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Tuesday, September 16, 2014

Schenectady Casino Bidder Invests in Slots Games For Kiddies

I mentioned the group opposing a casino in Schenectady the other day; haven't really discussed them here before. Their website, Stop the Schenectady Casino, can be found here.

On their homepage now, there's a link to this report about a multi-million dollar investment by Rush Street Gaming, the company that is hoping to build the Rivers Casino and Resort at Mohawk Harbor in the city, in Ruby Seven, a company that is marketing "social gaming"- or casino simulation games - to kids as young as 13 years old.

Ruby Seven games currently being distributed include “Cats Vs. Dogs Slots” featuring big-eyed cartoon cats and dogs in “a FREE to PLAY slots game with the cutest puppies and kittens, hourly bonus coins, and realistic slot machines [capitalization in original],”and a poker game promising to be “simple to learn.”
The game is accessible via Facebook, where it says that the game "is intended for use by those 21 or older for amusement purposes only." However, if you click on the Terms of Service, it reads:
The Service is intended for use by those 21 or older for entertainment purposes only. By using this Service, you declare that you are 13 years old or older. If you are between the ages of 13 and 18, you declare that your legal guardian has reviewed and agrees to these Terms.
Which I'm sure really happens.  (Apple iTunes has changed the rating to 17+.)  Although the games are said to be "free," in fact, as the report explains, this was actually an $8 billion market in 2012. The games come with free chips (or equivalent), but players have to pay up to replenish when they run out, and they can purchase bonuses and upgrades.

The report notes that Ruby Seven seeks to "bridge the space between land-based casinos, onlinegaming and social casinos." And it suggests the obvious; that Rush Street and its partner are attempting to sow the seeds of casino gambling in kids so that they can convert them to paying customers at their casinos, either online or brick-and-mortar, and possibly acquire behavioral information for marketing purposes, for when they reach legal gambling age.  The meticulously-footnoted report cites a study that concludes: "Studies of adult problem gamblers have reported that earlier onset of gambling is a risk factor for problem gambling."  And that's interesting now that I think about it just based on my personal experience.  All of the people I grew up with who later had an issue with gambling were amongst those with whom I went to Roosevelt Raceway back in high school.  (The tracks surely did their part.  In those days, the gambling age here was 21; I would go when I was 16, I looked and sounded more like I was 14, and only once do I ever recall being turned away at the betting windows.)

This report also notes that these game developers can make it easier to win than it is in actual gaming, thereby creating false impressions as to the odds involved; and that the "social network" aspect of the games and the virtual prizes involved can be as equally alluring as the promise of winning money.  It's an interesting read; and again, the link is here.

The report is dated September 9, the day after Rush Street presented for the Schenectady project, and the same day that they presented for the Newburgh casino that they hope to build in partnership with Saratoga harness (as well as for the Greenetrack proposal near Stewart Airport).  During those presentations, Rush Street emphasized the Best Places to Work awards that they earned at their Pennsylvania facilities.  But the very next day, Jim Odato reported in the Times Union that a casino workers union wrote to the Gaming Commission to complain of "illegal harassment by casino managers including threats, surveillance and other intimidation." 
Asked about the union's complaints, Rush Street Chairman Neil Bluhm and CEO Greg Carlin said the company's record speaks for itself. During two days of presentations to the siting board earlier this week, the company emphasized it has won repeated best-employer awards at its three casinos for years.

"We certainly have disputes with companies all the time, but there is nothing like this anywhere else," said Martin Leary, gaming research director for Unite HERE. The union has 275,000 members in hospitality and food service jobs, including about 100,000 casino workers. [Times Union]
The Schenectady group has also posted articles about the proposed casino's proximity to Union College, and the potential danger presented to students who may be lured there.  I actually went to Union, graduating in 19--......well, a long, long time ago.  Not sure what the student body is into there these days; but I don't recall much in the way of on-campus gambling in the form of poker games, etc.,  Back then, in 19--....well, back then, for horseplayers like myself, the Schenectady OTB office was just a short distance away; and around the block from there was Baum's Newsroom, where one could pick up the NY Post (to keep abreast of the PC's then, not to mention the internets) and the Daily Racing Form, probably for a couple of bucks.  And the Saratoga harness track was about a half hour away; we took many a trip there via Route 146 through Clifton Park, probably a couple of times a week when it was open.  The vast majority of students however made the trip to Saratoga to hook up with Skidmore girls (Union had just recently gone co-ed and the male-female ratio was untenable for guys), and I'd guess that the hormonal instinct is still more powerful than the lure of gambling for most students.  However, I don't want to downplay the concerns; I'd imagine that many of the students whose families can afford to send them there probably have a little disposable income available to piss away, and would therefore be likely targets for a casino operator.

 - City & State reports on the financial woes of Caesars, bidding for an Orange County casino in Woodbury, citing "a streak of quarterly losses and a mountain of debt that is projected to lead the company into a major debt restructuring, if not an outright bankruptcy."  The company points out that the NY bid is through an affiliate, Caesars Growth Partners.  CEO Gary Loveman (one of the smoother presenters that we saw last week) told the location board:
“This entity has in excess of a billion dollars of cash today on its balance sheet, it is very lightly levered and therefore has very sound financial circumstances. And this project, Caesars New York, would exist within the Caesars Growth Partners category. This entity would generate more than $200 million to the state of New York and its various local constituencies.”
But that maneuver has angered creditors, who have found themselves saddled with a weaker set of assets while potentially being on the hook for bigger losses if the company goes bankrupt or refinances its debt.  [City & State]
The piece also points out that Caesars was forced to drop its Massachusetts bid (in partnership with Suffolk Downs) in response to a report by state investigators that expressed doubt about the parent company's debt load, as well as a business relationship with a person with alleged ties to Russian organized crime.  The location board did not question the Caesars team about either of those situations; they skirted around the financial issue by asking generally about the situation in Atlantic City, and about the status of their financing.  Which, once again, raises the question of just how much preparation these guys did, or have done, for the task that lies ahead for them.

Monday, September 15, 2014

Group Pledges to "Bury" Genting in Lawsuits

The Albany Times-Union checks in with an editorial opposing Genting's proposed casino in Tuxedo. The editorial, quite appropriately, accuses Genting of "attempting to bypass the deliberations and virtually buy a state casino license" with its "outlandish" $450 million cash offer for what is a $70 million license fee, and its brash offer to "write you a check today."

Consider how the change in the state's constitution to legalize these full-blown casinos was sold to voters. Recall the controversially favorable — some say unfairly promotional — wording of the ballot proposition last November. It unequivocally stated casinos were intended for "promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated."

Backers portrayed casinos as a panacea for New York's most economically distressed regions, providing jobs and spurring other development. They conjured images of rundown and abandoned resorts in the Catskills and a second lease on life for the struggling region.
The editorial goes on to note that Tuxedo and the surrounding area do not at all qualify as a struggling region; neighboring Tuxedo Park has a median income of over $91,000.

Meanwhile, an environmental group is pledging to "bury" Genting in lawsuits should a license be granted to them.  Whether that in itself acts as a deterrent to the location board picking them remains to be seen...but considering the fact that community support is supposed to be one of the criteria, I don't see why it shouldn't.  There are 16 bidders, and I myself know of only four that have attracted an active opposition - East Greenbush, Tuxedo, Schenectady, and Tyre.  (I'd be more than happy to receive word of any others.)  So, it seems to me that there are plenty of options that would better satisfy the community support requirement.  And I don't see why the board would make a selection that is likely to be tied up in the courts....unless it finds the riches that Genting is promising too much to resist. Which is surely a possibility.
Sterling Forest Partnership opposes the proposed $1.5 billion casino because it is located on privately owned land surrounded by Sterling Forest, a 22,000-acre state park that was created in 1998 after concerted efforts by environmentalists. The group believes a casino of that size would disturb the environment, and a proposed Exit 15B off the Thruway would bring too much traffic to the area. [Times Herald-Record]
As we mentioned, there was an anti-casino contingent from Tuxedo at the presentation last Tuesday, and Genting at least acknowledged their presence; that as opposed to Saratoga Raceway and Casino, whose Rita Cox feigned ignorance of the roots of the opposition in East Greenbush.  Genting says they will work with opponents, and they're making a lot of promises as to how they will assuage environmental concerns; they'll treat runoff, they'll protect wildlife, they'll use low lighting that won't disturb the views.  And to that, I'll remind you that Genting pledged to "work closely with NYRA to transform [Aqueduct] into a casino and racetrack that will be the envy of the country.”  Yet, we were told at a NYRA board meeting by then president Ellen McClain in December, 2012 that Genting failed to follow through on a promise to keep the racing side of the plant clean - NYRA took over maintenance in 2013 - and repeatedly delayed groundbreaking on the Longshots bar which finally opened in April. 

