Citing declining wagering revenues, an outdated business model and an unfavorable funding framework, Governor David A. Paterson has directed the New York City Off-Track Betting Corporation’s (NYCOTB) board to issue a reorganization plan – and one, that, in Paterson’s opinion, should include “the tool of a Chapter 9” bankruptcy filing.
On Tuesday, September 1, the Governor signed Executive Order No. 27, authorizing the insolvent NYCOTB to file a Chapter 9 petition. The public benefit corporation, according to a news release issued by Paterson’s office, is currently running a monthly structural deficit of close to $600,000 and struggles with $500 million in unfunded liabilities stemming largely from employee benefits.
“This Executive Order will provide necessary flexibility to help restore NYCOTB to financial viability without any investment of state resources,” Paterson said in a statement.
The state took over the flailing OTB in June of 2008 and the current chairman, Meyer “Sandy” Frucher,” has estimated that the organization would be unable to fund operations after March of 2010. The Governor has directed NYCOTB to issue its proposal within two months.
“Our goal is [to] make NYCOTB a modern wagering operation that can operate lean and maximize revenue for state and local governments as well as the horseracing and breeding industries,” Frucher said in the news release.
The restructuring plan – which will focus on reducing expenditures and modernizing NYCOTB’s operations – was supported by an audit produced by the state Comptroller’s office that found that NYCOTB was on the brink of insolvency and was “too important to fail.”
Since its inception in 1970, NYCOTB has garnered more than $4.5 billion for state and local governments and the horseracing industry.
Paterson’s initiative has been applauded by groups ranging from the New York Racing Association to local labor unions.
