About Me 0111: Making Money

Making maple syrup in a hotter world

Maggie Koerth-Baker at 8:59 AM Thursday, Dec 30, 2010

It's hard to take big-picture global temperature increases and bring them down to a personal level—partly because of that confusion between weather and climate, and partly because scientists simply have a better understanding what is very likely to happen in an averaged-out global system, than they have of how changes in that global system are likely to affect your backyard.

I like the way Climate Wisconsin is trying to bridge that gap. First, they use interactive visuals to show the local symptoms of climate change, like rising average temperatures and fewer days of ice cover of Wisconsin lakes. Then, they connect those symptoms to Wisconsin life. If these trends continue, what impact will they have on things like fishing, forestry, farming and, yes, the making of maple syrup.

It's a hard line to walk. The family featured in this video has recently experienced some of the worst years for making maple syrup in four generations. But, because weather isn't climate, next year could be better for them, even as the climate, overall, continues to warm. At the same time, though, climate change is likely to have long-term impacts on where and how well sugar maples can grow—and when, and for how long, their sap runs in spring.

I think this video and the related essay do a better-than-average job of making that distinction. This family won't be out of business next year. But, over time, climate change is very likely to make this work harder for them. The harder it gets, Wisconsin traditions associated with maple syrup making will become less common—and the 5-million-dollar syrup industry will bring less money to the state.

Also, I just finished re-reading Little House in the Big Woods, and it's fun to see how the process of maple syrup production has, and hasn't, changed since Grandpa Ingalls threw a sugaring-off party at his Wisconsin cabin in the late 1860s. Check out the taps they hammer into the maples. They look just like the Little House illustrations, but instead of draining into wooden buckets, the sap now flows into plastic bags.

Thanks to agroman for Submitterating!

I have never been a gambler.

I pay attention to horse racing twice most years, and three times at most. I find out the winner of the Kentucky Derby (though usually not by watching the actual race) and then, when the Preakness rolls around, I check to see if the same horse has won both races.

If so, I pay just enough attention to learn if that horse also wins the Belmont Stakes, taking racing’s prestigious Triple Crown. The last time a horse actually won all three races was in 1978, so since then my excitement over the Belmont Stakes has been pretty limited.

In spite of all that, I thought I knew at least one thing about the gambling world: The house always wins. But it turns out that’s not the case when New York City or New York State takes the bets.

In early December, after about 40 years in business, New York City’s Off-Track Betting Corporation (OTB) closed its doors when it failed to receive a hoped-for legislative reprieve. In its last full fiscal year, ending March 31, the state-controlled corporation operated at a loss of $37.2 million after handing over the money it was required to give to the state, local governments, and race tracks. At the time of its closing, OTB had also racked up a pension bill that, together with health benefits promised to retirees, could be greater than $600 million.

This is a pretty astonishing feat considering that OTB’s business consisted of taking money from people and then giving some of it back to them. This is a business which was previously handled by neighborhood bookies, who never seemed to have a problem making money at it. To be fair, the bookies probably had a less generous pension plan.

Yet both New York City and New York State managed to fail to make money in the business of taking money for nothing. The city finally gave up in 2008, when it handed its mess over to the state.

Officials have tried to blame OTB’s collapse on decreased interest in horse racing. Speaking with The New York Times, John D. Sabini, chairman of the State Racing and Wagering Board, referred to off-track betting as “an industry that’s having a tough time…in a tough economy.” But while decreased demand is a fine excuse for not making much money, a gambling outfit should still be able to avoid losing money. All you have to do is reduce expenses to match revenues.

OTB could have easily closed down many or all of its betting parlors and relied on a small staff to manage Internet and phone traffic. For some businesses, atmosphere is everything, but OTB considered it a major upgrade in “customer amenities” when it installed restrooms and seating in 1993. It seems safe to say then that, while some may have enjoyed a sense of camaraderie in the storefront parlors, most people didn’t turn to off-track betting for the luxurious environment. With the cost savings from closing physical locations, OTB could have done some advertising to try to boost demand. That is what any rational manager would have done.

Unfortunately, instead of having rational managers, OTB had New York City and then New York State.

OTB was designed to function as a public benefit corporation, an entity that operates like a private business but turns over its profits to the state. However, everyone knew that OTB, being affiliated with New York City, was almost certain to become a bastion of patronage, if not corruption, and probably would never admit to having any profits to give back to the government. So lawmakers decided to have the corporation pay the city, and later also the state, a portion of its gross revenue, rather than its net profits. As Assemblyman J. Gary Pretlow of Mount Vernon succinctly explained: “If they’re allowed to pay on the net there would be nothing left over.”

This structure meant that the state was sure of getting some money, but it also meant the government had little reason to encourage OTB to cut costs. Meanwhile OTB had no assurance that it would have enough money after paying the state and the city to actually cover its operating costs, let alone reinvest in its business. The result was inevitable. Now that inevitability has come to pass.

It may take some skill to lose money collecting bets, but it’s the kind of skill New York has in spades. When it comes to the sport of mismanagement, there’s no doubt about it: The people who run the Empire State are thoroughbreds.

For more articles on financial, business, and other topics, view the Palisades Hudson newsletter, Sentinel, or subscribe to my daily opinion column, Current Commentary.

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