State will decide if nearly bankrupt betting company should close

State will decide if nearly bankrupt betting company should close

ALBANY — The state is poised to decide whether to close or expand a Hudson Valley betting corporation that has endured alleged fiscal mismanagement and is teetering on the brink of bankruptcy.

In her state budget proposal, Gov. Kathy Hochul recommended that Catskill Regional Off-Track Betting Corporation should close and counties that receive payments from it can sign agreements with other OTBs to fill the gap. The proposal is backed by legislators in Orange County.

But state lawmakers have other ideas. In their own budget proposals, legislators recommend giving the OTB a one-year lifeline by allowing it to use money earmarked for capital expenses to cover payroll and other costs.

The head of the Assembly’s Racing and Wagering Committee, Gary Pretlow, has also proposed authorizing Catskill OTB to expand into New York City, where another OTB had operated before it filed for bankruptcy and subsequently closed in 2010. Pretlow said he envisioned adding Westchester County to Catskill’s territory as well, although that county is not currently named in the bill.

In 2012, the state Legislature passed a similar measure to permit the expansion of Catskill OTB in New York City, but the bill was vetoed by then-Gov. Andrew M. Cuomo.

Hochul and state legislators are negotiating a budget that is scheduled to pass by the end of the month.

Their decisions will decide the fate of the nearly 50-year-old corporation after it’s had years of financial decline. The OTB was established to take bets on horse racing and distribute any profits to local governments and horse racing groups. After new details about reported mismanagement by the OTB’s senior leadership emerged last year, some state and local lawmakers demanded changes.

Wanda Williams, the new president and CEO of Catskill OTB, has been leading the struggling corporation since January. Williams called the governor’s proposal to close the OTB “an unfair continuation of a smear campaign by others to discredit, malign and dismantle Catskill OTB.”

“As the president and CEO of Catskill OTB, I hope to counter the false accusations, lies and misinformation and to work to secure opportunities for the corporation to thrive,” Williams wrote in an email. “I am dedicated to leading Catskill OTB in a very difficult situation, and I am committed to seeing us through these trying times, and I am very hopeful that we will prevail and prosper.”

State Gaming Commission Executive Director Robert Williams wrote to the OTB president earlier this month, expresssing serious concerns about the “lack of a viable business model” at the OTB and whether releasing capital money to the organization would create further problems.

“It would be irresponsible and unwarranted to release capital acquisition fund monies given the very real potential of an outcome similar to what occurred with New York City Off Track Betting Corporation,” wrote Williams, who is not related to the Catskill OTB’s president.

Wanda Williams is very familiar with the calamitous collapse of the New York City OTB. The New York City operation suffered from political patronage, inefficient spending, competition with illegal gambling and balancing payments to local governments with other expenses.

In 2010, when the OTB shuttered 50 betting locations around the city and laid off employees, Williams was the political and legislative director for District Council 37, New York City’s largest municipal union. District Council 37 represented about 800 New York City OTB employees and Williams advocated on behalf of those workers when the corporation closed.

She was appointed to the Catskill OTB board of directors in 2020 by the Ulster County Legislature and was elected president of the corporation by the board in November. Williams declined to answer questions about her salary or the payroll of the OTB.

While many OTBs are “falling on hard times,” Williams wants to “expand the portfolio” of Catskill OTB by stepping into the New York City market with self-service betting kiosks at bars and restaurants, Pretlow said. OTB Board Chairman Donald Utter also affirmed that the corporation’s vision is to expand the use of betting kiosks.

Assemblyman J. Gary Pretlow, chair of the Assembly racing and wagering committee, listens to testimony during a public Assembly hearing on racing and wagering on Wednesday, Dec. 9, 2021, at the Legislative Office in Albany, N.Y. The hearing was held to examine New York’s horse racing industry and the businesses that support it.

Will Waldron/Times Union

New York City Mayor Eric Adams did not respond to a request for comment regarding his views on bringing OTB wagering back to the city. As a state senator, Adams lead the Senate Racing, Gaming and Wagering Committee during the wind down of the New York City OTB.

Last year, the state released a 2018 audit by the inspector general that found Catskill OTB spent millions of dollars to rent warehouses and properties that were “largely utilized for the storage of worthless items and garbage.” The inspector general also found the corporation’s longtime president, Donald Groth, collected both a state pension and salary, failed to properly report the use of a company car and engaged in a longtime relationship with a subordinate employee.

In previous interviews with the Times Union, Groth denied any wrongdoing. He did not respond to a request for comment for this article. Pretlow dismissed the state inspector general’s report as a “hit job.”

According to the Gaming Commission and Utter, 80-year-old Groth maintains a paid position with the corporation.

Independent auditors found this fall that Groth, when president, did not have “an updated contract” with the corporation. The board of directors did not annually review his compensation, according to a copy of the 2022 audit obtained by the Times Union, although they were knowledgeable about the OTB’s operations.

The wagering corporation has been in financial straits for about a decade. The OTB previously sought permission from the Gaming Commission to file for bankruptcy, but it has never done that.

The organization closed betting branches and laid off employees during the pandemic and has not resumed full operations, getting revenue from several self-service kiosks and internet wagering, according to financial statements reviewed by the Times Union. As revenues have plunged, the payments that the OTB by law must make to local governments and horse racing entities have also dwindled.

“Catskill OTB is the only OTB that has not generated a single year of positive revenue for distribution since 2017,” auditors wrote.

The state Gaming Commission, which regulates the OTB, ordered the OTB to hire an accountant to perform an assessment of the corporation’s management and business practices in April, due to evidence that the OTB had failed to make timely payments to local governments as required by law, records show. The OTB took months to arrange the audit, letters exchanged between the OTB and regulators show. Auditors concluded in October that the OTB did follow state laws, their report shows.

The auditors emphasized that they could not see the OTB making money under its current business model.

“As Catskill has not generated a net gain in operations in five years, it is hard to envision a change in this trend without significant outside assistance,” the auditors wrote. “Catskill has already cut expenses to aid in generating revenue and as such, there are not enough other avenues available for Catskill to generate net gains.”

In the 1970s, New York established a collection of regional OTBs as venues where people could watch horse races and place wagers away from racetracks. The state allowed local governments to collect a portion of the revenue from the betting. 

But the gambling landscape has changed dramatically since the 1970s and customers who might once have patronized OTBs can now place mobile wagers on their phone or computer, choose from a wider array of casino and lottery gambling options and, most recently, place bets on other sports

A few OTBs have stayed afloat by offering slot machine-style gambling, through devices known as video lottery terminals (VLTs). Catskill OTB has long sought permission to have VLTs.

Of five regional OTBs, only Catskill and an OTB in western New York suffered net losses on their operation of horse racing wagering. But profits from horse racing wagering at OTBs across the state were declining before the pandemic and then suffered a further drop during the pandemic, according to the audit.

Capital District Regional Off-Track Betting Corporation runs a horse racing television station in addition to traditional OTB wagering.

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