Now, I don't know that we could expect the gentlemen on the location board to be quite that fully immersed in the details and history of all this (although, why shouldn't they be); but I sure would have liked to have heard them question Genting about past broken promises instead of being so concerned about golf courses, proposing hypothetical scenarios that are not going to happen (such as two casinos in the Southern Tier), and asking rote questions about financing, the answers to which are either already in the applications or easily attainable at another time.  Kevin Law told the folks in the yellow shirts to come back for the public comment sessions later in the month; and it's indeed the public that will have to ask the kind of incisive questions that we, for the most part, did not hear last week.

And as far as those lavish illustrations of what Sterling Forest will look like?  I might also take that with a grain of salt.  Here's the original illustration of what the Aqueduct racino was supposed to look like:

And here is what it actually looks like now:

I was very excited about the big water fountain.  Guess it dropped out of the plan at some point, along with the trees and the shrubs and that big tower thing that looks like the Chrysler building.  Anyone who was familiar with the old Aqueduct footprint knows that, for all the supposed glitz, it is really a relatively cosmetic change from the original.  May be a small point.  But the devil is in the details, and should Genting be granted the license to build this thing, I'd bet that it won't be quite as spectacular and glamorous as they portray it to be now.

Friday, September 12, 2014

Genting's Audacious Tuxedo Proposal Has Worldwide Ambitions

Man, it took me a few days (and a couple of excellent music shows) to recover from watching all of the oral presentations by the casino applicants on Monday and Tuesday.  I had a headache for around 18 hours afterwards.  You can read all of my tweets if you care to scroll through my Twitter feed here.  Or here's a serviceable recap of Tuesday's presentations from the Albany Times-Union.

It was all a lot of slick (and not that slick) videos, lofty (and, in some cases, dubious) claims and promises, (deceptive) illustrations of young, affluent looking types having fun, subtle (and not so subtle) putdowns of the competition....but one thing was notably missing.  The other side of the equation. 

Americans, according to The Economist, lost $119 billion gambling last year, most of it at casinos. [Aljazeera America]
Yeah, all that money that is gonna create jobs (for now), fund education, pay for fire truck ladders, and bribe enrich local governments has to come from somewhere.  Out of all of the presentations, only Jeff Gural/Tioga Downs acknowledged that the money lost at casinos is cash that is displaced from other segments of the local economy.  Otherwise, one might think that the money is generated out of thin air. It comes out of peoples' pockets, and while some can afford it, others cannot.  And while all of the bidders paid lip service to the issue of problem gamblers (one, the Nevele, even had a guy from the NY Council on Problem Gambling on hand, nice touch), none addressed the studies that suggest that up to half of casino revenues come from those with a gambling problem.  And I've never heard any studies whatsoever about where/how that $119 billion might be spent/saved/invested otherwise.  And how the overall employment/economic picture might be affected by that.

Look, there are some desperate towns/communities involved here.  Who are we to tell them that a casino won't provide a lifeline for some of their unemployed, inject life into local businesses, and provide much-needed financing for education, infrastructure, and government services?  But the money is, to a significant extent, as one casino operator himself recently conceded, a tax on the poor. I sincerely hope that towns like Newburgh or Ellenville get the relief that they need.  But I also hope that peoples' lives aren't irrevocably damaged in order for that to happen.  And remember, this is not a charitable endeavor, even though it sometimes seemed that way from the tone of the presentations; two of them referred to casinos as "beacons."  These companies stand to profit enormously from the pain of others, at least to some extent.  Otherwise, we wouldn't be hearing from them.

Seems to me that the board, or at least its chairman Kevin Law, bought right into all of the nonsense about water parks and all of these amenities that are clearly intended to gloss over the hard reality of the hardcore gambling facilities they are proposing to build. 
“On one hand, we want to help invest in communities that are distressed or have been historically not receiving the types of investments we would have liked for them to have received.."

But, Law said, “the state’s trying to grow the tourism industry and so there are some applications which would lend themselves to things beyond casinos and take advantage of skiing and golfing and vineyards and other aspects of our great state." [Capital New York]
Oh jeez, seriously Kevin Law?  The tourism industry?  Skiing and golfing?  Dude, you're really gonna fall for that?  Maybe he should speak to his colleague Stuart Rabinowitz, who skeptically questioned the Howe Caverns team about the whole concept of a casino being a family resort destination.  I wish he would have asked every bidder that.  (Rabinowitz was not on site on Tuesday; he observed and participated via the internet.)

“And then you have the economic realities of proximity to the masses of New York City’s population, and the real possibility of New Jersey, perhaps, allowing for casinos north of Atlantic City, which would then lend themselves to, ‘well, are we going to get boxed out?’ And do some of the later presentations make more sense?” Law said, referring to the Orange County proposals.
The Catskills bidders, and those needy towns in which they are proposing to build which are fervently hoping against an Orange location, cannot be encouraged by Law's remarks.  I'm not sure about this guy.  There were some times when he asked prescient questions, and others when he seemed confused, particularly when he asked Mohegan Sun if they were proposing to build at the Concord or at Grossinger's.  (Unless that was a sly commentary about their presentation not making that clear.....though it seemed quite so to me.) And I'm also still not quite sure whether Law and this board just missed the memo that everyone else seems to have gotten about two licenses going to Catskills/Hudson Valley and one each to the other two regions; or whether that 4th license is truly at play statewide.  It's obvious to anyone that the Southern Tier ain't getting two licenses, so I don't understand the point of his presenting that to the bidders as a possibility.  And the only possible scenario by which the Capital District gets two would be one at Howe Caverns, and one in the Albany/Schenectady area; but even that seems extremely unlikely. It's been suggested that the board will only award three licenses and punt on the 4th (thereby creating another round of lobbying and campaign contributions).  If the board is indeed going to diverge from the expectations, I'd think the latter is by far the most likely scenario.

One thing the board had exactly right is its sense of narrative.  By having Genting's Tuxedo proposal go last, it surely saved the "best" for last....if "best" means biggest, anyway.  We started out on Monday with Tradition's proposal for a $155 million project, plus a $35 million licensing fee, creating maybe 1500 jobs and generating $135 million in annual gaming revenue, with 90% of that coming from the local area.  We ended up on Tuesday evening with Genting's ginormous $1 billion Sterling Forest Resort - plus a voluntary overpayment of $380 million on top of the required $70 million licensing fee ("we can write the check tomorrow") - with a globe-spanning customer base, some 4,000 jobs (at an average wage of $75,000 a year....or so we're told; no doubt including the executives) and over $1 billion in annual gaming revenue.  Their hotel would be 1,000 rooms; we had heard of hotels with as few as 100 rooms, such as in East Greenbush.  They're going to pay for a dedicated exit off the NYS Thruway, at a cost of some $30 million.  They're going to revitalize the ski slopes and the gardens; the latter will be "mentioned in the same breath" as spectacular vistas in the Grand Canyon and Yellowstone Park, we're told.  "It will invite guests to dream of the intoxicating moments of life." 
I don’t think it is a shock and awe strategy,” said CFO Christian Goode. [Daily News]
Well, I was pretty shocked and awed at the sheer audacity of it all.  We'd been hearing all this talk about drawing customers that are presently going to other states, and from those states themselves.  Genting is talking about drawing gamblers from China, flying them to Stewart International Airport in private jets, and unleashing them upon the baccarat tables, apparently their preferred method of gambling.  In their minds, they're not competing with Yonkers.  They're competing with Las Vegas; they displayed a slide showing that it takes two hours longer to fly there from Beijing than it does to NYC.  They don't seem to particularly care about the threat of a casino at the Meadowlands, because they plan to increase their percentage of international revenue from 20% to 45% by the time one gets built there (and they ain't talking about Canada).

