COMMENTARY : Cuomo Getting the Message on Pari-Mutuel Tax

He really has no idea just how personally pari-mutuel taxes impact horseplayers, but New York Governor Mario Cuomo got the message that the takeout is very much on the minds of the people he encountered at Saratoga last month, when he made his first appearance at the racetrack in nine years. Horseplayers may have a tenuous relationship with money, but they would rather lose it in a photo finish than have too much raked off the top in taxes that make long-term success nearly impossible.

The governor is not confronted by the daily uphill battle in which 100 percent of the bettors compete for between 75 and 87 percent of the money wagered. But he has, it appears, become aware of a foul mood in this segment of his constituency.

“All they wanted to talk about was the takeout,” Cuomo said of his encounters at Saratoga with voters who are horseplayers. “They have the impression that they’re thought of (in Albany) as an alien group. They use the takeout as a measure of (the state government’s) empathy. What they’re telling me is that it’s not fair. You get the feeling there’s something at work here that’s very personal.”

Cuomo Wednesday recalled his brief, if enlightening, stroll through the Travers Day crowd at Saratoga during his second visit to a racetrack in little more than a month. He was at Belmont this time, accompanied by Vincent Tese, the state’s director of economic development and chairman of the New York State Advisory Commission on Racing in the 21st Century, and Steven Richman, the commission’s executive director. Tese’s panel is charged with studying racing and wagering in New York and making recommendations on reformation and restructuring -- in a hurry, hopefully in time for legislative action in the spring but no later than June 1.

Cuomo’s presence at Belmont Wednesday may be interpreted as a message he is committed to, or at least interested in, returning the racing and wagering business to the once-firm ground that has been steadily eroded since the establishment of the world’s worst off-track betting system more than 20 years ago. “We have no interest here other than making it better,” Cuomo said. “Over the long haul, you can make a great deal of progress.”

The Tese panel will study many things, including in-home simulcasting and the never-ending racing season in New York. Both are major issues with serious implications for the industry and state. But if his experience at Saratoga has opened Cuomo’s eyes to the grass-roots importance of taxation, his experience in government makes OTB, racing’s 10,000-pound political gorilla, a primary concern in the wagering industry’s reformation.

“OTB is an obvious problem,” the governor said. “But it can be dealt with and when you deal with it, the advantages are colossal.”

It has taken a governor two decades, during which New York’s OTB system has proven to be a failure of monumental proportions, to take a firm adversarial stance against one of the state’s great bastions of political patronage and government-appointed mismanagement. Cuomo said it is within the realm of possibility that the state will take over the six independently operated OTB corporations by guaranteeing the maintenance of revenue levels to local governments from the 5-percent surcharge on winning wagers. The state then would sell the OTB system to private interests. All this will be strongly opposed in the legislature. “OTB has become too strong,” Cuomo admitted.

“With money-making enterprises, people in private industry tend to do a better job than governments,” Cuomo said. “We’re conducting an intensive study of privatization of all kinds.”

OTB reformation, more than any aspect of the industry, is crucial to the future of racing, even more important than reducing the takeout. But if it is to be done correctly, the OTB franchise must be sold to a partnership of the state’s tracks. The alternative is a better-run OTB system that does nothing to strengthen the underlying industry.

The huge amount of money wagered on horse races in this state is ample evidence that the audience, though fragmented, remains intact, interested and involved. The real flaw in the system is that OTB is not part of the racing business, but a parasitic competitor disinterested in its debilitating long-term effect upon the industry that props it up.

New York’s OTB mistake is more than 20 years old and firmly entrenched in the state’s political landscape. It’s time someone finally said: “Oops.”