by Jeffrey Gural

Editor’s Note: The following is a statement from Jeffrey Gural in regards to the recent announcement of the new New York City OTB reorganization agreement.

I am writing as someone who has a large stake in the viability of New York’s Racing and Agriculture industry. I am extremely concerned that Joe Faraldo, as President of the Standardbred Owners Association, is creating this completely false impression that the sky is falling and that our industry is in crises as a result of the agreement reached between NYC OTB and the official Committee of Unsecured Creditors of NYC OTB. Nothing could be further from the truth.

I was on that committee representing the owners of 1501 Broadway where OTB is headquartered. At the same time I was also wearing my other hats as an owner of a dozen racehorses, over 40 mares, 30 weanlings, 20 yearlings, two breeding farms and two racetracks. I obviously felt it important that any deal that was reached was fair to the racing industry.

After studying the financial condition of OTB and future projections it became obvious that without major restructuring of the organization it would be forced to close. The impact of a closure, in my opinion, would have been catastrophic to the horseracing industry since over $700 million is wagered annually. The breeding industry receives over $6 million of which approximately $1.9 million goes to harness racing and the eight in-state tracks plus NYRA receive $57 million of which approximately $11 million goes to the harness tracks. Obviously having OTB shut down was certainly not a viable option. On the other hand, expecting the state with a $7 billion deficit looming next year to subsidize the losses was not realistic either. Instead we tried to find a solution that would inflict as little pain as possible on all of the participants.

Fortunately the Governor selected a strong restructuring person, Greg Rayburn, and together I believe the solution that was agreed on was the best deal possible for the industry under the circumstances. By the harness tracks agreeing to give up the dark day money, the maintenance of effort money and a portion of the commission on out of state Thoroughbred wagers, I expect that will cost the harness tracks $5 million, which in most cases is split with the horsemen. The majority of these payments have not been made since 2003 so the loss is theoretical since none of these funds have been in the purse account. The harness breeding fund, by agreeing to utilize the same formula that applies to the Thoroughbred breeders, will also lose approximately $500,000.

Now for the good news. In order to offset these losses to the industry it was agreed that OTB would be required to feature the New York racing product in all of the parlors and TV signals. This is something Mr. Faraldo has lobbied for and although he refused to provide his input when I reached out to him in early September we put broad language in that hopefully will accomplish that goal. In addition, the racetracks will take over the ADW (phone betting) function that OTB currently has in exchange for writing off approximately $65 million that is owed to NYRA and the other eight tracks. By taking over the ADW not only will the horsemen share in the profit but, more importantly, going forward when a bet is made at Yonkers or a NYRA track it will be treated as if it were made at the track. Therefore, rather than getting 5.5 percent the tracks will get approximately 20 percent, less a 1 percent administration fee. This alone should generate an extra $3 million for Yonkers which will be split with the horsemen at Yonkers.

Most importantly, however, was the agreement by the state to implement the free play pilot program currently in existence at Monticello and Tioga on a statewide basis. I believe based on the results at Tioga that this will increase VGM revenue by 10 percent or approximately $100 million of which the harness horsemen will receive almost $9 million and the breeding fund will receive an additional $1,250,000. More importantly, education will likely receive an additional $50 million as well.

There are also increased incentives for the racetracks to make capital improvements which further benefit the horsemen as we have seen at Buffalo where VGM revenue is up about 30 percent since their new casino opened using these funds.

The plan does have a provision to decrease race days at only one track, Monticello, where they currently race 207 days, including during the freezing weather in the Catskills over the winter. Since 98 percent of the purse money comes from slots, in essence it will mean a horse will race two or three fewer times but when they do race the purses will be increased to reflect the fewer days. This provision does not affect any other track.

How any of these changes affects the viability of the sport in New York is beyond me. Currently, our harness industry is and will continue to receive approximately $100 million from the slots at all of the harness tracks. If the legislature wants to take $22 million that is currently owed Yonkers from the state treasury it is fine with me but I am not sure the taxpayers would be all that happy.

Let me also point out that the union has agreed to eliminate 500 jobs, or half of their members, and my clients, the owners of 1501 Broadway, have agreed to allow OTB to surrender a minimum of 50 percent of the space they currently have under lease.

For Faraldo to attack the committee and the racetrack owners without knowing the facts is very unfair and potentially damaging to breeders like myself who are selling yearlings at Harrisburg in two weeks. As you can see, the effect of these changes is minimal and in the long run may actually increase purses.

Lastly, I want to make it clear that I am speaking for myself and not the other committee members who are free to offer their own opinion. I just want you and everyone in the industry to know the facts and feel secure that the racing and breeding industry in New York State is strong and to allow OTB to close would have been a catastrophic mistake.