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 time....you 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 yearAnd 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:
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)
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.