[Say, hypothetically, 100% of their revenue came from Asian tourists that can afford to fly here, check out some restaurants, shopping, and museums in NYC and then go to play baccarat and shop at Woodbury Commons and ski and check out the Renaissance Fair (but no golf at Sterling Forest, much to the apparent disappointment of board member Dennis Glazer).  Would it change the ethics of all of this if all of the jobs and revenue were generated in that way?  Surely wouldn't be the first time that Asians are funding government here!  Yes, it does seem exploitative....but anymore than depending on poor schnooks gambling away their paychecks?]

So, in one way, it's hard to argue with this gentleman:
“How can you say no to that?” said Chad C. Beynon, a gambling analyst at Macquarie Securities Group. “How can you honestly pick someone else?” [NY Times]
On the other hand, as the gaming committee leaders of the state Assembly and Senate complained after the hearings:
"[Assemblyman] Gary [Pretlow] and I intended Orange County never to get a casino because any of the disadvantaged counties – southern Ulster or Sullivan County – it’s going to hurt their banking efforts," [Senator John] Bonacic said. "Banks make decisions on anticipated revenue." [Politics on the Hudson]
So, it will come down to the governor location board deciding what is the real priority here - helping the counties that Cuomo were quite specific about benefiting in the immediate aftermath of the referendum vote?  Or taking the most money, no matter where it's coming from?

That's the big question....and one of the reasons why, despite what Law said at the end about possibly announcing their decision in mid- to late-October, I don't think it will happen until after the election. I don't believe Cuomo wants his margin of victory to be mitigated by furious voters who didn't (or did) get the casino that they wanted (or didn't).  Unless of course he comes riding into Sullivan County on a white horse days before the election announcing that they'll be no casinos in Orange County.  Looking at the size, scope and revenue projections of not only Genting's Tuxedo proposal, but those by Caesars' in Woodbury and Genting's own alternate proposal in Montgomery (which they made explicitly clear upon questioning is their second option), it would appear the money may be hard to resist.  I'd originally predicted that the casinos for that region would be limited to the Catskills in order to comply with the stated intention of the law.....but it's hard to still believe that considering the money figures that are being floated here.

 - Of the three Catskills bidders, only Empire Resorts (proposing the Montreign project.....which we learned is a combination of Monticello and the "reign of a king") said that they would forge on even if a license is awarded in Orange....although on a significantly smaller scale.  Upon questioning, the Nevele affirmed that they would not proceed even if the Orange casino is the Saratoga harness proposal in Newburgh....which Saratoga contends would not harm a facility in the Catskills (an assertion which was greeted with skepticism by board member Dennis Glazer).  Two of the Catskills bidders used the governor's own words about the importance of revitalizing upstate areas in their presentations.

 - The Nevele, repeating a claim made in their application, said that a casino there "will end unemployment in Ellenville in our lifetime."

 - As there were on Monday, there were subtle tweaks of the competition without mentioning their names (or drawing the wrath the board).  Saratoga harness pointed out that they don't have a conflict of interest in NYC whereby they might encourage their patrons to go from a high-tax racino (Aqueduct) to a lower-tax casino (a Genting facility in Tuxedo or Montgomery).  (Though they might very well want to do that themselves should they win a license, which they surely will, whether in Newburgh or East Greenbush.)  The Penn National/Cordish team, hoping to build in South Blooming Grove, a few miles from the Woodbury Commons mall, completely dismissed Catskills casinos as being too far from NYC.  And, most amusingly, on one of their slides, Mohegan Sun noted the location of the Monster golf course next to their proposed casino at the Concord.  Of course, that golf course is on the Adelaar part of the property.  That didn't however escape the notice of golf-conscious board member Dennis Glazer, who elicited an admission from the Mohegan Sun team that the course is not on their property and therefore not part of their proposal.

 - I find it pretty astonishing that Zephyr Teachout won SO many counties outright - some 30 in all! I think that's been understated in the reporting on the primary.  She got as much as 78% of the vote, in Columbia County, and trounced the sitting governor in the Capital District area.  Here's the electoral map, with Ms. Teachout triumphant in the counties shaded in green.

Whether it has anything to do with the casino process I can't say....but she beat Cuomo in all but two of the counties where a casino is being proposed, one of which (Orange) was a virtual dead heat.  Ironically, since hers was supposed to be a challenge from the left flank of the party, it was in NYC that Cuomo ran strongest, perhaps reflecting a GOTV effort and the support of some unions.  I would think that some of Ms. Teachout's support was "anyone but Cuomo" votes from the right flank of the party as well, in large part (based on how many lawn signs that I saw in my travels in and around Saratoga) based on his SAFE Act....and from across the political spectrum due to the Moreland Commission scandal, and the unprofessional behavior towards his challenger that was widely viewed on video last weekend.

Tuesday, September 09, 2014

Day 1 of Presentations Raises a Key Question

The first day of the oral presentations - by the Southern Tier and Capital District bidders - is history, and chances are that Day 2 is going on as you read this.  I did some live-tweeting during the day....and I'm at it again on Tuesday as well; nine presentations expected from eight bidders (Genting has two), and the action gets underway at 8 AM.

You can read the Twitter thread here if you're willing to do some scrolling, and I'll of course have more here in the days to come.   But, for now, a few of the Tweets, and then some thoughts:

Writing this on Monday night between games, so to speak, I'm wondering if things really are as we think they are.  I couldn't understand how/why Kevin Law, the chairperson of the siting board, kept asking the bidders if their estimates took into account the possibility of a second casino being awarded in the region.  I was absolutely incredulous, because, as we all know very well, one license each will be awarded to the Capital District and the Southern Tier, and two to the Catskills/Hudson Valley region. Right?

Well, not necessarily it seems.  I have to apologize - kind of - to Kevin Law for using words like 'embarrassing' and 'clueless' to describe what I thought was his clear misunderstanding of the casino law.  However, it is I who misunderstood; Mr. Law knows the law better than I, as he should. This is from the Gaming Commission's Power Point presentation on the law:

Indeed.  According to the law, there is no designation of any particular region as the one which will get two.  Where did we get that idea? Probably from the same place we got the idea that the Catskills was getting two casinos.  In fact, they are hardly even guaranteed least according to the letter of the law.

On the other hand, the reason why I'm only kind-of apologizing to the committee chairman is that Mr. Law just has to be well aware of the assumptions that everyone - and I mean everyone - has been operating under.....assuming of course that he has, of course, been immersing himself in all of the news and developments.  So, assuming that is indeed the case, I can't ponder why he would pose that question in that way.  The question drew some blank expressions.  Some mumbled about existing facilities such as Tioga or Saratoga harness.  It was only the final bidding team, the Rivers Casino in Schenectady, that pushed back and noted that they were assuming there would only be one award in the Capital District region.

So, what is it, Mr. Law?  Or maybe we should direct the question at the NY Gaming Commission? Do we need to assume that the 4th license is fully in play as written in the law?  Or is the general wisdom correct in that the Catskills/Hudson Valley region will get two licenses?  And, if the latter is not the case, why hasn't the commission cleared up a gross misunderstanding?  One that may be causing bidders to make incorrect assumptions in their projections?  Not only you think we'd have six bidders in Orange County if they didn't think there were going to be two licenses?  These companies put up a million bucks to apply (and who knows how much for the fancy consultants they hired to speak at the presentations) and I'm figuring they all did so under the assumption that they were bidding for one of two licenses for the region.  Or how about EPR Properties?  They are financing both the Adelaar project at the Concord, and Tioga Downs.  Under the general understanding, those two projects are not competing with each other.  But under the way the law is written, EPR is theoretically competing against itself.

 - After there were no questions about the community opposition to the Lago Resort in Tyre, I was pleasantly surprised when Law asked the Capital View team about the opposition in East Greenbush. He noted (incorrectly) that it was the only town where people were stirring up a fuss, and he asked about it, wondered where it was coming from and whether there were outsiders involved? Saratoga harness spokesperson Rita Cox replied that they have already made changes to the project in response to community input (they reduced the size of the hotel), that she didn't know where it was coming from (she knows exactly where it's coming from), mentioned the career fair, and said that they'll "continue" to reach out to the community (no, actually, they haven't, and I bet they won't).  One of the slides in their presentation noted that the support resolution was passed unanimously by the town board in June....not noting of course that one of the voters has since recused herself because her brother stands to profit, and another has changed her position, accusing the developers of a bait-and-switch based on the smaller hotel.

