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Saturday, April 18, 2009

Here We Go Again....Again

On a day when NYRA announced a reduction of purses at the upcoming Belmont meeting, Governor Paterson finally announced the procedure for the latest round of bidding to build the racino at Aqueduct. The bids are due by 5PM on May 8. The Memorandum of Understanding can be read here (large and not very interesting PDF file); and the document is negotiable. Indeed, the clause pertaining to the franchise fee has a big blank space where the bidders can propose what they are willing to pay; and likewise in the clauses relating to maintenance and additional renovation or refurbishment of the VLT Project going forward. I would doubt that the franchise fee number will be $370 million....especially since, this time around, that money will be due just ten days after the bid is accepted. Any bidder will need to have that cash either on hand or at their immediate disposal.

As was the case previously, the state will issue $250 million in bonds to finance the construction of the facility, with the state responsible for debt service and the bidder responsible for any cost overruns. The term of the agreement will be 30 years. And, in what is always the kicker in Albany: The Vendor selected will be chosen by the unanimous agreement of the Governor, Senate Majority Leader and Speaker of the Assembly... And that, of course, gives us little comfort that the health and welfare of the racing industry will be of prime importance.

Paul Post, reporting for the Thoroughbred Times, opines that, given the short turnaround, it is doubtful that any new firms will join the bidding process. So we may very well see the original threesome of Delaware North, SL Green/Hard Rock Cafe, and Mohegan Sun (with or without Capital Play this may recall that its COO was noncommittal about that). What remains to be seen is whether even those three maintain their enthusiasm for the project given the liquidity requirements, the continuing satiation of gambling in the Northeast, and the high tax rates on racinos in New York. Given the passage of time, it seems like a good time to review the breakdown of revenues, which will leave the VLT operator with a mere 22% towards its bottom line in the third year and beyond:

Purses: 6.5%/7%/7.5% 1st/2nd/3rd year
Breeders: 1%/1.25%/1.5%
Capital Expenditures for Tracks: 4%
General Racing Operations: 3%
Vendor Retention: 23.5%/22.75%/22%
(Total Vendor Fee: 38%)

Vendor Marketing Allowance: 8%
Division of Lottery: 10%
State (Education Funding) 44% (plus any of the Marketing Allowance that is not expended for applicable purposes)
And in a sign of just how far behind the rest of the state's racino-eligible racetracks the Aqueduct project is, the MOU cites two of the existing parlors as the standard that the bidder is required to live up to:
Vendor shall, at Vendor’s sole cost and expense, operate the VLT Facility in a manner comparable to or exceeding operations located at Empire City Casino at Yonkers Raceway in Yonkers, New York (“Empire City”) and Saratoga Gaming and Raceway in Saratoga Springs, New York (“Saratoga”).
- Charles Hawyard told the Form that the Belmont purses will be cut back to 2007 levels. Handle is down 9% thus far this year.
[NYTHA President Richard] Violette said one solution to defer further purse cuts would be for the North American Graded Stakes Committee to rescind the requirement that all Grade 1 races in 2009 carry a $300,000 purse, a $50,000 increase from 2008. Violette said at NYRA tracks alone, that stipulation cost overnight races $600,000..."In this economy the way the handle has diminished that $600,000 could be better used in overnight purses..'' [Daily Racing Form]
- The Devils lost to the Hurricanes in overtime last night, and all-world goalie Martin Brodeur was his usual gracious self in defeat, attributing the loss to lucky bounces. He didn't note of course that the Devils' lone goal was a fortunate deflection that floated into the net. Brodeur has lost 19 of his last 32 playoff games. The Devils have lost six playoff games in a row in Carolina, where they head for the next two games, perhaps without their captain Jamie Langenbrunner, who left the game with a lower body injury.


Anonymous said...

So the VLT rafle begins again? Wonder if Richard Fields, Bill Mulrow and others from the old Excelsior team show up this go round? Maybe not Mulrow, come to think of it as his Paladin Fund is a part of the Hevesi and Harding case that's being investigated.

Does anybody know why the NYRA public relations guy John Lee is leaving after the Aqueduct meet? He was one of the reasonable NYRA folks so this is not good news.

G. C. said...

Love the balls displayed by Silver launching the Aqueduct slots cash grab for the forth time. Time for another round of kickbacks, free airplane rides, free dinners and what not in the attempt to secure the slot contract. Could they go for round five early next year? Or did they go to the well too many times? Either way as long as Silver and the other connected ones secure their booty who cares about the people or racing.

Anonymous said...

Hi Alan - I seee your boy Obama took it on the chin from the despots of SA. I guess Il Duce agrees with them. Change you can count on / trickle up poverty.

PORT-OF-SPAIN, Trinidad and Tobago -- President Obama endured a 50-minute diatribe from socialist Nicaraguan President Daniel Ortega that lashed out at a century of what he called terroristic U.S. aggression in Central America and included a rambling denunciation of the U.S.-imposed isolation of Cuba's Communist government.

Obama sat mostly unmoved during the speech but at times jotted notes. The speech was part of the opening ceremonies at the fifth Summit of the Americas here.

Later, at a photo opportunity with Canadian Prime Minister Stephen Harper, Obama held his tongue when asked what he thought about Ortega's speech.

"It was 50 minutes long. That's what I thought."

Secretary of State Hillary Clinton ignored two questions about Ortega's speech, instead offering lengthy praise of a cultural performance of dance and song opening the summit.

"I thought the cultural performance was fascinating," Clinton said. Asked again about the Ortega speech, Clinton said: "To have those first class Caribbean entertainers on all on one stage and to see how much was done in such a small amount of space, I was overwhelmed."

A senior administration official declined to criticize Ortega, saying the president wanted to focus on the future.

Anonymous said...

I predict one bid and one bid only, Del North with very little front money.

Perhaps Mohegan Sun, but forget SLG.

Of course if there is only one bid the politicians will come up with some new reason to stall the project, calling it insufficient for some reason, so that they can line their pockets for a few more months/years as referred to in the comments above.

Anonymous said...

Capital Play is out of the running according to the Australian press. They are apparently facing insolvency inquiries in that country with a string of high profile creditors chasing them. Mohegan Sun will be going it alone.

Anonymous said...

What is an insolvency inquiry on Capital Play and where does this source come from, and why isn't S.L. Green going to bid, according to anons?

Anonymous said...

Watchful Horseman

I heard that it was SL Green who has high profile solvency problems. All such gutsy companies, have some type of financial problem(s) at the moment.

We don't care - anyone who passes the complex, NY State, hoops & hurdles, should be presently welcomed at Aqueduct.

Remember all previous NYRA & Aqueduct franchise bidders, have spent millions, during the maze of NY enduring State bidding processes.

Even look at even Delaware North - they left Empire, after Empire was left destitute, after bidding unsuccessfully for NYRA franchise.

Anonymous said...

Copy and paste this one in your browser. In this piece right after DelNorth and the State announced the deal was off, R. Donaahue Peebles the high profile Obama political fund raiser and pal of the Kennedy's, gave up a few secrets that many LTG blog followers had been expressing. How could the State have known from the beginning that Delaware North's $370 million was going to be paid quarterly when the MOU format for all bidders was to pay it upfront after the formal agreement was signed? This bit of "favoritism" reeks of a crooked deal that was fortunately upended and hopefully DelNorth/Peebles will be ignored. Perhaps this go round will be more on the up and up?

Anonymous said...

SLG are the call letters, check their balance sheet.

They purchase $7.5B in real estate in 2007 approximately 80% leveraged.

How much do you think it is worth today?