New York State leaders want to leverage the expanded authorization of video-lottery terminals (VLTs) to raise state revenues and to bail out the troubled thoroughbred racing industry.

The high stakes inherent in that effort are documented in a new study issued by the Maryland Tax Education Foundation (with the assistance of the Empire Center).

The study's primary author, investment banker Jeff Hooke, concludes that New York's racing and wagering assets -- including state-owned tracks, VLT licenses and Off-Track Betting (OTB) operations -- could be worth $2.1 billion if offered at a "public, competitive, open auction."

This happens to be roughly four times the value placed on the same assets by Friends of New York Racing, a coalition of throughbred horse owners and breeders, parimutuel firms and track owners that weighed in with its own report on the subject last year.

"Essentially, FNYR's proposal is a massive wealth transfer to private gaming interests that may or may not use the money to improve racing," Hooke's study says.

Hooke's estimate includes:

* $1.4 billion for licenses to operate VLTs at or near Aqueduct and Belmont;
* $300 million for the Saratoga, Aqueduct and Belmont tracks without VLT licenses; and
* $400 million for the OTB operations.

Putting aside the more complex issue of selling racetracks and VLT licenses, New York's six regional OTB corporations have been obvious privatization candidates since their inception more than three decades ago. They remain in the public sector primarily because they serve as a rich source of political patronage -- not simply jobs, but contracts and plain old perks (such as good seats at major racing events)

Hooke's valuable study wraps up the issue in this nutshell:

Clearly, New York State and its citizens benefit from the rich tradition of horse racing at Aqueduct, Belmont and Saratoga, the OTB operations, and related economic activities. The question is one of balance. Certainly, the state wishes to protect the New York horseracing industry, but it must do so in a way consistent with safeguarding the greater interests of taxpayers--i.e., insuring they receive a fair return on the disposal of valuable public assets. An open dialog and a fair, open disposal of valuable public property is a necessity for both the public coffers--and the public trust.