 - The Tioga presentation was pretty interesting.  Jeff Gural's team made a couple of admissions that none of the other six presenters did.  For one thing, they are assuming in their projections that there will be no organic growth in gaming spending, only a redistribution of existing revenue (with, of course, the familiar keep-it-in-the-state mantra).  In the presentation immediately following, Lago attributed part of their projections to "increased gaming behavior."  While the Southern Tier bidders all acknowledged that the majority of their revenue would come from the immediate area - 90% for Traditions and Tioga, 80% for Tyre - Tioga was the only bidder all day to acknowledge that money gambled by locals at casinos is money that would otherwise be spent on something else - "displacement of economic activity" as it was referred to.

As for Gural himself, well, he was Gural.   Besides saying that he hates gambling, I'm pretty sure he called Vernon Downs the best racetrack in the state.  He said that he wouldn't want his casino to be in a big city, because he'd prefer that people have to get in the car and drive a half hour so that they don't come every day and become problem gamblers.  When he admitted, under questioning by Bill Thompson, that only 900 of the projected 1200 permanent jobs would be new, he shrugged and noted that "we're allowed to present it like that."  I tweeted at the time that he was speaking like a guy who feels he's a lock.  I think in hindsight that he came across more like somebody who feels that he is entitled to it.  He even took the opportunity to point out the $600,000 that he spent to support the Prop 1 casino referendum.  He will be one astonished and unhappy camper if, for some reason, this does not go his way.

 - The Howe Caverns presentation was the least polished of the day; the only one without a video of any kind.  By insisting that the scientific methodology utilized to come up with their projections indicated that it's impossible for any casino in the region to do more than $185 million in annual revenue, they not only put some spin on their own number, but they took a not-so-subtle swipe at the competition, which they're not supposed to do.  All three of the other Capital District region bidders are predicting well north of that number.  They also discussed some creative financing schemes, including a federal "Immigrant Investor Program" called EB-5.  As we've discussed, the developers at Howe are proposing two water parks, one inside and one outside.  The water parks are no joke in this bid; it's an integral part of their strategy of drawing families, who, they say, will drive 3-4 hours to frolic in water parks.   Veteran casino developer Michael Malik was quite animated in defending this whole notion of it being appropriate to promote a casino as a family destination when questioned skeptically by siting board member Stuart Rabinowitz. 

OK, I could go on, but that's it for now.

Sunday, September 07, 2014

Ready to Rumble

Oral presentations by the casino applicants will take place on Monday and Tuesday in Albany.  The three Eastern Southern Tier applicants will lead things off on Monday morning, and the foursome competing for the Capital District license will take up after a lunch break.  Tuesday is a marathon that kicks off at 8AM, and we'll see all nine contenders for the two licenses in the Catskills/Hudson Valley region have their say; it's scheduled to wrap up at 6:40 PM.  I intend to watch as much of the proceedings on the webcast as I can, pretty much from start until either the finish or when I kill myself, whichever comes first.  I'll do a little tweeting to help keep my sanity (you can follow me by clicking on  the follow @alanLATG tab on the right), and will most likely have a few thoughts back here.

According to the official Protocol for the sessions, there won't be any badmouthing of rival bidders.

Applicants are instructed to limit their presentations to their own Applications. The Board will not entertain comments about other Applicants or submitted Applications.
That virtually eliminates the chance that there will be anything in the way of fun.  Power Point presentations were required to be submitted in advance to make sure there's no cheating in that regard.  The bidders - to be represented by "personnel qualified to competently and cogently respond to questions from the Board and expound upon the materials presented" - will get 45 minutes to present, and the Board 15 minutes to ask questions.  And then there are five minute breaks before the next session, which will give me time for a brief cold shower.

In an op-ed piece in the Times Herald-Record (limited free access), Sullivan County Legislature chairperson Scott Samuelson endorses the Mohegan Sun/Louis Cappelli proposal at the Concord. That could provide a boost for what I would consider to be the clear underdog against Empire Resorts' Adelaar project on adjacent land at the same site.  It was just in May that Samuelson was calling for both of the licenses for the region to be sited in his county....but that was before it was clear that Orange County was in play.  That caused Foxwoods to drop their plan for the old Grossinger's resort, leaving only the two bids at the Concord in play, surely a one-or-the-other proposition.

I'm a bit surprised to see Samuelson express a preference (though he does conclude with a reference to "both of Sullivan's extraordinary casino projects").  However, as we've mentioned before, the Mohegan proposal includes benefits throughout the county - a revival of Grossinger's and some commercial development in Monticello.  Samuelson calls it "a truly regional development that will invest in every corner of Sullivan County."

 - In case you missed it, you should check out the video of the sophomoric behavior of Governor Cuomo at Saturday's Labor Day parade in Manhattan, as he awkwardly ignored the immediate presence of his Democratic primary opponent Zephyr Teachout.

Labor Day Parade 9-6-14 ZT from John Kenny on Vimeo.

Mayor de Blasio, who helped to negotiate the deal by which the Working Families Party endorsed Cuomo over Teachout in exchange for the governor's support of a Democratic State Senate, doesn't come off so good here either.  And you'll also note the governor's personal protective goon, Joseph Percoco, inserting his ample frame between Ms. Teachout and the governor.  You have to love the way he kept a wary eye on her when she tried a different angle, and smoothly kept her blanketed like Ryan McDonagh on Claude Giroux.  I dunno, one might think that Cuomo would want Percoco to keep an extremely low profile considering that the reports of his efforts to extract supporting statements out of Moreland Commission members - even offering to write the text for them - is perhaps the most damning potential evidence of the kind of criminal obstruction of justice by the Cuomo Administration that was (more than) hinted at by U.S. Attorney Preet Bharara in his letter to the governor in July.

Later, when asked about the incident, the governor said: "I know she was at the parade, but I didn't get a chance to talk to her."  And yes, he said that with a straight face.

Cuomo Press Conf 9-6-14 Teachout from John Kenny on Vimeo.

Saturday, September 06, 2014

Environmental Review Process is Tilted Towards Casino Supporters

Montgomery County has spurned Capital OTB and its partners who are hoping to build a casino in Rennselaer, and instead has endorsed the proposal at Howe Caverns in nearby Schoharie County.  Despite the former's promise of more money, the county legislature opted instead for the promise of jobs generated by a casino in a neighboring county.

"We are not here holding checks out; the checks will manifest themselves if we get the project. Nor are we here to solicit a piece of paper to hold it up and say we have your support," Jeff Hyman, a representative of the Howe Caverns development team, said. "We intend to be a regionally transformative project, a catalyst for change. We want to be that beacon, that job generator for the community." [Recorder News]
Oh man.  I've heard these casinos described in a variety of glowing terms, but never before as a "beacon."  Well, if "beacon" means a lot of water features, then this proposal surely qualifies. 
The project involves a casino and a 254-room hotel with three full-service restaurants, banquet facilities, a pool and spa. There is also a proposed 55,000-square-foot state-of-the-art indoor water park, a 1.25-acre outdoor seasonal water park, 250-room family hotel, an arcade and entertainment park.
These guys are apparently not buying into the scaling-back thing, and must still believe that they'll succeed as a resort destination in the present environment.  With a planned investment of $450 million, this proposal is the most expensive amongst the four in the Capital District.  And it's a wet one at that.  Slot machines and water slides.  I don't really get the connection.  Except for the poor souls who want to drown themselves after gambling away the mortgage.
"There is no site that is more advanced than this one," Hyman said. "If we are granted a license we will be under way in a week."
  Well, I know of someone who says he can top that. 
“If Lago Resort & Casino succeeds in winning a casino license from New York State for the region, we will be ready to break ground within days." [Finger Lakes Times]
So says Thomas C. Wilmot Sr., hoping to build his Lago Resort (that's Italian for water) in Tyre, situated in the so-called Eastern Southern Region (even though it's not particularly east nor south).  Of course, not if the good people of Casino Free Tyre can help it.  Like in East Greenbush, the developers there are hoping to plop down a casino in the middle of a residential area, as we detailed pictorially in this post....and opponents in Tyre are taking the matter to court.  They were there last week, attempting to nullify all of their town board's resolutions in support of the project.  As in East Greenbush and Tuxedo, these residents have filed an Article 78 suit which challenges the support resolutions on the grounds that they were approved despite an incomplete environmental review that is required by the State Environmental Quality Review Act (SEQRA or SEQR).  The Tyre town board approved the resolutions on June 12 despite the fact that Part 3 of the required Full Environmental Assessment Form was not completed.
“That put the cart before the horse,” said [Attorney Douglas] Zamelis, who also argued the board didn’t issue a written decision on its approval, as required by SEQR. “They did not strictly follow the procedure laid out by state environmental conservation law.” [Finger Lakes Times]
Zamelis asserted in an Affirmation that the Town Board "failed to comply procedurally and issuing a finding that the casino project would not have one single significant adverse environmental impact."

