Rivers Casino raking in cash, but where's tax cut?

PHOTOGRAPHER: File Photo

Rivers Casino & Resort in Schenectady is pictured in February 2017.

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SCHENECTADY — Schenectady’s casino will mark its one year anniversary Thursday.

The new casino, its neighborhood and the city’s financial picture are all different from Feb. 8, 2017, when Rivers Casino & Resort first opened its doors.

Millions of new dollars are rolling in to the city, and more than 1,000 people work on site.

Some property owners still wonder, though, what happened to their tax cut.

[Casinos’ impact on state still up for debate]

When state officials were pitching limited casino legalization to New Yorkers for their approval; when various casino developers were pitching proposals to local communities across upstate New York; and when municipal officials were considering whether to support proposals in their communities, the talk was of large property tax cuts. The Schenectady City Council, for example, spoke of an 18 percent tax cut in a June 2014 resolution.

That hasn’t happened. The Schenectady city property tax rate was cut 0.5 percent in 2016, 4.8 percent in 2017 and 1 percent in 2018. The 2018 cut was more than erased by water and sewer rate increases, leaving property owners paying the city more in the second year of the casino’s operation than the first.

Countering this is millions in new revenue. Here’s what Schenectady, Schenectady County and the surrounding counties have gained from Rivers Casino & Resort:

A $300 million business built on what had been a tax-exempt, blighted factory site;
A one-time 2016 payment of $2.5 million to the county, $2.5 million to the city, and $5 million split among nearby counties, as their cut of the casino’s $50 million licensing fee;
More than $1 million to the city and more than $500,000 to the county from the one-time 1.25 percent mortgage tax on the casino and hotel;
Sales tax paid on all items purchased to build and equip the casino and hotel, also a one-time revenue item;
More than 1 million worker-hours of temporary construction labor;
Roughly 1,100 permanent jobs on a site that had been idle;
In 2018, $3.52 million in property taxes — $1,844,257 to the school district, $1,132,965 to the city and $545,948 to the county;
Higher property tax payments in 2019 as the casino’s now-complete hotel goes to full valuation;
Higher property tax payments in future years, as the casino and hotel’s assessed values and/or tax rates increase;
Annual revenue from the 4 percent occupancy tax on hotel stays and 8 percent sales tax on retail sales on site;
An unquantifiable impact, good or bad depending on one’s perspective, as new businesses and residential development spring up near the casino, bringing new visitors, taxpayers and tax dollars to the city;
A chunk of the roughly 32 percent gambling tax collected by the state, which for the 11 months of 2017 that the casino operated totaled $41.61 million; of this, the state kept $33.29 million, Schenectady County and the city got $2.08 million each, and the surrounding counties split $4.16 million.

Of course, there’s also been increased traffic, one-time infrastructure costs, costs of policing, and the impact on society of increased gambling. To cite one example of these impacts, the Center for Problem Gambling in Albany saw a 60 percent increase in enrollment in its gambling-treatment program from February to December — from 34 to 54 people.

Others circle back to the property tax rate. Some critics who opposed the casino before it was built still oppose it and point to their property tax bills as vindication.

Mohamed Hafez, a Schenectady activist and owner of six residential/commercial properties in the city, said the city set itself up for problems by not negotiating a host-city agreement, whereby it would get a defined annual payment instead of a percentage of fluctuating revenues.

He said he initially was opposed to the casino proposal on general principle and, once it gained approval, was opposed due to the vaguely defined benefits.

“We’ve been lied to by the mayor and City Council about the benefits of the casino,” Hafez said. “They continue to lie. Gambling only increases three things: Addiction, poverty and crime.”

He conceded that the high crime numbers in Schenectady County weren’t due to the casino but said the casino certainly wouldn’t reduce them.

The host benefit

A recurring sticking point in discussion of the casino is the amount of money the city gets as a cut of the total dollars gambled there.

The city’s decision to budget for a casino contribution of $2.75 million for 2017 was off by a wide margin: It received $2.03 million.

[Rivers Casino continuing to perform well below projections]

The city has lowered its expectations; it is budgeting for $2.3 million in casino revenue sharing for 2018. This should be a lot closer to the target, since the casino payments averaged $189,090 per month in 2017, which would have been $2.27 million, had there been 12 months of revenue.

So where did the city budget makers get the $2.75 million figure?

Mayor Gary McCarthy; Councilwoman Leesa Perazzo, former president of the City Council and former chair of its finance committee; and Councilman Vince Riggi, who objected to parts of the casino development process, all said this past week that the revenue projection was a moving target.

There were no firm numbers, nor any comparable casino in upstate New York to check for guidance, Perazzo said.

“You’re flying blind; you have no idea,” she said.

“Thin air,” Riggi laughed, when asked where the number came from.

McCarthy said projections provided by the state and by the casino developer were used to craft the budget. He didn’t have either at his fingertips, though.

Riggi noted that a $5.7 million figure was being thrown around for a while, and he cited a June 9, 2014, City Council resolution to support using that $5.7 million in casino-derived revenue exclusively for property tax reduction — resulting in an estimated property tax cut of 18 percent.

