The Update Desk: Sports Betting and More

I've done several updates on the experiment with non-Native American casino gambling here in New York, most recently in April, when sports betting was approved, the new regs came out, and all that excitement filled the air. Here's Schenectady-area Assemblyman Angelo Santabarbara, quoted in the April post.

Allowing sports betting in our upstate casinos brings sports betting out of the shadows and at a benefit to the taxpayers. It levels the playing field so we can create a responsible market for sports betting in a safe regulated manner... The additional revenue to the state makes it a win-win. 

Well, sure, except for reports of revenue falling well short of projections in other states that have already moved forward. Sort of sounds familiar, doesn't it?

Anyway -- the sports books at Tioga Downs, Resorts World Catskills and the Rivers Casino in Schenectady were up and running earlier, and del Lago's opened last Friday, with former SU and Philadelphia Eagles QB placing the first bet. I'll give an update on this latest "win-win" gamble once we have some data.

There are ownership changes on tap at two casinos. First, Wilmorite, the developer of del Lago and several shopping malls in the CNY area, is getting out of the casino owner business. The company, owned by the Wilmot family, is selling its shares to the property's co-owner, Peninsula Pacific. The investment firm's chairman and managing partner, M. Brent Stevens, said

This will position Peninsula Pacific as the sole owner of the property and signals our further commitment to be the premier source of gaming and entertainment in the Finger Lakes region. 

Stevens made it clear Peninsula Pacific is aware of the financial situation with del Lago and the other casinos in New York. noting

Sure, it has been disappointing. Sure, there are structural issues in the overall gaming market in upstate New York, But in the long term, we have faith in this property and we are as excited today as we ever have been about the ability to do the right thing, to grow our operations and have the right things happen within the broader industry in New York. 

Speaking on behalf of Wilmorite, chairman Thomas Wilmot Sr. said

del Lago Resort and Casino is good for our community - it has created employment opportunities, an entertainment destination and a new stream of revenue for the town and county. The continued success of del Lago is good for everyone in the Finger Lakes region.  

Meanwhile, Empire Resorts, the public company that runs the $1.2B Resorts World Catskills property, is losing money and suggested that bankruptcy might be the answer. In the end, Empire reached a deal to sell its stake to the majority owner, Kien Huat Realty and Genting Malaysia. The buyers are paying nearly $10 per share of Empire Resorts, about 15% higher than the trading price when the deal was announced. There's also an increased funding commitment - $77M - which will help with debt repayment.

Genting Americas president Ed Farrell said in an interview

We're in a unique position where we can assist with the management of Resorts World Catskills through our Resorts World New York property at a low costs. We can bring synergies to both projects and by just operating at a higher sale, we're going to be able to put the cost structure in a way that Resorts World Catskills can turn to black and we can make money going forward.

Are you a gambler? How much would you wager on any of the casinos turning things around, either through sports betting or the ownership changes?

Given their collective track record, I'm out.

The Update Desk: Casino Gambling (again)

Can it really be time to do another update on New York's ill-fated decision to allow non-Native casino gambling?  Why yes, yes it is - and this update is about the same as the last one, and the one before that.

As has consistently been the case, the news is not good for our Vegas-style casinos in the Finger Lakes area, the Southern Tier, the Capital region, and the Catskills.  Leading the way, again, is the del Lago Resort and Casino down the Thruway a bit from Syracuse.

We're told of another downgrade in their credit rating and a likely continued 'negative' outlook.

If the two-year-old del Lago Resort and Casino in the Finger Lakes is to survive, it's going to need new cash investment or face a difficult restructuring of its debts and finances.

The issue? Lower than expected revenue growth and, oh yeah -- too many other opportunities for throwing your money away. The same issues confound the other three, which are not meeting their revenue estimates, either. del Lago was about 57% short of projections. Here's what Moody's said, in part.

The downgrade and the negative outlook consider that despite a slight pickup in del Lago's monthly gamin revenue, this improvement is not enough to alleviate Moody's concern that Lago will be challenged to support its annual fixed charges of about $50M going forward.

And there's more news on the casino front, which is not necessarily going to be helpful to the cause, either.

