Sunday, February 24, 2008

Gov. Spitzer Update Pt. IV: NYRA and OTB Need Taxpayer Support?

This is one of the most recent, and biggest of Gov. Eliot Spitzer's 180 degree flip-flops on his "day one, everything changes" pre-election slogan. The New York Racing Association has just been given a 25-year renewal of it's franchise to run the horse tracks in NYS. In addition, he's offering NYC half of this year's 1.1 million dollar taxpayer subsidy that is needed to keep it's Off Track Betting corporation in business. Day one of year two, and everything stays the same.

Now, Spitzer is not solely responsible for the NYRA deal (See links to Bruno and the NYS legislature's disgraceful behavior ), and his "splitting the losses" deal is being rejected by Mayor Bloomberg, who is threatening to let OTB go out of business. However, both are indicative of Gov. Spitzer "caving" to the liberal political powers in the state. I can only express my disappointment at the direction he is continuing to take NYS in, and wonder what motivates him.

Here are some relevant excerpts, and links from the NY Post:

From the Sports pages (link):

The New York Racing Association has had the franchise to operate thoroughbred racing in New York since 1955. During those 53 years, there has been corruption and mismanagement at the highest levels, culminating with the operation filing for bankruptcy and NYRA basically driving New York racing into the ground...During his time as Attorney General, Spitzer made a name for himself by prosecuting high-profile cases related to white-collar crime and corruption. Perhaps it's time someone investigated Gov. Spitzer.

From Saturday's Op-Ed 02/23/08 (link):

NYRA's been mired in scandals for years - some of them probed by Spitzer himself as attorney general. Back then, he accused the outfit of fostering a "culture of criminality" and suggested that it be stripped of its franchise.

Certainly rank managerial incompetence drove NYRA's finances into the ground, prompting several state bailouts.

And while the gov insists that NYRA has since found religion, its woes linger: Last week's deal included a $105 million bailout to stave off bankruptcy.

Meanwhile, the authority managed to stave off private-sector interest in picking up the franchise by threatening a lawsuit over its tenuous claim that it owns the state land under the tracks.

How tenuous? Just ask AG Spitzer: "We own the land," Eliot insisted during his gubernatorial run. "[NYRA is] not going to use that as leverage. They are a state entity, created by the state . . . and they should be tossed out on their ear if they don't understand."

What a difference a year makes.

Spitzer quickly became a big advocate for NYRA's franchise renewal - even though the hapless, obstructionist, ethically challenged authority is the perfect example of the Albany status-quo he was elected to change.

As it was, the franchising process dragged on so long that the private investors lost interest, basically leaving NYRA as the only game in town.

Which apparently was the plan.

If it's not bad enough that Gov. Spitzer won't replace corrupt "public-private" bureaucracies with new private partners, let's look at what he's doing with NYC's OTB "corporation," another "public-private" venture that is costing taxpayer money to exist. Mayor Bloomberg is threatening to shut it down, but is he serious? (link)

The city's Off-Track-Betting Corp. was a step closer to shutting down yesterday as Mayor Bloomberg rejected an offer by the state to provide half the $1.1 million needed to keep the bookie operation from running out of cash in June.

"We're not in the splitting-losses business, particularly with our money," Bloomberg declared.

He said there's no way he'd ever spend taxpayer funds to subsidize a money-losing government betting operation.

But Pat Foy, the chairman of the Empire State Development Corp., said in a conference call with reporters that the city doesn't have the authority to simply shut OTB, which is a creation of the state.

"It's our belief that the ultimate closedown of OTB would be inconsistent with state law," said Foy.

He expressed confidence that a solution to OTB's problems could be achieved before the deadline. Bloomberg didn't sound as upbeat.

He lashed out at Albany for excluding the city in recent talks that resulted in the bailout of the New York Racing Association, a deal the mayor said the city would not have made "under any circumstances."

"A 25-year lease to a nonprofit corporation that is in bankruptcy and has some of its people convicted of fraud would not be my first choice in terms of picking a partner to work with," Bloomberg said.

His biting remarks came during a meeting of the OTB board, which voted unanimously to proceed with a planned shutdown on June 16 unless Albany stops siphoning more in profits out of OTB than it produces...

...In the middle of the grim session, Bloomberg was handed a letter from Foy stating that Albany needed more time to develop a comprehensive strategy for dealing with all six OTBs around the state.

Foy told reporters that the bricks and mortars model for OTB was outdated and that future operations would be based on growth in phone betting and the Internet, probably in combination with NYRA and the other OTBs.

He pointed out that despite its hobbled finances, OTB produced $17.5 million for the city last year - which was more than the $16.8 million that the state took in.

OTB board Vice Chairman Mike Hess said he remained optimistic.

"I'm still very hopeful this can be remedied," he said.

One insider told The Post that what's taking place is a "big game of chicken. We're talking about who controls a $1 billion revenue stream. This is one where there's going to be a lot of twists and turns before it's over."

That's what it all comes down to, in the end. How much revenue can be squeezed out of the average citizen. Betting, smoking, and other "vice" taxes are among the most "regressive" taxes, hurting "Joe six-pack" much harder than Paris Hilton, but that doesn't matter to liberals like Gov. Spitzer. He just sees it as a "revenue stream," without regard to his "progressive" ideals. Bloomberg is no better, and wil probably "cave" on an OTB deal if the state picks up all of the current tab, I'll bet.

This is a very complex issue, and I am only "scratching the surface," here. There are questions of equal treatment under the law for other gambling options over the internet, and the built-in corruption of public-private corporations that have conflicting interests, for starters. Spitzer fails part IV of this evaluation, because he hasn't dealt with any of the obvious bad actors in the system. Indeed, he has rewarded them, to the taxpayers' detriment.

PS: Since this post is almost as much a prediction, as well as an update on Spitzer's latest antics, this will be the last of the SPITZER UPDATES. There's much more to say about Eliot, and the rest of the corrupt political class in NYS, and it's occasional national impact. Stay tuned to LEAVWORLD: GRAFFITI POLITTI and GRAFFITI POLITTI on Gather for this conservative NYer's view!

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