Which is exactly what they did.   The important thing to remember about this entire environmental review process is explained on the state's website:
The Legislature has made SEQR self-enforcing; that is, each agency of government is responsible to see that it meets its own obligations to comply.
So, it's not like the State Environmental Police sweep into town to conduct a study and make a decision based on the merits.   The "lead agency" signing off on the environmental review for Tyre is none other than the Town of Tyre Town Board.  The same Town of Tyre Town Board that is attempting to push this project through despite the vociferous opposition. So of course they're going to make every attempt to reach the conclusions that they want to will the boards in all of the other cities and towns supporting casino proposals.

Now here, because I know you're all dying to see it, is the completed Full Environmental Assessment Form for the Lagos project.

Actually pretty interesting if you're interested in this type of stuff.  There are three parts.  Part 1 is a general questionnaire about the project; by completing it, the town board is acknowledging that the project is a Type 1 action which is "likely to have a significant adverse impact on the environment and may require an Environmental Impact Study."  Part 2 is a step-by-step process which is "designed to help the lead agency inventory all potential resources that could be affected."  The critical Part 3 that was missing from the Tyre paperwork is like the essay portion of the exam: the lead agency must provide a written explanation for everything that they designated in Part 2 as potentially having a "moderate to large" impact on the environment.

In the above form, there are several areas designated in Part 2 as being potentially adversely impactful, including surface water, plants and animals, agricultural and aesthetic resources, transportation, noise/odor/light, and "consistency with community character."  Nonetheless, the resolutions were passed before the town provided the Part 3 explanations of why, despite those characterizations, they would not "pose a significant environmental impact."  In addition, the casino opponents say that the meetings at which the forms were discussed were not open to public comment.  So, no doubt some residents could have made a fair case that there would be a significant impact on, say, human health, or traffic, or noise.  Input of that sort was not accepted.  The opponents have to go to court under Article 78 to challenge the process.

The eventually-completed Part 3 seems like an exercise in contradiction, in which the Town Board glosses over the concerns that they themselves raised in Part 2.  So, for example, the impact on agricultural resources does not pose a significant adverse environmental effect, the board says, because there's plenty of other agricultural land besides the 85 acres that would be converted.  Plants and animals will not be significantly affected because the herbicides and pesticides are commonly used in commercial development.  Most ridiculously, the community character will not be adversely affected, the town board says, because there's already a nearby highway (Route 90) and a truckstop.  The latter is the most obvious example of the fact that whoever is writing this can tilt it towards whatever position they want.  This process is totally self-fulfilling.  If Casino Free Tyre was writing it, they could surely make an equally compelling case that 85 acres can fit 64 football fields, surely a significant plot anyway you cut it; that any application of herbicides and pesticides has the potential to affect living species, no matter where and how it is used elsewhere.  And any assertion that a 24-hour casino would not change the character of virtually any community, no less a rural town with a population of 900, is just patently absurd!  I mean, seriously!

So, as one might expect, the environmental review comes down to spin, and spin is politics, and politics comes down to money.  The board members are following the trail, and who knows exactly what they are being promised due to the loophole which exempts lobbyists from reporting their activities in communities of less than 50,000.

Thursday, September 04, 2014

Saratoga EOY Press Release Lacks YOY context

NYRA's end-of-Saratoga press release is rather unusual, as far as these things go, for what it doesn't include rather than for what it does.  "Paid attendance for the 40-day meet was 972,018," we are informed.  As far as handle goes: "Final on-track handle was $150,387,442. Final all-source handle was $571,163,484."

That's all well and good.  But where is the context that generally accompanies such figures; specifically, the year-over-year comparisons to last season's numbers that one would normally expect? Well, they're not in this press release.  So, here they are:  the 2014 (announced) attendance of 972,018 is up 12% from last year's figure of 867,182.  The on-track handle of $150,387,442 is up 1.99% from $147,456,901 in 2013. All-sources handle of $571,163,484 is down 2.6% from $586,683,154 last year.

So, why weren't those year-over-year numbers included?  Well, maybe in small part because the all-sources handle was bad news.  But probably primarily because the attendance was good news - too good in fact!  Because NYRA had to know that if that 12% figure had come out of their mouths, it would surely have drawn snickers.  (And, that's right.....that's two posts in a row containing the word snickers.)  As has been widely-discussed, 6,730 season pass holders were added to each day's attendance whether they were there or not.  (And, on the other hand, multiple admissions were no longer counted on giveaway days.)  So, I guess it was an effort to be consistent that the increase in on-track handle was similarly not acknowledged, even though that figure indicates that the actual attendance was most likely at least flat, and quite possibly up a point or two.  Whatever the reason, I would postulate that NYRA ended up shooting themselves in the foot by manipulating the crowd numbers as much as they did; to the point where they were hesitant to even announce the YOY comparisons across the board.  Any increase in on-track business would certainly have been something worth tooting, and NYRA took the horn right out of its own mouth.

The funny thing about the press release is the sentence that follows the attendance line:

Saratoga also experienced strong food and beverage sales, commensurate with the increase in attendance for 2014.
Yeah, but what increase?  It's almost like they originally had the comparison in there, took it out at the last minute, but forgot to scrub the rest of the paragraph!  More likely, it was put in there slyly, just to tell us that they know that we know that they know that we know that the attendance was up, even if they're not going to tell us that specifically.

As far as the decline in all-sources handle, a really smart guy I know pointed out that the summer meet at Gulfstream could be at least partly responsible for handle declines we've seen not only at Saratoga, but at other tracks such as Del Mar and Monmouth as well.  Haven't read any such speculation in the media, but that surely makes sense.  For example, this past Sunday, the all-sources handle at Gulfstream was $3.7 million, hardly an insignificant amount as compared to the Saratoga figure of $14.2 million.

 - Over the years writing this blog, I've learned that it's almost always worth the time and effort to delve deeply and fully into reports such as the one by the Inspector General on the takeout sunset snafu that we discussed in this post.   One really has to do the grunt work him/herself.  The press generally doesn't go into that kind of detail, often relying more on the cover letter or the summary finding sections that one will find at the end, which themselves don't provide the juicy details that makes for good reporting.  (Even a reporter who does actually read these things usually doesn't have the room and/or the editorial leeway to go much beyond the bare facts.)

Well, I suppose I can blame it on being on vacation, but I was lazy when it came to this particular Inspector General report.  Fortunately, Tom Noonan was not, and he did a much better and more thorough job discussing it than I.  His post on the subject is well worth the read.

Casino Process Plods on Amidst Atlantic City Carnage

As you may have read, it was not a good holiday weekend in Atlantic City.  Two casinos shut down, and Trump Plaza closes in a couple of weeks. 

By mid-September, Atlantic City, which started the year with 12 casinos, will be down to eight, and almost 8,000 people will be out of work. [FOX]
And this carnage is the backdrop to the approach of next week's oral presentations by the casino hopefuls.  Good timing there.  One really has to wonder what the outcome would be should the casino referendum be voted on now......with fair language.  The idea that the amendment was for "the legislated purposes of promoting job growth" might prompt snickers at this point.