The Update Desk: Casino Gambling

It's almost hard to imagine that I'm able to write - again - on New York's great experiment with casino gambling.

Most recently, in this post, we learned about the downgrading of del Lago's rating by Moody's, and it's accompanying gloomy outlook that del Lago is not viable without some restructuring, and in this post, we learned that del Lago and at least one of the other new casinos was looking for a better tax deal from the state. (These are just two of several posts I've done on this subject over the past four or five years.)

And then, just a couple of weeks ago, we got news that the newest, the biggest of the four approved casinos (please, don't let them build any more of the darn things!) is also in a bit of a pickle.

It seems that Empire Resorts, which built the new Resorts World Catskills casino, lost over $58 million in the first five months it was open. The company also owns the Monticello Raceway, what we here in NY call a 'racino' as it has both harness racing and slot machines. According to the company's SEC filing from June 30,

We cannot be certain that our business will generate sufficient cash flow from operations, that our anticipated earnings from the Casino will be realized, or that future borrowings will be available under our existing debt arrangements or otherwise to enable us to service our indebtedness or to make anticipate capital expenditures... Our future operating performance and our ability to service our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. 

As it did with del Lago, Moody's downgraded Resorts World Catskills' rating.

Now, I know the language used in SEC filings is almost as carefully crafted as a Hollywood script or a politician's concession speech, but you can see that they're struggling with cash flow and debt, the same as del Lago and Rivers. Tioga Downs, in the Southern Tier, may be doing a little better.

The latest article notes that 'informal' requests for help from the state, the ones made by del Lago and Rivers, were rejected.  And it has a link to another article that proves what most of us knew all along, and what the experts have been saying for a couple of years: the upstate market is over-saturated with gambling opportunities.

How so, you say? Well, take a look; in addition to the four new  under performing Vegas-style casinos, we have

• seven Nation owned casinos
• six racinos (including Tioga Downs and Vernon Downs, which has had its own issues)
• one thoroughbred track
• 120 Off-Track Betting locations and
• three Nation-owned electronic gaming locations

Add in the ready availability of online gambling, and legalized sports betting (likely coming to New York in the near future), and it's hard to imagine anyone would think we're over-saturated, right?  

Time will tell whether all those things that are beyond the control of the casino owners will turn in their favor or turn against them like a bad hand of cards. What remains important is that we taxpayers aren't called upon to bail them out. 

After all, while the local casinos are happy to show us pictures of their lucky winners, we never see any pictures of people the casinos bailed out after a losing streak.

The Update Desk: Casino Bailouts?

This is one of those rare posts that truly writes itself; I just has to pull the excerpts.

November 11, 2013:
Last Tuesday, New Yorkers overwhelmingly approved perhaps the most ridiculously worded, most biased proposal ever to appear on our ballot:

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 revenues generated.

A breakdown of the vote, as illustrated in this article by Michelle Breidenbach in the Post Standard, shows where the opposition to the measure came from: 

• Ten counties in Western New York - Seneca gambling territory - voted no by between 50 -59%. Niagara and Monroe county results were 'undetermined' at the time the article was published; however according to the unofficial results, both are leaning no but by very small margins - less than 500 votes in Monroe, and only 250 votes in Niagara. 
• Here in Central New York, four counties - Madison, Onondaga, Otsego and Tompkins - voted the proposal down; Oneida county was still up in the air but is leaning towards approval, albeit by only 401 votes. 
• In the capital area, Albany, Schenectady, Saratoga and Warren counties all said no. Rensselear was leaning yes, by just over 700 votes, while Washington was saying no, by only 65 votes.
• Further north, Hamilton county (118 votes) and Lewis county (369) were also leaning no.

And from June 22, 2014:
Enter Wilmorite, the Rochester developer who has long been engaged in Onondaga County as well: 

• Think ShoppingTown Mall and Great Northern Mall, once glistening, booming retail establishments.
• And think the proposed OnCenter Hotel, to be built downtown using the proceeds from a racino that Wilmorite wanted to build in Cicero.  
• And think, more recently, of the defaulted mortgage on the old Sibley's building, which a local developer wants to get working on, and hopefully won't be delayed by Wilmorite's default. 

