THE BLOG
09/05/2009 05:12 am ET Updated May 25, 2011

New York City's OTB Operation Finishes Out Of The Money

Rudy Giuliani used to call New York's Off-Track Betting operation the only bookie in the city that lost money. It still does. So much so that the board of directors is thinking about declaring bankruptcy. Apparently a state-run public benefit corporation is allowed to do this under some very rare and disastrous circumstances.

If they exist, you can bet the OTB will achieve them.

The problems of the city's OTB are multitudinous. It's losing bettors to the Internet at a rapid rate, but it still maintains nearly 1,500 employees and 68 betting parlors. You'd think closing some of them wouldn't be that hard a chore - after all, neighborhoods don't exactly cherish them the way they do fire stations. But the OTB hasn't.

It also doesn't seem to have cut down on management perks - the New York Post reported last week that a state audit, as yet unreleased, found that the city OTB has 87 vehicles, some of them very expensive, recently purchased and used by executives to commute to work.

Oh, and it's been run for the last seven years by Giuliani's cousin.

As soon as Michael Bloomberg took over the city in 2002, he named Raymond Casey, the Giuliani cousin, president of OTB. Casey - along with his brother and father - had worked for the city while Rudy was mayor, and Bloomberg made sure they were kept on the public payroll. Since Casey's old job as chairman of the Trade Waste Commission was being eliminated, he was moved to the betting department - a decision that the administration said had absolutely nothing to do with the fact that Giuliani had given Bloomberg a critical endorsement.

During the Giuliani administration, things had picked up so much for the OTB that it was actually making money. But under Casey things got much, much worse. He signed what critics say was a disastrous new agreement rearranging the way the city divided profits on the bets with the state and the New York Racing Association, which runs the Belmont, Aqueduct and Saratoga tracks. He did not do any studies on staffing needs, even though the last time the OTB took a look at its employment practices was back when the hottest TV show in the nation was "Dukes of Hazzard."

And the Post says he agreed to several no-bid contracts that the state audit found questionable, one of which went to former Senator Al D'Amato.

Originally, the theory behind OTB was that the state and the tracks had taken their share off the top, the profits would be used to help pay for city schools. Instead, Bloomberg found he was looking at a growing mountain of OTB debt. He threatened to close the whole operation down, saying that he wasn't going to lay off teachers and firefighters to help keep a "bookie operation" afloat. (Everyone in the city found this to be a reasonable line of thinking except the union that represents more than 1,400 OTB employees.)

Given the fondness Bloomberg has shown in the past for social ills like smoking, nobody found it all that hard to imagine him shutting down the whole shebang, a move that would have created immense headaches for the racetracks.

In the end, Gov. David Paterson agreed that the state would take over the operation. In theory, this was going to allow calmer minds with a larger vision to improve the entire, troubled New York racing situation. Of course, no such thing happened. If the state had been interested in being practical, it would have privatized the whole thing years ago.

So things are unchanged, except that the OTB parlors are losing more money than ever. (Dave Seifman of the Post recently quoted an OTB official as saying that the city system has a negative cash flow of $600,000-800,000 a month.)

Everyone seems to hate OTB. The city, which is supposed to get a few million dollars from OTB under the arrangement Bloomberg worked out, threatened to pull the plug on the cable channel that broadcasts the races unless it got its long-overdue money. The Catskill region's OTB president recently predicted New York City's operation "is about to implode and cause problems for all of us."

Last week, the president of the New York Racing Association, Charles Hayward, told an upstate paper that the OTBs "really have become places where good local politicians are sent to max out their pensions."

"Unless you're Giuliani's cousin. Then you get it a lot earlier," chimed in the NYRA chairman, Steve Drucker.