NEW YORK, NY June 06, 2008 —HOST: More than a hundred thousand people are expected to attend the Belmont Stakes tomorrow as Big Brown tries for the first Triple Crown in three decades. Off Track Betting parlors will also be packed, but don’t be fooled by the crowds. As WNYC’s Ilya Marritz reports, OTB is a sick horse in danger of being euthanized.

REPORTER: Any racing fan will tell you the situation is dire – and a little baffling. Here’s Art Mueller, an Astoria bartender.

MUELLER: I think it’s crazy. I mean, how could you have a thing that you make $125 million and you end up losing nine million dollars?

REPORTER: Mayor Michael Bloomberg couldn’t agree more. New York City OTB is, after all, a betting operation. It takes in a billion dollars a year. How can it be losing money?

BLOOMBERG: The state uses it as a cash cow and the city has been subsidizing the state.

REPORTER: Bloomberg is angry that mandatory payouts to the government and the racing industry have gobbled up almost all of New York City OTB’s profits. That’s forcing the city to make up the difference, he says. Even though NYC OTB is technically a state benefit corporation, it’s run by the city.

And so last February, the mayor threatened to close New York OTB by the middle of June, and challenged the state to do something about it. Last month, the Governor’s Director of Operations, Paul Francis, offered a compromise. It would have OTB make its payouts to the state, city, and racing industry based on net profits, not total revenue.

FRANCIS: For every one of those entities it’s hard to receive less money from New York City OTB than they receive today, but the alternative is that New York City OTB will close.

REPORTER: Now there’s barely a week to go, and no deal in sight. There’s not even a bill. Lawmakers say they’re working on it. But behind the scenes, the racing industry is pressing them to reject the Governor’s ideas.

HAYWARD: You know that’s really a non-starter for NYRA.

REPORTER: Charles Hayward, President of the New York Racing Association or NYRA, the nonprofit that runs Belmont, Aqueduct, and Saratoga.

HAYWARD: For NYRA that would mean a hit of twelve million dollars. And as you may know, we’re currently, um, in bankruptcy.

REPORTER: Oh yeah. Here’s one more reason Bloomberg wants done with racing. The operator of the state’s three biggest racetracks is in Chapter 11. For obvious reasons, NYRA is reluctant to let go of the money it’s been getting from OTB.

But NYRA has so much more on the table than that. There’s a pending hundred million dollar bailout by the state. And, believe it or not, Albany is just about set to renew NYRA’s racing franchise for another 25 years.

Clearly, the New York Racing Association has been astonishingly effective at making its case to legislators. Little wonder. It has Albany lobbyists on contract for close to a thousand dollars a day. It’s not pretty, Hayward admits, but it’s how business gets done in the capital.

HAYWARD: Our business includes hauling manure out of the track, it includes providing barns for the horses. And it also includes paying lobbyists.

REPORTER: NYRA isn’t the only one plonking down big bucks on lobbyists. Documents obtained by the New York Public Interest Research Group show that former Sen. Al D’Amato’s lobbying firm has a contract with New York City OTB worth twelve thousand dollars a month.

That’s less than half of what NYRA is spending. But the mayor and his allies appear to be winning the rhetorical battle. The New York Post crowed “Good Riddance, OTB”, and most other local papers are solidly behind Bloomberg.

LIEBMAN: The mayor on financial issues is really Teflon. I mean, if the mayor says we’re losing money, there are very few people who will disbelieve him.

REPORTER: Bennet Liebman is one person who does disbelieve the Mayor. He’s a law professor, and a former member of the State Racing and Wagering Board. He says it’s “disingenuous” to call OTB a “cash cow” for the state. Straight payments to the state in 2006, he points out, were about $12 million. Significant, but hardly a bonanza.

The real issues, Liebman says, is that horse racing is an expensive show to put on, a lot more expensive than casinos, and the public has been losing interest in the races for decades. The best solution, he says, would be to make OTB leaner. That might just put it back in the black.

LIEBMAN: You could say look, we make a lot of money by internet and phone account wagering, we will focus on that. You could only operate those OTB branch offices that you’ve improved and have been shown to bring in a ton of revenue.

REPORTER: Then, Liebman says, OTB could make money for everyone. Maybe.

But telling Mayor Bloomberg how to run OTB isn’t an option that’s under discussion in the capital.

For WNYC, I’m Ilya Marritz.