Onondaga County is already using casino gambling as an economic development tool. For example, some of the money the county is putting towards the seasonal concert amphitheater on the west shore of Onondaga Lake -- a crap shoot worthy of any Las Vegas high roller --  is an advance on our projected share of the money from Oneida Nation/Turning Stone agreement, so from that perspective I guess it makes sense that we'd at least think about gambling again with Wilmorite...

...Alas, as with most gambles, timing is everything. And so is picking the right horse. The fact that McMahon couldn't rally his troops and bring the vote to the floor means we missed the opportunity to support the deal, and it will hold (or fold) without us. That may be to our benefit, as it wouldn't look good on our resume if we backed the Wilmorite horse again - and lost, again.

And this, from July 2, 2014:
Finally, and this is sort of a non-Wilmorite wild card:  in its infinite wisdom, the New York Legislature passed a bill authorizing gambling at racinos until 6AM. Racinos are horse tracks that also have limited gambling, mostly video terminals.  Revenues are down at some of these places, and so our elected representatives decided that they can stay open another couple hours to try and get a few more bucks out of the folks who can't think of anything better to do in the wee small hours of the morning.

Hmm. Revenues are down at existing gaming facilities, at a time when we're proposing a major expansion of gambling?  How ironic...  

It'll be interesting to see how our new regional casinos will fare against this backdrop, and if the promise of last fall's constitutional amendment -- "promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues produced" -- will come to fruition.

And, from November 24, 2017:
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.

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.

And from January 14, 2018:
NY legislators and Governor Cuomo don't seem to be too worried. For example, here's a fabulously irresponsible comment from Senator John Bonacic, the Mount Hope Republican who happens to be chair of the Racing, Gaming and Wagering Committee in the state senate, who noted in effect that developers always lie to get approval for their projects.

It was a very competitive process for four casino licenses, and of course their consultants were going to put rosy projections in order to get the Gaming Commission to hopefully give them a license. 

Gee, thanks for the oversight, Senator -- you do know that means oversee, not overlook, right?

For his part, our ever optimistic Sonofa Gov noted about the new casinos

They've all been wildly successful in creating jobs and building beautiful complexes.

Which, as we know, counts for everything with him. The state is littered with beautiful buildings created as part of these economic development, money-for-schools or tax revenue generators (but that's a whole nother post.)

And finally, today's update, from the Rochester Democrat and Chronicle:

The del Lago casino in the Finger Lakes is seeking a better tax deal from the state to address its struggling revenue - slightly over a year since it opened. 

Tom Wilmot, the principal owner of the casino, told USA TODAY Network's Albany Bureau on Tuesday outside the Capitol that he hoped state leaders would assist the casino. 

He didn't say specifically what the request was, but it appears the casino is seeking a lower tax rate paid to the state.

"I think we need some help at this point, and what the future holds, time will tell," Wilmot said. 

Whether the state Legislature and (our Sonofa) Gov. Andrew Cuomo will come to the casino's aid is uncertain. 

And (del Lago isn't) the only one: Rivers Casino in Schenectady is seeking a better tax package from the state, according to Assemblyman Phil Speck, whose district includes that facility. 

Time will tell, indeed. Time will tell.

The Update Desk: Casino Gambling

Last November, I shared the news ( in this Meanwhile Back in Albany post) that New York's gamble on allowing private, non-Native American casino gambling was not doing as well as expected.

The majority of voting New Yorkers who remembered to turn over their ballots back in 2013 decided we would amend our constitution back in 2013 to allow for up to seven new casinos "for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated."

As I noted in that post in November, the first three casinos - del Lago Resort and Casino (Waterloo) Tioga Downs in the Southern tier (which has its own crazy story) and Rivers Resort and Casino (Schenectady) are all under performing, by some $200 million or so, according to projections.

Competition is increasing - the fourth of the 'up to seven' casinos will open in the Catskills later this spring. The new place, Resorts World Catskills, will have a 100,000 square foot casino, 2150 slot machines, and 134 table games, along with a hotel, spa, golf course, and multiple dining options.

