Ontario County v. Capital Dist. Regional Off-Track Betting Corp.

• Decision Date: 04 August 1989
• Docket Number: OFF-TRACK
• Citation: 144 Misc.2d 893,545 N.Y.S.2d 643
• Parties: ONTARIO COUNTY, Petitioner, v. CAPITAL DISTRICT REGIONALBETTING CORPORATION and the New York State Racing and Wagering Board, Respondents.
• Court: New York Supreme Court

Page 643

545 N.Y.S.2d 643

144 Misc.2d 893

ONTARIO COUNTY, Petitioner, v. CAPITAL DISTRICT REGIONAL OFF-TRACK BETTING CORPORATION and the New York State Racing and Wagering Board, Respondents.

Supreme Court, Schenectady County.

Aug. 4, 1989.

Ontario County Atty. (Kenneth A. Windstein, Asst. County Atty., of counsel), Canandaigua, for petitioner.

Philip Stillman, Schenectady, for Capital Dist. Off-Track Betting Corp.

Robert Abrams, Atty. Gen. (Steven H. Schwartz, Associate Atty., of counsel), Albany, for New York State Racing and Wagering Bd.

ROBERT F. DORAN, Justice.

At issue in this CPLR article 78 proceeding is the disposition of surcharge revenues collected by the Capital District Regional Off-Track Betting Corporation (hereinafter Capital OTB) from the non-simulcast handle generated from races conducted at the Finger Lakes Racetrack (hereinafter Finger Lakes). Finger Lakes is located in Ontario County and is not within a city having a population in excess of 100,000. Capital OTB is a regional off-track betting corporation and is a body corporate and politic constituting a public benefit corporation (Racing, Pari-Mutuel Wagering and Breeding Law § 502[1]. Capital OTB encompasses a geographical territory of 21 counties, 16 of which are participating counties (Racing, Pari-Mutuel Wagering and Breeding Law § 519[1][e]; Par. 3 of Capital OTB's answer).

The New York State Racing and Wagering Board (hereinafter Board) is a Board created within the Executive Department of New York State, which Board has general jurisdiction over all horse racing activities and all pari-mutuel betting activities, both on-track and off-track, in New York State and also over the corporations, associations and persons engaged therein (Racing, Pari-Mutuel Wagering and Breeding Law § 101[1].

The total surcharge on off-track winning is five percentum of the portion of pari-mutuel wagering pools distributed to bettors at off-track betting facilities (Racing, Pari-Mutuel Wagering and Breeding Law § 532[1]. Prior to July 1, 1985, and pursuant to Racing, Pari-Mutuel Wagering and Breeding Law § 532(3)(a), 50% of the surcharge monies on off-track pools for winners was distributed to those cities or counties entitled to receive revenues from regional off-track betting corporations pursuant to § 516 of the Racing, Pari-Mutuel Wagering and Breeding Law or to an off-track betting operator; the balance, the other 50%, was distributed in accordance with Racing, Pari-Mutuel Wagering and Breeding Law § 532(3)(b). Since Finger Lakes is not located within a city with a population in excess of 100,000, the second 50% of the surcharge monies collected by Capital OTB on races from Finger Lakes was to be distributed to Ontario County pursuant to Racing, Pari-Mutuel Wagering and Breeding Law § 532(3)(b)(ii).

The Laws of 1984 (ch. 363) authorized the simulcasting of horse races. Initially, the simulcasting was to be on an experimental basis from July 1, 1984 through June 30, 1985. By the Laws of 1985 (ch. 286, § 45), the experiment was extended through June 30, 1990. The simulcasting provisions are contained in Article X of the Racing, Pari-Mutuel Wagering and Breeding Law.

The Laws of 1985 (ch. 286, § 29) also amended the surtax distribution provisions of Racing, Pari-Mutuel Wagering and Breeding Law § 532 by amending paragraph (b) of subdivision (3) of § 532 of such law by adding a new clause (v), which reads as follows: "(v) where the track conducting the race is located in a thoroughbred special betting district and is simulcasting pursuant to section one thousand eight of this chapter outside such special betting district, ninety per centum to the off-track betting operator and ten per centum to the county in which such track is located." The effective date of the Laws of 1985 (ch. 286) was July 1, 1985.

Since July 1, 1985, Capital OTB has been retaining 90% of all of the second 50% of surcharge monies generated from races at Finger Lakes and distributing the other 10% to Ontario County.

Capital OTB has been calculating that 90-10 distribution based on the total amount of surtax on off-track winnings pools from races at Finger Lakes, whether the surtax was generated from branches of Capital OTB which simulcast or from those branches which do not simulcast. Capital OTB currently has 53 branch offices, with 42 of those branches displaying simulcast races from the Finger Lakes and 11 branches offering wagering opportunities on Finger Lakes races without simulcasting the races.

