have the breathing space for a comprehensive review of the alternatives before us. We have now completed that review; it showed us three alternatives.

One is to shut down, resulting in the repercussions I’ve just described. 

The other is to scale back the existing NYC OTB model, continuing to operate at a loss without any hope of reinvestment or reinvention of the organization—and resulting, almost surely, in the same repercussions that a shutdown would produce. 

The third is to remake NYC OTB into an efficient, profitable, 21st-century organization that doesn’t just survive, but that grows, prospers, and infuses new life into those three original and worthy goals. 

To do that, we must change the model that has stopped working, and that in turn requires action by you, the legislature. 

We have a plan to renew and reinvent NYC OTB. I will outline for you the highlights of the plan along with our key principles. More detailed information about the plan is contained in our full submission.

As we implement our plan, we will adhere to the following core principles:

1) Realize we are a public benefit corporation and exist to maximize revenue that supports the
equine industry, the City, and the State.

2) Treat our employees, many of whom have dedicated their careers to us, with fairness, dignity and
respect.

3) Not require any taxpayer money from the State

4) Act in a transparent fashion and cooperate with our fellow stakeholders.

5) Rationalize a system that has long been irrational and fit it into a comprehensive wagering policy of the State.

6) Be sustainable over time.

In summary form, the major components of the plan are as follows:
 
1) Reduction of headcount by approximately 55% through early retirement, attrition, and severance.

2) Closure of approximately two-thirds of our existing branches.

3) Creation of a utility service corporation for all the regional OTBs and tracks that will eliminate redundancies and save money.

4) Establishment of five modern flagship entertainment centers, one in each borough.

5) Introduction of new technology to replace shuttered branches, improve the wagering experience, retain customers and build a new revenue stream.

6) Use private financing, not public money, to address our deficit, fund transitional costs and
finance the capital costs of building the flagship facilities through the issuance of bonds under
section 611 of our enabling statute.

7) Create a level playing field by criminalizing unlicensed out-of-state ADWs and internet pirates that take away business and violate the State Constitution. 

We cannot achieve all this unless the State Legislature acts swiftly and decisively. 
 
The most critical legislative changes required to secure NYC OTB’s viability is the modification to the legislative distribution scheme. NYC OTB will pay for the product and services it receives, at fair market value, as part of its operating structure. All other payments to the industry will be from the residual. Without this change there can be no refinancing and thus no OTB!! This is a zero-sum game.

The second change is to authorize the introduction of internet technology to substantially replace the outdated bricks and mortar model.

I believe that following a changeover to the legislative distribution protocol described above, a closer alignment of the in-state, on-track interests and those of NYC OTB will be achieved and a stable equilibrium point assuring NYC OTB’s future financial well-being will result.

Thank you for your time and attention.  I would be happy to answer any questions you may have.

Tags: NYCOTB, otb, Paulick Report, Sandy Frucher

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