So, some of the bidders are now changing their tune.  Remember all that stuff about the casinos being "resort destinations" that will attract families from all over the Northeast for some good wholesome fun? 
New York's casino expansion was sold on the idea that it would draw tourists and their money upstate. Yet the developers now acknowledge that they need local gamblers to succeed.
"Times have changed," said Bill Walsh, the developer behind the $172 million Traditions Casino and Resort proposal in the state's Southern Tier. "People are looking for convenience. They don't want to drive five hours to get to a casino now. You need a primary market." [Albany Times Union]
Of course, in its Executive Summary, Traditions stated that it would "draw considerable traffic from the Pennsylvania market," and that "over half" of its projected 4,000 daily visitors would come from outside of Broome County.  Wonder what they'll say next week.  Mohegan Sun, hoping to build at the Concord, boasted of largesse in its Executive Summary; an over 800,000 square-foot full-service complex, with the majority of its customers to come from a 100-mile radius including NYC, Western Connecticut, Northern NJ, and NE Pennsylvania.  Now, its CEO Mitchell Etess says:
"You might figure: Build a bigger casino, you might have a better chance of winning.....But you have to look at the market size. You need the right-sized building that can operate efficiently."
They've already hinted at a smaller project under the assumption that Orange County will get one of the two licenses for the region.  And we've already seen Saratoga harness scale back the size of their proposed project in East Greenbush. 
“A lot of people think Atlantic City got hurt because of the increasing competition – and that’s certainly true,” says Izzy Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Stockton College in Galloway, N.J. “But the bigger story is that it wasn’t about competition, really, it was about a fundamental restructuring of what the business is, from ‘destination’ casinos in places like Nevada and Atlantic City, to more of a ‘convenience’ type of place.”
“It’s not just a question of building a better mousetrap, one that’s more attractive or interesting.....I think it’s more about the mousetraps that are positioned near the mice, so that’s where you’re seeing some growth, especially within cities.” [Christian Science Monitor]
Not all of the developers are thinking smaller.  Caesars confirmed to the Times Union that they are going ahead with their $880 million plan and not scaling back.  Of course, their casino would be in Woodbury, just 50 miles north of NYC, and right near the retail outlet mall there.  So they are positioned near a lot of mice.  (And suckers.)

As far as the more remote locations go, they talk about all of the benefits to the local community.  But if the mice are coming primarily from that community - which we really figured all along would be the case - then what will be the net benefit in the end?  More jobs - at least at first - but a whole lot of money diverted from local businesses to slot machines.....not even considering the matter of gambling addiction resulting from, or being exacerbated by, a casino around the block.

 - The Save East Greenbush group has amended their legal complaint with respect to the crass conflict of interest of one of the Town Board members who voted for the resolution supporting the casino.  Sue Mangold has since recused herself due to the fact that her brother stands to gain from the real estate transactions; but she only did so when called out by the casino opponents (even though it was acknowledged in the application).  The suit now seeks to invalidate the vote based on her participation.  It also adds some respondents who own land adjacent to the proposed site.

When we were up in Saratoga last week, I visited the East Greenbush site and met with one of the casino opponents who lives right nearby.  I have to tell you I was pretty taken aback.  When I'd seen the satellite image of the area (which I embedded in this post), it seemed like a street that was, though in a generally suburban area, across the street from a shopping mall and a Holiday Inn.  What that satellite image doesn't portray however, is that the street runs up a hill (thus, Thompson Hill Road, duh), completely isolating it from the main road.  This is strictly a quiet suburban street.  The idea of a casino plopped down in the middle of it is nothing less than mind-boggling....and, I'm sure, terrifying for the residents (at least the ones not making out by selling their parcels).  This is the spot.

Any of you who live in a similar setting should just try and picture it for yourselves, and imagine how you would feel.  Not only would there be a casino, but also an access road to be built directly to it from the main road down below.  Is there any wonder why the residents are so outraged?  Politics and the wishes of Governor Cuomo aside (for whatever that's worth), the siting board just has to realize that this is not an appropriate location for a commercial venture of any kind, no less a casino with 24/7 traffic and activity.  Jeez.

But meanwhile, Jimmy Feathers continues his efforts to destroy this community for his own enrichment by raising the ante in his bidding war with Rennselaer, in an attempt gain the endorsement of the city of Albany.  Capital View has countered Rennselaer's offer of $10 million with one for $11 million - an upfront $1 million payment in addition to another $1 million over each of the next ten years.  As opposed to the Rennselaer offer, which would come from the city's share of the revenues, this would come directly from the pockets of the developers.  In addition, the developers would "try" to ensure that 25% of the jobs go to Albany residents....which, considering that they have already pledged to shift jobs there from the Saratoga racino, probably wouldn't leave much for Troy or East Greenbush itself.....and "try" to spend $5 million with Albany businesses.  The Albany Common Council has also accepted the Rennselaer offer.....which Albany Mayor Kathy Sheehan unsuccessfully tried to negotiate up by 2% a year in her shameless attempt to extract money and promises out of the two.  And remember, Albany's endorsement won't necessarily mean a thing in the end.  The Council is scheduled to meet again today.

Wednesday, September 03, 2014

Rensselaer Mayor Wants State to Ignore Probe into Casino Partner

Rensselaer's pro-casino mayor Dan Dwyer says, in effect: 'Hey, man. Don't be taking it out on us just because the Hard Rock casino proposal would be funded by a subsidiary of a company which made an investment which ended up being paid as a "loan" to Zimbabwe's despotic leader Robert Mugabe which enabled him to buy minivans and pickups and weapons used to kill and brutalize opponents which eventually prompted his electoral opponent who had beaten him in the first round of elections to withdraw which allowed Mugabe to remain in power, all so that the company could get a piece of the action from a rich platinum reserve that Mugabe had seized from a private company shortly beforehand."

Or something like that.  This is the article in Bloomberg Businessweek that led to the questions about Och-Ziff Real Estate, the funding component of the Hard Rock/David Flaum/Capital OTB partnership that is hoping to build a casino near the Amtrak station just outside of Albany, that were raised in James Odato's article in the Albany Times-Union on Monday.

 Lee Park, a spokesman for the commission, would not say specifically if the reports about [parent company, the hedge fund] Och-Ziff could impact its chances of getting licensed. "As required by the Request for Applications and the Multi-Jurisdictional Personal History Disclosure form, each applicant provided comprehensive background material," Park said. "The Gaming Facility Location Board and the Gaming Commission are reviewing this material and factoring it into their decision-making process."
I remember following the events surrounding that 2008 election in Zimbabwe with disgust and shock at the brazen nature of the violence.  Re-reading about it now in the Business Week piece, I find it no less disturbing.....but can't help but note how the scale of depraved inhumanity in the world has grown exponentially since that time; and indeed, seemingly just in the last few months.  Man.  As far as what this has to do with a casino in upstate New York.....sure, the people involved in the Och-Ziff subsidiary providing the funding had nothing to do with investment decisions made six years ago by an American expat living in London.  Och-Ziff Real Estate has funded casinos that have been licensed in other states.  And the SEC investigation into just if or when the parent Och-Ziff knew that its investment in a third-party corporation would end up in the hands of a tyrant who kills his own people (as if that is particularly shocking nowadays) is still ongoing.  So perhaps Mayor Dwyer is correct in telling the Gaming Commission that they should ignore the matter.  (Though he should definitely avoid comparing the matter to Joe Bruno's acquittal on corruption charges.  That really falls flat.)

On the other hand, these allegations against Och-Ziff are not new.  Here's an article from 2012 that discusses how the money ended up with Mugabe.  So perhaps it's perfectly fair to judge Hard Rock quite harshly for doing a poor job of due diligence and/or not considering and/or ignoring the likely appearance issues that Och-Ziff Real Estate's mere association, however distant it may be, with a company that was apparently so cold with, and dismissive of the potential consequences of, its pursuit of profit.  After all, the general quality of a bidder's judgment is surely fair game in this process.

Of course, in a similar vein, the Gaming Commission is looking for the most money for the state.  And, in the Times Union piece, Odato also reports that Hard Rock's revenue estimates are "well above" those from the competing Capitol District proposals in East Greenbush, Schenectady, and Schoharie County.  So, could be that the commission will conveniently overlook the allegations.

Monday, September 01, 2014

This Is a Betting Game

Hope everyone has been having, or had, a fantastic holiday weekend.  And I hope that some of you got to get away, as we have.  Been up in Saratoga, and the weather has been, with the exception of Sunday, rather exceptional. Hasn't been a total track trip; spent some glorious days up at Lake George, Lake Moreau, and the Berkshires  So, sorry for the lack of posting; we'll get back in the swing of things before too long.

But I did want to mention the goings-on at Mohawk Raceway on Saturday night, where many of the top stars in harness racing gathered for an evening of big races with big purses.  Pullthepocket wrote of what was an active night at the tote machines.

Over $5.1 million was wagered on the card. It was the largest handle at the Milton oval in its existence.

