New York’s bet on new casinos has yet to hit jackpot

This was to be a year of celebration for New York’s booming gambling industry, with gleaming new casinos opening, rapturous bettors flocking in and a win-win for the state, with a torrent of new taxes pouring into government coffers at no cost to anyone but the bettors’ themselves.

But like casinos — where glitter often hides the grime — the reality has been far less glamorous, with underwhelming returns, evidence of industry cannibalization and a new, sharp-edged conflict between the state and a major tribal gambling operation.

In 2013, Gov. Andrew M. Cuomo signed a law allowing for seven new, full-scale casinos in New York, hoping to revive economic activity and providing new tax revenue in moribund upstate areas. Before that, the state had only licensed so-called “racinos,” which are connected to racetracks and feature video lottery terminals — similar to slot machines — but no table games like blackjack and craps.

So far that expansion has indeed led to some $70 million in new gaming tax and ample jobs at new facilities and constructions sites, according to casino operators. But early returns from two casinos that opened in February have been weaker than projections, according to the most recent figures posted by the New York State Gaming Commission.

The Del Lago Resort & Casino — built opposite an Amish farm adjacent to the Thruway outside Rochester — is on pace to gross about $151 million in gaming revenue in its first year, significantly lower than the $262 million it had projected when it applied for the license in 2014.

Likewise, the Rivers Casino and Resort in downtown Schenectady, next to the Mohawk River, has also underperformed. Its first-year projections ran between $181.5 million and $222.2 million; since opening on Feb. 8, an event attended by Cuomo, the casino has grossed $81.8 million — a pace that represents just 77 percent of even its lowball estimate.

A third new casino, Tioga Downs, which in December was converted from one of the state’s racinos, is also running short of its projections.

Lee Park, a spokesman for the Gaming Commission, said it was “much too early to make any judgment on gaming performance,” noting that some of the new casinos’ amenities, like hotels, are still under construction or only recently opened. “It is entirely premature to give credence to any analysis of how well the casinos are operating,” he said.

Under the license agreements, the new casinos pay a hefty gaming tax, ranging from 37 to 45 percent on slots and 10 percent of table game revenue; those funds are then divvied up for education and host cities and counties and nearby counties.

But there are also signs that some of the winnings at the three new casinos are coming at the expense of the racinos, which also help fund education. In places like Saratoga Springs, the Saratoga Casino Hotel has seen a precipitous drop in its net winnings since the opening of the Rivers casino, some 30 miles to the south.

Last August, the racino brought in about $16 million during the month, typically its biggest of the year with thoroughbred racing on at the nearby Saratoga Race Course. This August, however, its net winnings were down by nearly 25 percent, and that means

less money for education: All told, the casino is on pace to contribute nearly $14 million less than it did during the 2016-17 fiscal year. Other racinos have also seen declines since the new casinos opened.

James D. Featherstonhaugh, an Albany lobbyist and part owner of the Saratoga racino, said he expected even more declines as the Rivers and other new casinos build out their player databases and facilities.

“It’s clear that we’ve reached the stress point, especially in upstate New York,” he said, adding “the number of good quality jobs and first-rate facilities, we’re at the end of that.”

Still, like Gural, Featherstonhaugh said the state’s gaming industry had created “a pantload of jobs” over the years, and he expected that his business would eventually stabilize despite the Rivers. “I think both institutions will survive just fine,” he said.

That may not be the case for another racino, however; in June, during an extended legislative session, Cuomo agreed to $2 million in tax relief to keep afloat Vernon Downs outside Utica, something he said would save 300 jobs in “a part of the state where we can’t afford to lose 300 jobs.” (In pitching the casino idea in 2013, Cuomo had said that no state money would be spent to create the casinos, but called the Vernon Downs deal “a stabilization package.”)

And while he appreciated the help, Gural, who also is the majority owner of Vernon Downs and a financial donor to the governor, said he was still only breaking even at Vernon, as competition was fierce, especially as another tribal group — the Oneida Nation — has ramped up its gambling operations in central New York.

The Oneidas, owners and operators of the Turning Stone resort, opened another casino on tribal land in 2015 and are planning another early next year. “It’s a competitive environment but it always has been,” said Ray Halbritter, the Oneida Nation representative. “And if you think this is new, you haven’t been paying attention.”

Shortly before the 2013 law creating the seven new casinos, Cuomo had struck a separate deal with the Oneida, Seneca and Saint Regis Mohawk tribes, which operate five independent full-scale casinos. The deal sought an end to years of conflict involving land claims, exclusivity zones and hundreds of millions of dollars in withheld payments.

But Cuomo and the Senecas — who once tossed burning tires on the New York State Thruway during a conflict over state taxes — are once again at odds, after the tribe stopped making contractual payments to the state from its casinos in June. The Seneca’s position is that they have fulfilled their obligations under a 2002 compact, which allowed them the exclusive right to open casinos in a huge chunk of Western New York in exchange for payments to the state.

The state disagrees, saying the compact was automatically extended in December and with it, the payment schedules, despite such schedules not being explicitly outlined. On Sept. 7, the state filed a demand for arbitration seeking to force the Senecas to pay up, saying the tribe owes the state — and a raft of local counties and municipalities — approximately $31 million, with another payment due later this month.

“The nation cannot pick and choose the terms that are renewed,” the state’s filing reads.

Last week, the dispute intensified, as the governor reiterated his position. “We see no desire on their part to live up to the agreement,” Cuomo said, speaking to reporters in Niagara Falls, adding: “People don’t like to pay. I get it, you know? But we have an agreement.”

The Senecas shot back almost immediately. “Ignoring the facts and running from the facts do not change the facts,” said Todd Gates, the Seneca president. “The Seneca Nation has complied with the compact. New York state has not.”

The Senecas have continued to thrive, with a splashy casino here in downtown Buffalo and an impressive complex at Niagara Falls, where its gleaming hotel towers over the Niagara River. As talks with the tribe got heated, Cuomo had threatened to allow a new competing casino in Niagara Falls, something industry analysts said seemed unlikely considering the Senecas’ dominance there.

And as for the governor’s demand for arbitration, Gates was terse in his defense of his position that his tribe was abiding by the compact. “The deal was made,” he said. “And we’re living by it.”


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