Capitol NY

Governor Andrew Cuomo unveiled legislation that would legalize three full-scale, Las Vegas-style casinos in upstate New York, a key component of his upstate economic development plan.

Table games like blackjack and poker are now illegal in New York, but are legal in surrounding states.

To render them legal here requires a constitutional amendment, which, in turn, requires the approval of two successive state legislatures and a state referendum. This legislation, should it pass, would comprise the second state legislative approval, meaning it could go to the voters as early as this fall.

Among other things, the legislation includes something that gambling interests have been lobbying hard for: a much lower tax rate than the law currently requires.

“They have spoken to me about it, saying we have to have it changed,” Westchester Democrat Gary Pretlow, chair of the Assembly’s racing and wagering committee, told me last fall, referring to gambling industry representatives, who have spent millions lobbying state officials.

Right now, the nine racetrack casinos (racinos) that operate the state’s already-legal electronic slot machines pay a tax of more than 60 percent.

That’s one of the highest rates in the nation. Related: it also means the state’s racinos generate more tax revenue than most other states.

But Cuomo’s legislation would levy a tax of only 25 percent on the gross revenue of the three casinos he’d like to bring to upstate New York.

That discrepancy between the existing tax rate for racinos and the proposed tax rate for full-blown casinos isn’t entirely crazy, since the profit margin on human-operated table games is much lower than it is on slot machines.

But a flat 25 percent tax rate would in fact create a loophole of sorts, whereby profits from slots at casinos would be taxed at a dramatically lower rate than profits from slots at racinos.

Racino operators think the tax discrepancy could put them out of business.

“With that tax rate, a racino could not compete with a casino under any circumstances,” said James Featherstonhaugh, president of the New York Gaming Association, which represents the state’s nine racinos.

Cuomo’s office had no immediate comment.

Also, despite the heavy lobbying efforts of the Oneida Indian Nation, which operates Turning Stone Casino, the legislation contains no apparent mechanism for local approval.

The Oneidas recently reached a territorial exclusivity agreement with the state, so their interest in local approval has presumably waned. A spokesman for New Yorkers for Local Approval of Casinos had no immediate comment.

Instead of local approval, the state’s gaming commission, or a board created by the commission, will select the locations based “only on merit,” according to the release.

Also, no casinos will be located in downstate or New York City until at least five years have passed since the first upstate casino opens.

And, casino operators hoping to win one of those three upstate licenses will have to pay a fee of at least $50 million.