No Sure Bet: Four Casinos In The Cards—Or Are They?

City & State

On July 30 Gov. Andrew Cuomo signed the Upstate New York Gaming Economic Development Act into law. Should voters approve it by popular referendum in the November general election, four new full-scale casinos would be built, spread out over three parts of the state: the Catskills/ Hudson Valley, the Capital Region/ Saratoga and the Central-Southern Tier.

New York City, the suburban counties directly north of the city and Long Island will remain off-limits to casino development for a period of seven years. Meanwhile, the rest of the state is disqualified from new full-scale gaming under exclusivity zones negotiated with the Seneca, Oneida and St. Regis Mohawk Indian Nations in Western New York, Central New York and the Adirondack region, respectively. In exchange for exclusivity, the tribes have agreed to share their own casino profits with the state and to remain neutral in the state referendum battle.

According to the latest Siena College poll taken of registered voters on Aug. 12, 49 percent of New Yorkers support allowing non-Indian, Las Vegas-style casinos to be built in New York, with 42 percent against and 9 percent undecided. Those numbers have largely remained unchanged since Siena began polling the question last August.

Karl Sleight, an attorney for the firm Harris Beach who specializes in the racing and gaming industry, is optimistic the measure will pass. According to Sleight, without Indian nation opposition, “You’re really left with the opponents who oppose casinos for social reasons, and they’re usually not well funded, or funded by someone who has [outside] interests in it being defeated. That [alliance] doesn’t seem to be coalescing at this time.”

State Sen. John Bonacic, chair of the Senate’s Racing, Gaming and Wagering Committee, also feels confident, though when informed of the polling immediately asked if it were a poll of only New York City voters or the whole state of New York. (It was the latter.) With New York City’s mayoral race looming, citywide voter turnout is expected to be up this November. And while some larger upstate cities like Syracuse, Buffalo and Albany will also have mayoral contests, the fact that there are no statewide races this year means upstate New York’s voter turnout will likely be depressed. As a result, New York City voters who have little to gain from casino development in Saratoga could largely decide the casino referendum. While the heavily taxed casinos may help bring in revenues to assist with educational aid and property tax relief statewide, the areas slated for casinos will get the added benefit of thousands of private sector jobs in regions of New York sorely aching for economic opportunities.

According to the New York Gaming Economic Development Act, four licenses are up for grabs in three regions, and each region is guaranteed at least one; by that math, one region could get two casinos. Conventional wisdom in the industry suggests that the Catskills/Hudson Valley will be the destination for the extra facility. The region’s combination of proximity to greater New York City and pre-existing tourism infrastructure makes it an ideal place for the “resort destination” casinos that Cuomo’s plan envisions, and the high rate of unemployment (e.g., 8.2 percent in Sullivan County as of June 2012, according to the New York State Department of Labor) suggests that local governments in the area would embrace the economic opportunity with open arms.

According to Bonacic, who represents the region, “heavy hitters” with deep pockets have shown interest in the Catskills. Empire Resorts, the owner of the Monticello Raceway, has partnered with EPR Properties to invest $300 million into restoring the Concord Resort Hotel to create a gaming destination. Other potential sites include former Borscht Belt megaresorts like the Nevele Grande Hotel in Ellenville and Grossinger’s Catskill Resort Hotel in Liberty.

In the Capital Region, Saratoga Springs seems the likeliest location for a casino, given the long tradition of gambling in the city. Saratoga Casino and Raceway is the oldest video slot parlor in the state, and the Saratoga Race Course has been drawing racing enthusiasts to the region since the 1860s.
Unless, of course, local politics intervene.

“Saratoga is the most logical place, but the conversation could change, and the question could be based on the mayor of Albany,” Sleight said. “Gaming is a highly regulated industry: Of all the industries, nuclear is the most regulated, healthcare is second and then gaming is a close third.”

Meanwhile, in the Southern-Central Tier, the early front-runner appears to be Tioga Downs, a racetrack and racino in Nichols. Jeff Gural, owner of the establishment, thinks his site fits the profile because so much of the logistical legwork has already been done to establish the current gaming site. That is to say, he already has video gambling and racing; now it would just be a matter of adding in the table games and some amenities.

“We have plans and approvals in place to expand into a casino, a spa, and we have the support of the community. We already have a license,” he said, adding that while “you could argue that Nichols, New York, isn’t where you want to be,” he is ready to “turn [Tioga Downs] into a casino in six months. I have all my approvals, all my environmental [requirements]. I’m ready to go, and expect to start construction immediately. The governor and the people of New York are not looking for jobs in 2019; they want them in 2014.”

Still, of the three regions, the Southern- Central tier seems vulnerable to emerging with a sleeper candidate for its regional bid. Stretching northward from the Pennsylvania border, the zone of development extends to Seneca County and Route 14 in western Wayne County on Lake Ontario, about halfway between the metropolitan areas of Rochester and Syracuse.

“I don’t think when people draw maps in New York that anything is done unintentionally,” Sleight said. “Very rarely is something like that done by accident.”

As for Rochester or Syracuse hosting a casino, the exclusivity zones drawn around the Indian Nations’ casinos prohibit it. In fact, none of the five biggest cities in New York (New York City, Yonkers, Rochester, Buffalo and Syracuse) will be in a zone eligible to develop a casino under the law that was passed, despite the potential profits that would come from putting a casino in an urban environment with a large built-in population. It’s also unclear exactly how much casino development the state will attract; New York will tax between 37 percent and 45 percent of a casino’s gross earnings after payout on slot machines in the three regions, and 10 percent of the gross from table games. By contrast, the effective tax rates on casinos in New Jersey and Nevada are 9.5 percent and 8 percent, respectively.

“We’d all like to have the ridiculously low tax rates of Atlantic City or Nevada, but those days are over,” Gural said. “The government is interested in revenue, and when those were established they gave them a low tax rate because that was the only reason to invest in those areas. I think the tax rate [here] is fair.”

With the state’s relatively high tax rate, it is ultimately unclear which investors will come to build casinos, and where the proposals will be targeted. But even talking about investors and sites is premature, asserted James Featherstonhaugh, the New York Gaming Association’s president.

“It’s hard for anybody to be really predictive right now, because no one has seen the criteria that the gaming commission will put together after the referendum passes,” Featherstonhaugh said.

That commission has not even been fully manned yet: Of the seven members that will make up the committee, only four appointments have been filled. Of the three members to be determined, one will be appointed by state Sen. Co–Majority Leader Dean Skelos, one by Assembly Speaker Sheldon Silver and one by the executive branch.

With all these unsettled factors—the unapproved referendum, the incomplete commission and the fact that no concrete proposals for sites have yet been submitted—any conventional wisdom about where the next casinos will wind up may be little more than wishful thinking.

Which is somewhat fitting. After all, in the world of casinos and gaming, there are no sure bets.