Also opening soon is Point Place, the latest offering from the Oneida Nation, which owns Turning Stone Resort Casino in Verona (east of Syracuse) and another mini-casino in Chittenango. Point Place, in Bridgeport, is supposed to cater to folks in Onondaga County, where the Legislature doesn't want to be in the gambling business and repeatedly turns down even putting up an OTB parlor, as well as from the communities around Oneida Lake and points north.

As noted in this recent article on Casino.org,

When Point Place Casino near Syracuse opens on March 1, the boutique $40M, 65,000 square foot casino will feature 500 slot machines and 20 table games. And while that might be great news for area gamblers, it's not quite as welcomed by the competition.

New York gambling venues have been sprouting up across the state since legislators opted to legalize four commercial casinos in 2013. The result has been a increasingly crowded upstate market, with private and Native American gaming operators fighting for the same customer base. 

NY legislators and Governor Cuomo don't seem to be too worried. For example, here's a fabulously irresponsible comment from Senator John Bonacic, the Mount Hope Republican who happens to be chair of the Racing, Gaming and Wagering Committee in the state senate, who noted in effect that developers always lie to get approval for their projects.

It was a very competitive process for four casino licenses, and of course their consultants were going to put rosy projections in order to get the Gaming Commission to hopefully give them a license. 

Gee, thanks for the oversight, Senator -- you do know that means oversee, not overlook, right?

For his part, our ever optimistic Sonofa Gov noted about the new casinos

They've all been wildly successful in creating jobs and building beautiful complexes.

Which, as we know, counts for everything with him. The state is littered with beautiful buildings created as part of these economic development, money-for-schools or tax revenue generators (but that's a whole nother post.)

So as we look to March, and hundreds of thousands of square feet of new gaming space, we have this dreary outlook on Wilmorite's del Lago from Moody's, which landed on January 10th.

Moody's Investor Services downgraded Lago Resort and Casino, LLC's Corporate Family Rating today to Caa2 from B3 even while the company's Probability of Default Rating was lowered to Caa2-PD from B3-PD. At the same time, Lago's 1st lien revolver and term loan were downgraded to Caa1 from B2 and its 2nd lien term loan was downgraded to Caa3 from Caa2. The rating outlook is negative. 

In English, what does that mean (emphasis added)?

Key credit challenges include Lago's slower than expected ramp up, single asset profile, and the highly competitive nature of the market which it operates that may impede the company's ability to support its capital structure. There are five gambling facilities, including four racinos and one Native American full scale casino within 100 miles of del Lago's location...

The negative rating outlook considers Moody's expectation that, despite the likelihood that Lago will cover its cash interest obligations and remain in compliance with its financial covenants during the next 12 months, albeit marginally, without a substantial improvement in the rate and degree of ramp-up or an additional equity investment by the owners, Lago will not be able to achieve a level of performance that can support its existing debt capital structure. 

 Lago's rating could be lowered if it appears there will be debt restructuring that involves impairment to existing lenders..

Now, it would be unfair if I failed to mention spin-off economic benefits stemming from del Lago and the other new casinos. For example, the State of New York might be making some extra money.

Data obtained from the State Thruway Authority shows Exit 41 (del Lago is just across the Thruway from the toll booths) had a monthly average of 266,306 vehicles the year before del Lago opened, the casino says. Since the casino opened, average monthly traffic at Exit 41 has increased to 381,477 vehicles...

Another real success story is the Magee Diner, just down the road from del Lago. It's one of several local businesses where gamblers can use their rewards points. The diner's owner, Gary Schlegel, has seen sales increase 15% since the casino opened.

We see more and more new faces in our restaurant every day, and 80 percent of the time my customers tell me they are on the way to or from del Lago.

Schlegel plans on adding outdoor dining and said he's going to see about getting a liquor license, too. This is great news, but as with any other downstream economic effect, this will last only as long as del Lago lasts. Like those shiny under-leased or empty new buildings I mentioned above, hopes and dreams of small business owners are also scattered across the landscape.

I don't want the casinos to fail -- we're already over-invested in them. And I certainly don't want the small business owners who are seeing a bump in business go back to where they were, or worse - fail completely - should the casino 'trickle-down' revenue streams dry up. 

What I do want, though, is responsible stewardship and leadership from our elected officials. That, my friends, shouldn't have to depend on a roll of the dice or the luck of the draw.