State picks VLT operator for Aqueduct racino
Saturday, January 30, 2010
By PAUL POST, The Saratogian
SARATOGA SPRINGS — The state’s long-awaited selection of an Aqueduct Race Track gaming operator is finally over.
Gov. David Paterson announced Friday that Aqueduct Entertainment Group has been awarded the 30-year contract to operate the downstate track’s 4,500 video lottery terminals.
The facility is expected to provide millions in new tax revenue to the cash-strapped state and give New York’s thoroughbred industry a major boost. Most importantly, Friday’s decision should prevent any threat of a racing shutdown, because AEG is obligated to give New York Racing Association funds to keep operating until the racino comes on line.
“AEG has both the financial viability and ability to pay the required up-front licensing fee,” Paterson said. “AEG complied with every request made during the review process and addressed satisfactorily all matters related to licensing ability. All of the groups have valid proposals, but AEG presented a comprehensive bid that enjoys community support and also offers strong marketing appeal.”
NYRA is slated to get 7 percent of racino revenues — 4 percent for capital improvements, 3 percent for operations. NYRA has already announced plans for $100 million worth of improvements at aging Saratoga Race Course, which could produce significant local construction during the next few years. Priorities include new restaurants, new backstretch worker dorms and major infrastructure overhauls in the grandstand such as plumbing and electrical work.
NYRA President and CEO Charles Hayward couldn’t immediately be reached for comment.
Plans call for 3,000 VLTs within six months of AEG’s signing a memorandum of understanding with the state, AEG spokesman Davis Hodge said. The remaining 1,500 machines would come on line within a year’s time.
Larry Woolf, former head of MGM Grand Hotel in Las Vegas, is one of AEG’s lead partners. He is currently head of the Navegante Group that runs Casino Niagara in Niagara Falls, Ontario.
Other members of the AEG coalition are GreenStar Services Corp., Turner Construction Co., Levine Builders, The Darman Group Inc. and Empowerment Development Corp., PS&S Design, Siemens AG and Clairvest Group Inc. Navegante or its partners currently operate other casinos in Nevada, Wisconsin, Taiwan, Chile and other Canadian sites.
Paterson’s budget called for a minimum up-front payment to the state of at least $200 million from the winning bidder. However, Assembly Speaker Sheldon Silver, D-Manhattan, said Friday he would only support Paterson’s selection if the up-front payment is increased to $300 million.
AEG could not immediately be reached for comment to see if it could provide the extra
AEG was one of five firms competing for the gaming contract. Others were Delaware North Companies partnered with Saratoga Gaming & Raceway, The Peebles Corp. and MGM; SL Green Realty Trust/Hard Rock Entertainment and Penn National Gaming.
Trainer Linda Rice hailed Friday’s announcement as a step in the right direction for New York racing. Many breeders have left New York for Pennsylvania, attracted to that state’s higher purses fueled by lucrative new casinos.
“I’m delighted that we can at least move forward,” she said. “I’m relieved to hear they’ve finally named someone. We’ve been waiting too long already. Hopefully we can regroup and pull things back together.”
Barry Ostrager, president of Saratoga Springs-based New York Thoroughbred Breeders Inc., said, “We hope the implementation process is swift and uneventful. The announcement was certainly a long time coming and the state government has literally deprived the citizens of the state of a billion-plus dollars in revenue with the unnecessary delays that have attended this process.”
However, prominent Saratoga Springs horseman Jack Knowlton said, “Given the history of this, it may not be over yet.”
Penn National on Wednesday blasted Paterson and charged the state with a midstream change in the selection process rules. Penn National was the apparent high bidder with a $301 million up-front offer.
“We were extremely shocked and dismayed by the governor’s announcement, given we offered over $100 million more to the state than AEG in our bid,” said Eric Schippers, Penn National senior vice president. “In addition, our proposal complies with the conditions outlined by the speaker for the winning bidder. We remain committed to this project and will await further details about the selection process before commenting further.”
Some observers have speculated that one or more firms might sue the state.
Paterson, Silver and Senate Conference Leader John Sampson, D-Brooklyn, were charged with making the decision. Firms submitted bids last fall, but the selection was marked by one unexplained delay after another.
In addition to the extra
$100 million up-front payment, Silver said his support is contingent on several other items. They are:
ä Require use of existing approved footprint for a timely SEQRA approval. Any future development would be subject to the normal SEQRA process. No waiver requests or requests for expedited approval will be permitted.
ä All investors at any level, partners, directors, managers, contract holders and principal and other selected employees must obtain a license from the State Division of the Lottery. Anyone who has been denied a gaming license in any jurisdiction anywhere in the world, or convicted within the past 15 years of a felony or any other crime or offense involving fraud, larceny of any sort, theft, misappropriation or conversion of funds, or tax evasion is prohibited from obtaining a license.
ä Throughout the final approval process, all changes in the proposal including but not limited to partners, investors at any level, management, development or principal employees, and contracts must be reviewed by the Division of Lottery and approved by the three leaders prior to the conclusion of the approval process.
SL Green spokesman Rick Matthews said, “We question whether AEG can meet such conditions. We are awaiting word on that. We stand ready to re-engage state officials should AEG fail to meet conditions outlined by the speaker.”
Originally, Delaware North was chosen to run Aqueduct’s racino in October 2008. But when the economy collapsed, it couldn’t come up with the financing for a $370 million up-front pledge and the deal fell apart. Paterson announced last spring that he was starting the selection process over. Six firms submitted bids, three more than the first time. However, casino mogul Steve Wynn dropped out last fall because of ongoing delays, leaving five firms to choose from.
AEG partner Jeffrey Levine, founder and CEO of Levine Builders, said, “Aqueduct Entertainment Group is honored to have been selected to operate the video lottery terminals at Aqueduct racetrack. We look forward to completing the memorandum of understanding and beginning construction.”
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