Governor lays out vision for first three casinos

PHOTOGRAPHER: David Lombardo

Three casinos would be built in three specific upstate regions — the Capital Region, Catskills and Southern Tier — under the terms of a scenario laid out Thursday by Gov. Andrew Cuomo.

The plan would first require that the state reach an understanding with the operators of New York’s Indian casinos.

In a news conference Thursday morning, Cuomo said the state would create so-called exclusivity zones around existing Indian casinos in western, central and northern New York if their compacts with the state can be brought into “good standing,” which means reaching agreements on revenue-sharing.

Cuomo’s plan

If terms can be reached with the operators of the state’s Indian casinos, three new casinos would be built, with the locations to be in the Capital Region, the Catskills and the Southern Tier. Five years after those are opened, up to four more could be built. Downstate locations might also be considered at that time.

If no agreements are reached with the Indian tribes, the governor said, the three casinos could go into any of six possible upstate regions, including near existing Indian-run casinos and racinos.

The regional plan shed the first real light on the governor’s vision for seven live-table non-Indian casinos, which is being proposed in a state constitutional amendment. Before Thursday, Cuomo had only specified that he wants three upstate casinos, with revenue going to support local governments and education.

Specific locations and operators would be chosen by a temporary committee consisting of real estate and financial experts. The selection process for these committee members is still under consideration.

“The [state] Legislature will not be involved in the selection,” Cuomo stressed. “We do not want a politically determined outcome.”

State legislators have expressed serious reservations about being excluded from the selection process, with some introducing legislation that would identify specific possible casino sites. State Sen. John Bonacic, an Orange County Republican who is the Senate’s point man on racing issues, is advancing a plan in which the state Legislature identifies target regions and the state’s Gaming Commission selects specific operators and locations.

Cuomo’s committee would award casino licenses based on a bidder’s proposed job-creation estimates, investment in the project, local support for the project and compatability with the region’s tourism efforts. The bidder also would propose a tax rate, which the governor hoped would create the best outcome for the state and local governments.

“Who will pay us more?” he said, rejecting the idea that the best rate would come from having the state set it. “I think we have an asset to sell. … I think you’re better off making the tax rate one of the bid features.”

The state’s nine racinos pay an effective tax rate of almost 70 percent, which is the highest of any gambling operation in the country. Casinos in Las Vegas are at the other extreme, with an effective tax rate of about seven percent. Part of the variation in the rates stems from the types of games being offered, as live-table games are less lucrative than electronic gaming, which is featured at the racinos.

Cuomo was critical of the rates being paid by the racinos, arguing that the operators were the only ones getting rich and taxpayers didn’t get a good deal.

This drew a sharp rebuke from Gary A. Greenberg, a minority owner of Vernon Downs Casino & Hotel, which is a racino. “Whoever is advising the governor is giving him bad advice,” he said.

The state’s nine racinos generated almost $317 million in tax revenue, including about $220 million for education, in the first three months of this year, a five percent increase from the same period last year.

In the wake of Cuomo’s remarks, James Featherstonhaugh, president of the New York Gaming Association, which represents the state’s nine racinos, said only that his members were interested in continuing their beneficial relationship with the state.

Until the tax rates are determined, it is impossible to gauge the revenue casinos will generate for the state and local governments. Cuomo wants 80 percent of the tax revenue to fund education, 10 percent to go to the host county and 10 percent to go to the surrounding counties.

Secondary criteria for evaluating projects would include the bidder’s ability to finance a plan, their experience in gaming, an ethics check and timing of a potential project. “How fast can you start? … How fast can you finish?” Cuomo said.

The Saratoga Casino & Raceway has outlined a $40 million expansion that could be completed in six to nine months if it was given live-table games.

If the state’s racinos, seven of which are in the upstate region, aren’t awarded a casino, Cuomo said he was confident they would be able to compete with the new casinos. Highlighting the existence of a casino and racino in Oneida County, he said, “I don’t think one is the enemy of the other.

“This business doesn’t work in the traditional sense,” Cuomo added, arguing that clustering casinos could be beneficial.

A recent casino study by the state of Pennsylvania found that it is possible to reach market saturation, at which point casinos are competing for the same pool of gambling dollars.

If any of the racinos see a decline in the amount that is gambled with them, it will mean less money for the state’s breeders and racing purses. The racinos contribute a percentage of their net profit to breeders and purses, which New York Thoroughbred Breeders Executive Director Jeff Cannizzo credited with helping to revitalize harness and thoroughbred racing and breeding in the state.

He declined to comment on the governor’s proposal.

A second round of casinos under the governor’s plan wouldn’t come until at least five years after the initial three were awarded. Cuomo said the delay would ensure a competitive advantage for the first three casinos.

The geography of Cuomo’s plan, which puts Saratoga County and Warren County in different regions, keeps alive the possibility of casinos in both Saratoga Springs and Lake George, with parties in both communities now lobbying for a casino.

Cuomo is “cautiously optimistic” that the constitutional amendment will be passed for the second time in two years by the state Legislature before the end of June, with a public referendum on it in November. He previously signaled an openness to delaying the referendum until 2014 but rejected that idea on Thursday.