Gov. David Paterson said Tuesday he was trying to save the long-troubled New York City Off-Track Betting Corp. by signing an executive order authorizing it to go to bankruptcy court and effectively reinvent itself.

The order allows for financial reorganization of the decades-old New York City OTB, a series of parlors where people can bet on horse races, in the federal court. Despite taking in $1 billion a year in bets, the OTB, an independent public benefit corporation, has consistently posted losses and owes about $220 million, including almost $40 million to the state.

The signed order and a subsequent court filing would allow the OTB, which has more than 1,300 employees, to close some of its 68 betting locations, break some leases and other contracts, cut labor costs and install less expensive automated betting machines.

Paterson called it an unprecedented move for a public entity, but a necessary move.

"For years we have known that OTB was broken," Paterson said. "It has hemorrhaged money."

New York City OTB Chairman Sandy Frucher said about 80 percent of its handle is paid back to bettors. From the balance, payments are made to the racing industry, New York City and the state before covering the OTB's operating expenses. He said it needs about $150 million to recapitalize.

The OTB hopes to file a reorganization plan within two months, Frucher said. Structural changes, expected to include distributions to its various beneficiaries, will require approval by lawmakers.

There are six regional OTBs in New York state, and Frucher said one issue is that they compete with each other. He questioned whether there was a need, for example, to have six regional OTB presidents.

Paterson and Frucher noted that the original idea behind establishing OTBs almost 40 years ago was to move betting away from street bookies while providing support to the racing industry.

In an audit released last month, state Comptroller Thomas DiNapoli said the New York City OTB was facing financial insolvency and had contributed $386 million to the racing industry over a four-year period.

Auditors questioned some of its practices, including consultant contracts with no written justifications, and whether it needed 87 vehicles, with no written rules governing their assignment to staff.

State auditors are reviewing the conditions of the other five regional OTBs to determine if they face similar problems, DiNapoli said.