However, what if I told you that for all that purse money and all those stakes, the handle after the first eleven races was $2.7 million, but the handle for the last race - one race, a nondescript $30,000 conditioned affair - was $2.3 million alone.

You'd think I was cray cray as the kids say.

But that's what happened. The last race of the evening had a carryover of the Super High Five, and bettors, going after a takeout reduced pool went to work.

Stakes races, pomp, pageantry, a hundred or so horses and a couple of millon dollars brought in $2.7 million through 11 races. A takeout reduction in one race brought in $2.3 million.

This is a betting game.  One of these days the industry will treat it as such and be better off for it.
A commenter pointed out that if you excluded the show pools, where there was some active bridgejumping action, the last race outhandled the other 11 combined, and easily.   And then he pointed out that the 14% Pick Five out-handled the carryover Pick Six at Del Mar on Saturday.

As the esteemed Mr. PTP pointed out....this is a betting game.  You can tout "big days" with big purses all you want....but, in my opinion....and as I explained towards the bottom of this post....that alone is not going to attract new betting fans; and not necessarily, as we saw at Mohawk, the biggest handle numbers, as opposed to some "ordinary" races with attractive wagering options for horseplayers.   (Though it should be pointed out that there were some poor betting races on the programs - showcases for big favorites such as the sensational 2yo Artspeak [whose race attracted a cool quarter million in show money], the Hambo winner Trixton, the streaking Sweet Lou.])

That afternoon, Wise Dan made his return to the races at Saratoga.  And as the two-time defending Horse of the Year strolled down the lane towards the paddock (#4), very few people in the vicinity were paying attention.

There's a point there, though I'm not sure exactly what it is.  We do know that the folks in the backyard at Saratoga, as a group, are not the most attentive horseplayers to start with.  But if they were wheeling barrels of money down the lane with a fanfare of how you can share in a larger portion of the jackpot, then I think some folks would put down their Bud Lights and listen up a bit.  (And by the way, if NYRA wasn't so busy blasting ads and clanging bells over the PA, perhaps they could let people know when a little piece of equine immortality is walking through the backyard just a few yards away from where they are sitting.)

It used to be said that racetracks want to see everybody win.  After all, the pari-mutuel house doesn't care who wins or loses; they get their cut no matter what.  But these days, that's no longer the case.  With the jackpot bets, they want you to lose.  Bigger carryovers generate more handle. Someone's gonna win, but a lot more people are gonna lose.  But as long as people keep coming to play as the jackpots get bigger, the tracks have more incentive to make the bets harder to hit.  Gulfstream's Rainbow Pick Six is a prime example of that.

Nowhere has that been more apparent in recent days than at Saratoga. Inscrutable 2yo maiden races loaded with first time starters used to be tilted towards the beginning of race cards.  No longer.  Two of them in Friday's and Sunday's Pick Six sequences; the 9th on Friday consisted of all first-time starters.  I found the latter particularly vexing, having noted a banner ad on the NYRA website pointing out the low 15% takeout on non-carryover pools.  But what good is that when you have to contend with an all first-time starter race?  I dunno, I don't play pick sixes, but I'm thinking that I'd rather see a higher takeout and races that I can actually handicap instead of guess at and ultimately end up spending more money spreading the race, no?  NYRA is so intent on making the wager un-hittable, and generate the most revenue possible (I guess that's the idea, though wouldn't a free square or two attract more handle too?), that they ran the Wise Dan race as Saturday's 5th, moved Sunday's Glens Falls out of the sequence (even though there was a decent sized field and no big favorites).....and have even moved the Grade 1 Hopeful, the traditional closing day feature, to the 4th race!  And on a mandatory payout day too!

Well, looking at the handle numbers, it doesn't seem that too many people are dissuaded from betting Pick Sixes with races of that sort.  But you sure as hell wouldn't see me in those pools if I was a player.  Seems to me that it would take just one well-organized boycott of a carryover day to make them stop doing stuff like that.

Have a great Labor Day.

Friday, August 29, 2014

Inspector General Report on Takeout Error Confirms the Obvious

If you missed it (and are interested), this is the Inspector General's report on the takeout "scandal" in which $7.4 million was improperly withheld by NYRA from winnings paid on certain exotic bets from Sept 2010 through December of 2011.  The report is a 122-page exercise costing who-knows-how much money that confirms what we already knew: it was a mistake.  An inadvertent error on the part of a multitude of people and entities.  A "snafu," rather than a true "scandal."  No smoking gun emails amongst NYRA executives plotting and scheming to squeeze a little extra revenue out of its customers by intentionally flouting the law.  You can bet that if there were, this report wouldn't have been issued on the Monday of the sleepiest week of the summer season, a couple of days after Odato reported on its existence in the Times Union. Though former CEO Charlie Hayward takes the brunt of the blame in newspaper reports such as Odato's, the most pointed criticism leveled against him in the Findings and Recommendations section is regarding his testimony that he did not completely read an email sent to him by Steven Crist in which a fan pointed out that the rate was in violation of the law.  "Regardless of the veracity of his representation, Hayward was, at best, careless in his reading of the email."

The error really came down to two things: the failure of the legal department to note on their calendars the date on which the temporary 1% takeout increase was to sunset; and, that notwithstanding, the fact that NYRA executives believed that they could rather than had to lower the rate.  Not to mention the failure of various people and entities, both inside and outside of NYRA (such as the now-defunct Racing and Wagering Board), to notice the discrepancy.

But we knew that.  And, I suspect, so did those who ordered and conducted the investigation.  It would have been a feather in a lot of caps had they found some organized effort to "rob" bettors, but it was not to be. As we knew.

Nonetheless, the release of the report gave the press and a politician the chance to catch up on a little NYRA bashing. Report: NYRA Cost Bettors $7 Million screamed a front-page headline in the Saratogian, as if this was some kind of new revelation.  State Senator John Bonacic, a strong supporter of the casino resort destinations (that contribute to his campaigns) - and therefore, an enemy of horse racing - took the opportunity to note the troubling lack of accountability that had existed within NYRA which resulted in the overcharging of the betting public. 

“Although more than $600,000 was refunded, there is more that can be done to set the overcharge right for aggrieved fans. [Capitol Confidential]
Actually, there are no aggrieved fans.  Nearly everyone who was affected never knew what hit them, and didn't miss an amount that was probably, in many if not in most cases, less than it costs them this year in increased admission fees every time they go to Saratoga.

Nonetheless, the matter was blown out of proportion - in my opinion, anyway - to became one of the key reasons/excuses used by the governor to take over the NYRA board, leading to the uncertain place where we find ourselves today, with the scheduled end of state control approaching next year.  We can only guess as to what will happen.....mine is that I continue to doubt that it will be anything nearly as drastic as Frank Stronach owning one-third.  But the direction of NYRA surely has changed drastically as a result.  Hayward was focused on teletheaters to fill the void left by NYC OTB - in fact, it was his concern about the necessary politics that was behind his failure to request a takeout reduction that he thought was optional at that time.  But under Chris Kay, the matter has been squarely on the backburner as he and Martin Panza try to attract more people to the track on 'big days' with an enhanced guest experience.  And the former CEO, as a racing guy, appreciated the logic behind lower takeout rates - ironically, considering his dismissal over a rate which was too high - and surely would have advocated for them at an appropriate time, if one there ever would be.  With the current focus on short-term P&L, you can just forget about lower takeout rates here, at least in the immediate future.  The bottom line is the priority now, no matter what it takes to get to the theoretical break-even without slots (whatever that really means as long as slots money is still supporting purses and capital improvement).  We shall see where this all takes us a year down the line, and beyond.

 - Frank Gabriel, who recently joined NYRA as the racing secretary at Belmont and Saratoga, has abruptly left his position and will return to Dubai.  He is the second high-level employee hired under the present management to resign shortly afterwards; Eric Wing served briefly as Director of Communications.

Wednesday, August 27, 2014

Casino Odds and Ends, Aug 27

 - I wrote a bit (just a bit) about the Travers here on the TimeformUS blog.

Even as he was winning generous tax breaks from Sullivan County for the proposed casino at the Concord, Mohegan Sun CEO Mitchell Etess once again warned that an Orange County casino would spell doom for the project.

"The reality (then) is whether a Sullivan County casino is even financeable.....That's because at least 35 percent of Mohegan Sun at the Concord's potential business will come from Orange County, Etess told the Times Herald-Record's Editorial Board on Monday.