“That came from New York state — those inflated figures,” Riggi said. “It’s pretty clear that we were misled by somebody, and it looks like it was the state.”

McCarthy said the resolution Riggi mentioned was put together by the council to mollify certain members of the council and win their support for the casino project. The number was essentially meaningless, he said.

Rivers Casino refused to comment on what it projected in the way of host community benefits.

Two documents on file with the state Gaming Commission offer a little insight on the moving target that was the city/county host community benefit: A consultant’s report and the state casino license application submitted by Rush Street Gaming, owner of Rivers Casino & Resort.

The June 12, 2014, report “Economic and Community Impact Analysis,” prepared for Rush Street Gaming by The Innovation Group, a New Orleans consultant, estimated a 2017 host benefit of $6.64 million to $8.13 million, to be split equally by the city and county (plus an equal amount to be split among surrounding counties).

Prorated for the 11 months that Rivers was open in 2017, that would be a range of $6.09 million to $7.45 million.

The resulting low-end payment would be $3.05 million each for the city and county for 11 months, or $2.77 million for 10 months. Officials said that is what was budgeted — $2.75 million for 10 months — on the belief that Rivers would open around March 1.

The report also forecast that the host benefit would increase in each of the subsequent five years, hitting a range of $7.69 million to $8.56 million in 2021.

The formal casino license application, submitted later in 2014 by Rush Street, departs somewhat from the consultant’s report. It projects $5 million to $5.5 million in host benefits in year one, then $5.6 million to $6 million in year five. Its projection of state gaming tax paid in the first year — $69 million to $86 million — missed the mark by a huge margin. Rivers paid $41.63 million in total state taxes in the 11 months it operated in 2017, which would have been $45.41 million for a full year, pro-rated.

The city and county each get 5 percent of that total as their host community benefit. The nearby counties divide 10 percent among themselves based on population.

The net gain

Whatever the host community benefit payment is, the city has benefited from the new casino, said McCarthy, Perazzo and Riggi. Until recently, the site was an eyesore that generated no jobs, no taxes and no economic benefit to the surrounding community, they said.

Riggi said his various “no” votes over the years were based on the fact that the city was not getting a defined host benefit, but rather a percentage of a range to be determined.

Now that it’s built, it’s an asset to the city, he said.

“Just being there is a good thing,” Riggi said. “We’re taking in more money than we were before. It’s a big boon for Schenectady.”

“We still have $2.1 million coming to the city you never had before, along with $1 million in property taxes,” Perazzo said.

Rush Street partnered with Rotterdam-based Galesi Group to develop the casino. Galesi CEO David Buicko said he’s 100 percent happy with the results, both as a businessman and a taxpayer — unlike the other three new casinos, Rivers got no breaks from local or state governments on its mortgage, property or sales taxes.

He said he takes business guests there for meals two or three days a week because it is such an impressive sight.

County leaders also are happy with the casino project. In a statement, Gary Hughes, chairman of the county Legislature’s Economic Development Committee, said: “The Rivers Casino has met our expectations as a transformational project for Schenectady County and our riverfront.”

McCarthy said the casino’s first year was a partial one, and a work in progress: The street to its front door, Erie Boulevard, was a moonscape of road work for much of 2017, and the rest of Mohawk Harbor was a construction zone.

“I would like to have had both of those projects completed,” he said.

As such, he said, there is promise for growth in the coming years as the neighborhood’s physical transformation is completed and the casino hits its stride.

The mayor said the casino and Mohawk Harbor are creating a level of economic activity in the city that other communities can only wish for.

“The naysayers — we listen to them — the chronic complainers are not the future of this city,” McCarthy said. “You have to sometimes take some risks and look at the future of the city. We’re doing that.”

McCarthy acknowledged that not all parts of Schenectady have benefited equally but said the others will benefit in the future.

“We’re not perfect — all in all, we’re going in the right direction,” he said.

The celebration

Rivers Casino would not discuss its first-year financial performance with The Daily Gazette. But it readily provided details on the monthlong celebration events it is planning for its first birthday, some of which require membership in the casino’s Rush Rewards program:

Birthday cake for guests on Thursday, Feb. 8, the actual anniversary date of the opening in 2017.
Top managers handing out cash from 4 to 6 p.m. Feb. 8.
A performance by country music star Randy Houser at 8 p.m. on Feb. 9.
A 6 p.m. to midnight show Feb. 10 by fan favorites from among the bands that have performed at Rivers during its first year.
Special packages at Rivers and The Landing Hotel on Feb. 11 and 12.
Giveaways of hooded sweatshirts Feb. 15 and kitchen gadgets Feb. 22.
A 25 percent discount all month for Splash Spa customers who spend more than $50 on weekdays.
Gaming promotions and giveaways all month with prizes ranging from a new car to a briefcase full of cash.
Parking, entertainment and dining promotions for guests over 55 years of age each Monday in February.