It is the contention of the petitioner, Ontario County, that the 90-10 distribution of the second 50% of the surtax monies should apply only to the surtax monies being generated from the 42 branches which simulcast. Ontario County claims that it should receive the full second 50% of the surtax monies being generated from the 11 branches which offer wagering opportunities at Finger Lakes races without simulcasting the races.

To set forth in dollars and cents what is at stake in this proceeding, the court has, from the papers provided, generated the following example. Attached to the answer of Capital OTB is Exhibit "A", which is a computer printout prepared by Capital OTB. The printout reveals the total net handle by Capital OTB generated from races conducted at Finger Lakes for the period April 1, 1988 through March 31, 1989. The total net handle for that period was $27,223,624, of which $3,842,958 was generated from the net non-simulcasting handle. The surcharge calculations are based on the winning pools, which are calculated by subtracting the tax mandated by Racing, Pari-Mutuel Wagering and Breeding Law § 527. Because that tax varies with the type of bet--anywhere from 17% on regular bets to 36% on super exotic bets, plus the breakage--the Court has used 18% as an overall tax figure to be deducted from the total net handle before the surtax imposed by Racing, Pari-Mutuel Wagering and Breeding Law § 532 is calculated. Multiplying $3,842,958 X 82% generates a net figure for purposes of the surtax calculation of $3,151,225.56. Multiplying the $3,151,225.56 by .025 generates a surtax to be distributed according to Racing, Pari-Mutuel Wagering and Breeding Law § 532(3)(b) of $78,780.64. Presently, petitioner Ontario County is receiving $7,878.07 of that amount. The balance is going to Capital OTB. Petitioner asserts that it should receive the full $78,780.64. (The court has asked the parties for verification of its example, and all agree that it is reasonably accurate. However, the Attorney General's office feels that $81,663 would be a more accurate figure than the $78,780.64 figure of the court.)

Before reaching the merits of this proceeding, the court must first address two affirmative defenses of Capital OTB which state that the petition is barred by the Statute of Limitations for CPLR article 78 proceedings and that petitioner is equitably estopped from maintaining the present proceeding. The court concludes that the Statute of Limitations does not bar the proceeding and that petitioner is not estopped from commencing this proceeding.

Capital OTB premises the Statute of Limitations argument on the fact that the Director of Planning and Policy of the Board, in a letter of February 18, 1987 addressed to the Comptroller of Capital OTB, stated that the 1985 amendment "now directs that of the 50% of the surtax ordinarily paid to Ontario County, that 90% thereof (i.e. 90% of 50%) shall remain with the 'off-track betting operator' and only 10% thereof (i.e. 10% of 50%) shall be remitted to Ontario County." The February 18, 1987 letter was in response to a letter request from Capital OTB dated January 27, 1987 to have some clarification as to how Capital OTB could treat such 90% of the second 50% of the surcharge. Capital OTB would have the court use February 18, 1987, the date of the letter, as the controlling date for the commencement of the running of the Statute of Limitations. The court does not find that date controlling. Ontario County had no knowledge of the letter. Moreover, it should be noted that the Board never promulgated any rules or regulations to the effect that the off-track betting operator would get 90% of the second half of the surcharge monies as a result of the 1985 amendment.

Capital OTB also argues that the actual knowledge on the part of Ontario County that it was receiving only 10% of the second half of the surcharge monies was sufficient to commence the running of the Statute of Limitations. Capital OTB cites a letter from it to the Ontario County Finance Officer dated December 18, 1986 and argues that it should have been clear to Ontario County then that it was receiving only the 10% and thus, that any proceeding challenging that type of distribution should have been made at least within four months of the receipt of that letter in 1986. The court does not agree with Capital OTB. Rather, the court determines that the controlling date for the purposes of the commencement of the running of the four-month Statute of Limitations is February 23, 1989, the date that petitioner received notice by way of a "fax" letter from the Board that the letter of February 18, 1987 was formally adopted as the official interpretation and opinion of the Board. The February 18, 1987 letter was adopted as the official interpretation and opinion at a meeting of the Board held on February 23, 1989 which considered the petition of Ontario County for a determination in its dispute as to the distribution of the monies. The petition of Ontario County was contained in a letter to the Board dated January 11, 1989.

In addition to the affirmative defense of equitable estoppel in its answer, Capital OTB, in paragraph 16 of the affidavit in support by Philip Stillman, Esq., also alleges that petitioner is guilty of laches and that any grant of the relief requested in this proceeding would financially prejudice Capital OTB. Capital OTB cites Matter of Elefante v....