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| February 26, 2010 The New York City Off-Track Betting Corp. may have to shut down in March if the state Legislature doesn’t change the way revenue from horserace-wagering parlors is distributed, the operation’s chairman said in court. “We might have to shut down around the end of March,” Off-Track Betting Chairman, Meyer Frucher, said today in bankruptcy court in New York. “We will run out of money, and we will not be able to pay our employees.” OTB wants the Legislature to allow it to distribute shares of the betting revenue to the state’s racing industry after it deducts operating expenses, not before. Frucher testified at a hearing to determine whether OTB should have been allowed to file for bankruptcy under Chapter 9, of the federal Bankruptcy Code, which is generally for municipalities. OTB, the operator of horse-racing betting parlors in New York City, is state-run. The New York Racing Association, owed $14.7 million by OTB, opposes the corporation’s presence in Bankruptcy Court, arguing that Governor David A. Paterson didn’t have the authority to allow a filing for a Chapter 9 reorganization. “We don’t believe the governor was empowered to do so,” Brian S. Rosen, an attorney for the racing group, said in closing arguments at today’s six-hour trial. “The governor usurped legislative action.” Protection From Creditors U.S. bankruptcy law protects companies from creditors as they reorganize. The Racing Association said in court papers that the Chapter 9 filing was used by Off-Track Betting to avoid paying the association and others. “There’s no reason to believe the state Legislature will change the statutory distribution the OTB pays to the industry,” Rosen told U.S. Bankruptcy Judge Martin Glenn. The judge said he will make a decision after studying written arguments from both sides. The association opposes the OTB’s proposed change in the division of betting revenue because it would receive a reduced share. The association conducts racing at the Aqueduct, Belmont and Saratoga racetracks. Paterson is seeking legislation incorporating elements of the OTB’s plan for change, Frucher said. He and racing industry officials testified in January at a joint hearing of both houses of the Legislature, he said. OTB filed for protection on Dec. 3, citing high costs and outdated technology. Losses have totaled $40 million in this fiscal year, Frucher said today. Economic Threat If OTB fails to reorganize, from 35,000 to 70,000 jobs may be lost in New York’s horseracing industry, especially upstate, where much of the horse-breeding takes place, Frucher said. “This would have a serious negative impact on the state economy,” Frucher said. He said Paterson asked him to become chairman of Off-Track Betting in June, when it was in a “perilous situation.” Earlier today, a banker testified that OTB is unlikely to get financing to reorganize unless the Legislature changes the way it shares revenue. “A number of statutory changes are needed to be implemented for OTB to be successful in the capital markets,” said Kent Hiteshew, a managing director of JP Morgan Securities. OTB has said it’s seeking $250 million to finance its restructuring and pay creditors. OTB’s plan to reorganize includes shutting down about two- thirds of the current parlors in the city’s five boroughs, renegotiating labor contracts and firing workers, Frucher said. OTB would replace the closed parlors with five more cost- efficient “super-parlors,” he said. The case is In re New York City Off-Track Betting Corp., 09-17121, U.S. Bankruptcy Court, Southern District of New York (Manhattan). |
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