Given the dire condition of Sullivan County's economy — a poverty rate of 17 percent, compared with 12 percent in Orange — a Sullivan without a casino and its thousands of jobs would spell disaster."We're saying, if you put a casino in Orange County, you might as well turn out the lights in Sullivan County," said Etess, a Sullivan native whose family ran the fabled Grossinger's hotel in Liberty. [Times Herald-Record, limited free access] 
I'm not entirely sure how this is going to work as a threat, considering that Empire/EPR Properties, also hoping to build at the Concord, doesn't need no stinkin' financing, backed by Genting as it is.  The carrot that Etess and his partner Louis Cappelli are offering is to provide benefits throughout the area, and not just at the Concord.
Ehrlich cited a new deal with the struggling Holiday Mountain ski area in Monticello that would include a $1 million loan for a mountain coaster and zipline for Holiday and promotion of the ski slope to Mohegan Sun customers. Mohegan Sun would also develop a spa/hotel and a revitalized Big G golf course at Grossinger's, which is owned by...Cappelli. Another Cappelli property in Monticello near Albella's Italian restaurant would be transformed into office space, said Cappelli's son, Bryan, chief operating officer of the Cappelli Organization.
The tax breaks add up to "approximately $36 million in tax exemptions over 20 years," according to the Herald-Record.  There's also a provision to assess the property based on a lower value, and a smaller project, should one of the licenses go to Orange County.  (And as we've mentioned, the potential irony with this whole Orange County thing is that a casino there, being touted as so potentially valuable [and damaging to the Catskills] due to its proximity to NYC, would be that much more susceptible to competition from the Meadowlands and from the NYC area casino(s) that would inevitably follow.....and, in fact as this commenter adroitly points out, a siting in Orange could actually spur said development in Jersey.)

 - Casino Free Tyre heads to court today to press their legal action to throw out the town's resolution supporting the Wilmorite project.  I'd written more on their lawsuit here.

 - Montgomery County, which lost out on a possible casino when the project in Amsterdam, at Exit 27 of the Thruway, was disqualified, is considering throwing their support behind the proposal in Rennsalear. What does a casino located some 35 miles south have to do with Montgomery? Money.  What did you think?  The county legislature heard a presentation from John Signor, the president of Capital OTB, a partner in Hard Rock's Rensselaer casino bid.
Signor said OTB has been losing revenues during the past 10 years because of competition.  This also impacts Montgomery County, which gains approximately $51,000 in revenue from OTB.

The partnership with the casino, he said, would double the county's revenue to $100,000 a year, depending on the gaming revenues..
In addition, OTB is partnering with a developer in Rochester (David Flaum) to own the land in Rennselaer and provide the casino operator with a ground lease.  This would generate an additional $1.5 million in revenues for OTB. [Recorder, subscription only]
Signor told the legislators that a Rennselaer casino would generate $748,000 in total for the county, as opposed to $564,000 from the proposed casino at Howe Cavern.  Perhaps taking a cue from the city of Albany, the legislators decided to defer the decision in order to give other developers an opportunity to present proposals.  And to sweeten them accordingly.

Monday, August 25, 2014

Brush Fires for Orange County Casino Developers

A couple of little issues have popped up for two of the casino bidders in Orange County.  In Woodbury, where Caesars Entertainment is hoping to construct their aptly-named Caesars New York - an $880 million resort casino ("a sustainably designed, contemporary structure that compliments the region's natural surroundings") - the company is contending with a land use issue introduced by the descendants of one of the property's past owners.

The issue is a deed restriction that dates back to 1971, when former governor W. Averell Harriman sold the land to Avon Products.  It prohibits the construction of a hotel on the site, a restriction which is "kept in effect through subsequent sales."  An attorney for the family - the descendants of Governor Harriman and his father, the railroad baron E.H. Harriman -  warned that the family "is determined to enforce this restriction through the court system should a gaming license be awarded to Caesars.” [Times Herald-Record, limited free access]

However, Caesars, the clever conglomerate that they are, anticipated the problem and devised a workaround.

Caesars and its development partner sought to avoid that obstacle by securing an adjacent strip of land owned by Norfolk Southern Railroad, which had no such deed restrictions.

Caesars plans to build a casino on the main site and an attached, 300-room hotel on the neighboring parcel, if it wins a state casino license.
But the Harriman family says that doesn't work for them.  "The casino cannot be severed from the hotel. It remains part of its ‘purposes’ and thus, it is banned by the deed restriction.”  They are not buying the nonsense about the casino complimenting the region's natural surroundings....instead, they want to "preserve the compelling beauty of the Ramapo Valley."

Caesars says the suit is "frivolous," and sticks to the argument that the adjacent land is not part of the Harriman parcel.  Reminds me a bit of the situation in East Boston, where Mohegan Sun is applying for the Boston area license so that they can build a casino at Suffolk Downs.....but on the property that is located in the town of Revere, rather than in East Boston where voters rejected the casino in the kind of local referendum that is not required in New York.  It was Caesars who was originally to build an East Boston casino at the track.  They were forced to withdraw, prior to the vote, because state casino investigators had concerns with them, including a business relationship with a person alleged to have family members involved in organized crime outside the United States. Funny that we haven't heard any such concerns here; these companies don't seem, at least thus far, to be subject to that level of scrutiny in New York.

In the meantime, Caesars has gone ahead and opened an office in Woodbury, with a little opening ceremony.  They've promised to spend $20 million to alleviate traffic issues around the Thruway; it already gets backed up around there on busy days at the Woodbury Commons Outlet Mall.  But other than those concerns, I haven't read of any real opposition to the project in Woodbury; no organized opposition groups that I've seen...

...At least from within the town.  The neighboring village of Kiryas Joel, a Hasidic community located about five miles west, had already registered their displeasure with the Woodbury project.  However, the village has now turned its legal wrath upon a competing proposal: the one by Penn National and Cordish in South Blooming Grove, located about five miles to the north.  The Live! Hotel and Casino (exclamation point is theirs) is to be a "$750 million plus" world-class casino with 3,200 slot machines, 190 table games, and 80 poker tables.....with the usual amenities to "take advantage of the site's beautiful, tranquil surroundings" (which the operators will no doubt do their best to dissuade their customers from seeing in favor of those 3,200 slot machines).  The developers have entered into a letter of agreement with "internationally renowned chef" Bobby Flay.  Is it really appropriate for a member of the New York Racing Association board to be involved in a venture such an upstate casino whose only possible effect on handle at racetracks could be negative?

Anyway, Kiryas Joel has filed a lawsuit against the developers, Orange County, and individual members of the Village Board.  Like lawsuits we've seen filed thus far in East Greenbush, Tuxedo, and Tyre, the complaint involves environmental issues, and the failure of the village to complete - in fact, not even yet start - the SEQRA process.  Specifically, the village is concerned about sewerage, claiming that South Blooming Grove has made promises to the developers regarding sewer capacity that it has "no control or power over." 
  In the suit, Sterthous said South Blooming Grove supported the casino and offered the sewage capacity "in exchange for staggering amounts of financial compensation," which includes a $10 million payment by the casino developers to the village, a $2.25 million payment for the village's public safety department and $1 million in road improvements.
In the agreement, the village pledges to "pursue all reasonable efforts to make 260,000 gallons per day of sewer capacity available to the project, at customary rates." The figure of 260,000 gallons per day of sewer capacity is the amount the village believes it has in additional capacity, according to the host agreement.
"The village has no authority to provide through sale or otherwise any district wastewater treatment capacity to a casino without a written agreement with the county and a determination by the district that excess capacity exists," wrote Sterthous. [The Chronicle]
This is the first legal action I've seen that was initiated by a neighboring town rather than by residents in the host community itself. As we've said, in New York, as opposed to Massachusetts, developers are not required to complete formal agreements with their neighbors.  However, the complainants in Kiryas Joel (in addition to objections based on their religious beliefs), feel that this effects them directly; citing its "close proximity," and their belief that the project will "overburden the limited sewage treatment capacity."  I suppose that makes them an interested party.

The action spurred the usual response from the developers and the town.  The mayor called it - yes -"frivolous," and Penn National supplied the usual stinky response that skirts around the issue:  "We are extremely disappointed at the Village of Kiryas Joel's effort to try to deny jobs and important new tax revenues to South Blooming Grove." [Times Herald-Record, limited free access]