November 24, 2017

Meanwhile Back in Albany (v12)

Nathaniel Brooks/NY Times
Remember when New Yorkers voted to amend the state Constitution to add casinos?

It's hard to believe it was four years ago - back in 2013 - that we had the opportunity to vote on, and ended up overwhelmingly approving, this change.

I have long felt that it was a combination of two things: the promise of a sure thing from the government, and the hope for a long shot personal win - that led to the approval of the initiative.

The potential for a personal win? Go to your local casino (not to one of the ones owned and operated by Native Americans or, heaven forbid, one in another state), try your luck, and walk away with a ton of cash. After all, it happens all the time -- we see the billboards and the TV ads of the winners, and the beautiful people in their fancy clothes having a ball at the casinos, right? And who would be having that much fun if they were losing?

The sure thing the government promised us? Let's look back at that ballot initiative:
The proposed amendment to section 9 of article 1 of the Constitution would allow the Legislature to authorize up to seven casinos in New York State for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenue generated.
Fun times, right? Hopes were high back in those days. Not so much now, though. According to an article from earlier this month,  all three of the first licensees are underperforming. 
  • del Lago Resort and Casino, down the Thruway a bit from Syracuse, opened earlier this year with projected gaming revenue of $263M for its first year.  As it stands, they'll probably fall about $100M short.
  • Rivers Resort and Casino also opened earlier this year in Schenectady, and is expected to fall about $80M short of its $222M projection.
  • Tioga Downs, which upgraded from a racino to a casino that opened in December 2016, had lower projections - $103M - and is also expected to fall short, by around $30M.
An Associated Press article out today goes into more detail on why we may not be seeing the 'elusive' jackpot we were all waiting for.
Analysts blame a crowded market for the disappointing new casino revenues. Aside from the five full-scale Indian casinos, New York is home to ten 'racino' horse tracks with video lottery terminals. The Oneidas, who operate the Turning Stone casino in central New York, also run a mini-casino in a strip mall near Syracuse. 
That competition is going to be increasing, too.
A fourth $1.2B casino resort selected by state officials is set to open in March in the Catskills, about 90 miles northwest of New York City. Another casino less than an hour from the New York border in Springfield, Massachusetts, is set to open later in 2018. And the Oneidas are set to open a second mini-casino near Syracuse in the spring. 
For casino hosts like Schenectady, which budgeted for revenue that's not coming in, things are not looking good. Here's Councilman Vince Riggi:
It's a plus (the new revenue that is coming in), but it's still a disappointment, that's the way I see it. We were told to expect much more.
Tioga Downs owner Jeff Gural, who also owns the Vernon Downs Racino, has a different take on things, and focuses on the economic benefits of the casinos instead of on the less-than-projected revenues.
It's been a huge success. Whatever has been promised from an economic development standpoint has been delivered by the casinos. The real losers, frankly, are the owners of the three casinos. 
I would be remiss if I failed to mention that Gural asked for and received a bailout from the state to keep Vernon Downs open; it gets to keep more of the money that would have gone to the state, and they get to use capital improvement funds for operating expenses. The racino was losing about $5K a day, state officials were told; competition was one of the main drivers of the losses, Gural noted.

Meanwhile, back in Albany, legislators are not happy. Assemblyman Gary Pretlow, a Dem from Westchester  County, wants the state comptroller to investigate, as he's concerned the state will be asked to step in and help. His letter to Tom DiNapoli, he noted (in part)
When our state passed legislation to expand gaming, our decision was based on projections of robust revenues and promises that casino development would not place new burdens on taxpayers... The last few months, however, have called into question those projections and promises.
And, he noted
It is critically important that we have reliable and realistic long-term revenue projections - so we can prevent the recent gaming expansion from creating an arms race to more and more tax subsidies.
I would add that it's critically important that local governments budget responsibly, which would include not betting the farm that all of the promised gaming revenue would actually come in - but maybe that's just me.

Oh -- about that gaming expansion Pretlow mentioned? It's going to get worse.

Here in NY, we've got another billion dollar casino resort opening in the Catskills in March, and another mini-casino from the Oneidas opening in Bridgeport, at the outer reaches of Onondaga County, also in the spring. Another is scheduled to open in Springfield, MA, a relatively short hop from the NY border.

This will be one to watch going forward. With our appetite for bailing out gambling facilities already demonstrated, this could all turn into one really ugly crap shoot.

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