Feb. 19 (Bloomberg) -- The board of New York City's Off- Track Betting Corp., the first legal off-site pari-mutuel wagering operation in the U.S., voted today to shut down the business at the urging of Mayor Michael Bloomberg.

Bloomberg, who controls the corporation's five-member board, said in November that the city is facing a $2.7 billion deficit in the coming fiscal year and couldn't afford to inject more money into OTB. He asked Chairman David Cornstein to draft a plan to shut it down.

OTB, which collects more than $1 billion in bets a year, is required by legislative mandates to compensate the racing industry based on gross revenue. In 2006, the business had a $125 million operating profit, yet had to pay the state's racing industry $98 million. City Comptroller William Thompson said OTB might run out of money by June.

``There was ample time, not just weeks or months, but actually years to find a solution to a broken problem, which is horse racing in New York State,'' Cornstein said at the board's monthly meeting today. ``Unfortunately, nothing was done to correct the situation. Instead, the people in Albany decided they were not able to chew gum and walk at the same time.''

With today's vote, OTB will close in June unless state legislators in Albany come up with a plan to save it. City Councilman David I. Weprin, a Democrat from Queens and chairman of the finance committee, said he has introduced a resolution to change the formula to distribute OTB revenue based on net profit rather than gross.

State Seeks Solution

``Our goal is to ensure they don't close,'' Sisa Moyo, deputy press secretary for the state Assembly, said in a statement. ``We need to get to the bottom of why they're not working. We will be examining the issue to see how we can best resolve it.''

According to the closing plan, operations would stop June 15 and layoffs would be effective the next day. Notices of job cuts would go out April 17. Two parlors, one in Astoria, Queens, and one in the New Dorp section of Staten Island, would close by March 1.

``When people criticize this operation as the only booking operation that does not make money, that is just not true,'' Bloomberg said during the meeting. ``They make money; the problem is, somebody takes away 120 percent of the money that they make.''

OTB was created by a referendum in 1963 to put private illegal bookies out of business and started operation in April 1971. It takes bets at about 70 locations throughout the city and via the Internet and telephone.

Lost Jobs

About 1,500 workers would lose their jobs in a shutdown of OTB, which has already put a freeze on hiring and salary increases and is limiting overtime in anticipation of closing. Since 2004, the business has cut 14 percent of its workers and closed six branches.

``I've always felt optimistic,'' said Leonard Allen, president of Local 2021 of the American Federation of State, County and Municipal Employees, which represents about 1,300 OTB workers. ``I can't see a billion-dollar business being thrown in the trash. I don't know exactly what the solution's going to be, but I feel like in the 11th hour they will come up with something.''

Today's decision comes less than a week after Governor Eliot Spitzer and the New York Racing Association Inc., the bankrupt operator of the state's Aqueduct, Belmont and Saratoga thoroughbred racetracks, agreed to a plan that would allow that company to continue operating.

Future of Racing

The state Senate has agreed to work with Spitzer's office and the state Assembly to come up with a solution before the current legislative session ends in June, said Scott Reis, a spokesman for Senate Majority Leader Joseph Bruno, a Republican. Spitzer spokesman Errol Cockfield didn't immediately return a telephone message from Bloomberg News seeking further comment.

``We are aware of the plight of New York City OTB,'' Reis said in a telephone interview. ``In fact, Senator Bruno had proposed that we find a solution as part of the framework on the future of racing that we approved last week. Obviously the other parties didn't agree to that.''

Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

Last Updated: February 19, 2008 16:32 EST