Senate Bill S6612

                                 
BILL NUMBER: S6612

SPONSOR: KENNEDY
 
TITLE OF BILL:

An act to amend the racing, pari-mutuel wagering and breeding law and
the tax law, in relation to compensation for directors of the regional
off-track betting corporation

 
PURPOSE OR GENERAL IDEA OF BILL:

This bill reiterates existing law to emphasize that board members of
regional off-track betting (OTB) corporations are entitled only to the
compensation expressly authorized by statute, and it creates a mechanism
for greater oversight of any promotional plans created by an OTB to
ensure for the accurate accounting and distribution of promotional
items.

 
SUMMARY OF PROVISIONS:

Section 1 amends section 502 of the racing, pari-mutuel wagering and
breeding law to emphasize existing law by clarifying that OTB directors
              

are only permitted to receive the compensation that is expressly
provided for under law. Additionally, this section is amended to provide
that reimbursement for the expenses incurred by a director will only be
received after certification, sworn under penalty of perjury, that such
expenses actually incurred.

Section 2 amends section 1617-a of tax law and adds a new section
requiring video lottery gaming agents to submit annual marketing and
promotion plans for video gaming facilities to the gaming commission for
review and approval. Each video gaming will also submit a yearly report
to the gaming commission detailing the accounting of the use and imple-
mentation of the marketing promotion plan, including the name and
address of each person receiving promotional items or things of value in
excess of fifty dollars.

Section 3 sets the effective date.

 
JUSTIFICATION:

A recent audit completed by the State Comptroller revealed financial
abuses by at least one regional off-track betting (OTB) corporation that
is also a video lottery gaming agent. Specifically, the audit revealed
that that the OTB was awarding compensation to board members in the form
of health insurance benefits,(1) free concert tickets, free sporting
event tickets, and other fringe benefits that are not authorized by
statute. Existing law expressly sets the maximum compensation to be
provided to any board member of a regional OTB.  Yet, notwithstanding
the existing statute, OTBs are flouting this statutory mandate and
awarding health insurance and other benefits in excess of the statutory
compensation.

Regional OTBs are public benefit corporations that distribute revenue to
participating local governments. Therefore, every dollar inappropriately
spent on health insurance or other unwarranted benefits for board
members or others not entitled to those benefits is a dollar less that
is distributed to municipalities that rely on OTB revenue to address
taxpayer needs, such as maintaining roads, sewers, bridges, and schools.
According to the comptroller's report, one regional OTB spent $230,000
on health insurance for its directors and nearly $1.3 million on a
marketing program involving the purchase of sports arena suites, concert
tickets, and concession fees, which were purportedly intended to attract
and reward loyal customers but were instead diverted to board members,
OTB executives, and their friends. The Comptroller also found that the
OTB failed to keep accurate records accounting for the complementary
distribution of tickets, in violation of the Commission's rules and
regulations. "Had these resources been used for promotions such as
retaining and rewarding loyal customers and targeting prospective
customers," the Comptroller found, " OTB could have increased . . .
revenues to participating municipalities."

This legislation codifies existing law and makes clear the no compen-
sation may be awarded to an OTB board member unless expressly authorized
in this section. Additionally, the legislation creates greater oversight
and accountability by ensuring that promotional plans are implemented as
intended. All participating New York municipalities will benefit from
the increased transparency and accountability required by this legis-
lation.

 
PRIOR LEGISLATIVE HISTORY:

2021-22: A9455A - referred to ways and means/S. 8580 referred to racing,
gaming and wagering

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.
(1) Health insurance has long been understood as a form of compensation
under New York Law (Op. Att'y Gen. No. 2007-F1). In 2008, an Attorney
General opinion made clear that section 502(10) expressly prohibits
board members from being compensated in excess of the maximum amount set
forth in that section, and therefore could not lawfully authorize health
insurance benefits for OTB board members.  (Op. Att'y Gen. No. 2008-3);
see also Letter from Nelson R.  Sheingold, Counsel for the Comptroller,
Office of State Comptroller, to Thomas Teige Carroll, Bureau Chief,
Taxpayer Protection Bureau, NYS Office of the Attorney General, Referral
of OTB Health Insurance Matter (Sept. 23, 2021). Nevertheless, at least
one regional OTB has continued to flout that statutory prohibition by
awarding board members compensation in the form of health insurance
benefits.