Plans to fast-track the licensing of three New York City casinos have made their way into a state Senate budget bill for the upcoming fiscal year.
The aggressive proposal calls for the New York State Gaming Commission to issue a request for applications by July 1 and for the commission to award the highly coveted licenses within 150 days of that.
“Neighboring states have authorized forms of gaming that are siphoning New York state dollars and travel industry-derived revenue to other out-of-state markets,” the proposal states.
“Simultaneously, as a result of the Covid-19 emergency, state and local revenues have been devastated,” it continues. “This is particularly alarming given the potential effect on the state’s education funding. The Legislature recognizes that downstate gaming resorts have the potential to significantly boost revenues for education support, create thousands of quality jobs and support the local economy downstate.”
The proposal also includes a mechanism requiring New York City Council approval of the casino locations, setting up the strong possibility of months of heated debate among the powers that be in the greater metro area.
To advance, the plan will have to be reconciled with the Assembly’s budget bills, which don’t include any action on casinos, and with the much more deliberate thinking of the administration of Governor Andrew Cuomo,
The governor’s budget proposal called for a request for information on potential downstate casino licenses𑁋“to seek information from parties interested in developing and/or operating one of the three remaining gaming facilities” and “assess interest in the unawarded licenses by focusing on determining the appropriate size and scope of development, the value of the gaming facility licenses and the process that should be used in award consideration.”
But for a state reeling from the economic and financial devastation of the pandemic𑁋and a governor battling a sexual harassment scandal that has diminished his power𑁋the go-fast approach could prove more compelling than it might have been in normal times.
The Senate proposal promises an instant $1.5 billion windfall from a minimum license fee of $500 million for each of the three licenses, plus an annual tax on gaming revenue of 45 percent contingent on business levels and other factors.
It also includes a mechanism for the state’s struggling upstate casinos to seek breaks of up to 20 percent on their taxes if they meet a list of criteria, including “the inability of the operator to remain competitive under the current tax structure.”
Conceptually, the administration agrees with this, its budget proposal calling for a “a petition process for the casinos to demonstrate their need for a lower tax rate based on certain criteria, including their financial projections, the use of the additional funds, impact on the overall competitive landscape and other economic factors.”
The 2013 law that authorized up to seven full-scale casinos in New York imposed a 10-year moratorium on downstate expansion to give the four upstate properties time to establish themselves. Despite a five-year head start their performance has been mixed at best, and in a statewide market saturated with gaming options, all four have consistently failed to meet their initial financial projections. At the same time, casino giants like Las Vegas Sands, MGM Resorts International and Genting and their New York allies have been lobbying to scrap the moratorium. But in the face of opposition from Cuomo it wasn’t expected they’d succeed. Then everything changed in the wake of the Covid crisis, and the likelihood that the Legislature will rewrite the rules sooner rather than later suddenly looks very real.
“Let’s not waste time with a process,” said Queens Senator Joseph Addabbo, who chairs the Committee on Racing, Gaming and Wagering in the upper house. “We know there’s interest. Let’s have a process that’s time-constricted and we can recognize the revenue this year.”
The go-fast approach also favors the two incumbent operators, MGM and Genting, which operate massive racinos at Yonkers Raceway and Aqueduct and naturally oppose the creation of three new license in their respective backyards.
This would be less lucrative than awarding three new licenses, according to a study conducted by Spectrum Gaming under contract with the state. But it would still be hefty, generating upwards of $4.2 billion in gaming revenue and around $500 million in taxes annually.
It also enjoys the support of those who see a quick solution to two of the licenses by simply allowing the two properties, both well-established in their respective markets, to scale up to full casinos by adding house-banked slots and table games. Their support is reported to include powerful labor groups such as the Hotel Trades Council.
If this is the way it goes, and it seems likely, it would leave the decision of where to place the third license, which promises its own raft of complications, given the range of competing interests in a city the size of New York. Manhattan would be the obvious choice, but this has at least as many influential opponents as supporters, many of them concerned about the effects of cannibalization on what the city traditionally offers to tourists and residents.
As Clyde Barrow, a former SUNY professor now resident at the University of Texas-Rio Grande Valley, told metro-area news site City Limits: “It’s not just an additive process where you build a casino and it attracts new growth. A very significant proportion of a casino’s revenue will come from existing facilities.”
There is also the question of how the various market forecasts will fare in the face of the arms race that is likely to ensue if New Jersey moves ahead with a competing casino in the Meadowlands, if Connecticut OKs a third casino to defend the market share that Foxwoods and Mohegan Sun will lose, and a new Indian casino springs up on lands owned by the Shinnecock Tribe on Long Island.
“New casinos in New York City would likely siphon off some of the business the state’s existing video lottery facilities now get, making them candidates for a tax break, too,” said Barrow. “And if the city casinos spur new casinos in other states, and those cut into local casino profits, what then? It becomes this never-ending downward spiral where you keep building in what is essentially a saturated market, and the more you build the less the state collects.”
