The Daily News is now reporting that federal investigators are indeed interested in the Aqueduct racino selection process; and not just in Senator Malcolm Smith's relationship to non-profit groups to whom he's directed member funds to.
But wait a minute....hold on there, Mr. Kenneth Lovett, Daily News Albany Bureau Chief. You're basing this supposed news article on an anonymous and quite self-serving quote from an unnamed losing bidder? Seriously? Why don't you get back to us with something a little more substantial and credible. Like a confirmed story about a subpoena delivered to the governor's mansion.
Not to say it's not true of course; I have no idea. [Fred Dicker, reporting in the Post, at least names the company that the anonymous source is associated with.] But I just would find it hard to believe that the Justice Department would be interested in this matter at this time, no matter how opaque and fishy it might seem. However, as we've said, there are some prominent and extremely powerful people in the nation's capitol who would love to see Governor Paterson go away into the night for once and for all.
The Daily News along with, and especially, the New York Post have been going absolutely ballistic over this from the moment the governor made his fateful selection. So, it was no surprise to see the story of the release of the bidders' documents plastered on the front pages.
OK, I think it's time to step back, take a deeeeeep breath, and have a reality check. These two papers would have found something to complain about somewhere in AEG's bid, no matter what. So let's take a look at exactly what is so horrible, how we've been Aque-duped, as the headline says. I'm going to play a little bit of devil's advocate here...but not that much, and to make a larger point later on.
The articles in each of the papers, here and here, make two main points. The first is that AEG's initial offer of upfront money was only $150 million, which was behind the other bidders. But, so what? This is old news, and we are well aware that all of the bidders were allowed to increase their offers. AEG then met the governor's demand to increase the offer to a minimum of $200 million. But, while it's pointed out that this still was behind Penn National's $301 million, nobody bothers to mention that the latter started out with a token offer of $5 million before getting into the game. The fact is that, however they got there, AEG is now committed to come up with the $300 million required by Sheldon Silver.
The other main argument is that AEG initially came in on the low end of the financial projections, and then raised them once the offers were revised.
James Featherstonhaugh, a lobbyist for rival Delaware North, said, "There's no reason why their numbers have changed. Nobody else's number did." [NY Post]But, for their part, AEG said their initial numbers were ""very conservative," while "these new numbers more accurately reflect the market conditions and revenue potential that our group can bring to the state." [Daily News] Hmmm, seems a somewhat reasonable argument.
And besides, though less emphatically, I'm going to again say here, so what? Projections are just that; guesses, and they are often quite wrong once reality takes over.
We're also told, in another Post article, of an "expert" who tells us: "A consortium is only as strong as its weakest link, and all the links here, with the exception of Siemens [one of AEG's partners], lack financial firepower." But conveniently ignored is the fact that Deutsche Bank is said to be a non-equity financial backer of the project. And remember, once AEG comes up with the $300 million, its immediate financial needs are minimal; the state will issue bonds to pay up to $250 million in construction costs. Additionally, we're told by the News, that AEG, in its pre-emptive release of the documents, didn't disclose that Karl O'Farrell was originally part of the group before being dumped last year. Yeah, so?
How does any of the above impact on the ability of this company to construct a racino (with state funds)? Even the Post editorial quotes another "expert" who says: "Their construction résumé is solid. It appears AEG would get Aqueduct open and running." And isn't that the most important thing at this stage of the game?
I say this not because I think the process was clean - it stunk. And not because I think there was no political favoritism and shenanigans, not because I don't think there should be any investigations, and NOT because I think AEG was the most qualified bidder! I think it's clear that they were not! However, in all of this criticism and hand wringing, I have not read a single word about what is to become of the racing industry in this state if, as the Daily News advocates, we "Scratch Aqueduct Deal." Not one word about the fact that NYRA is mere months away from being insolvent; thoroughbred racing months away from being shut down. And nary a mere mention of the franchise agreement which requires the state to supply operating funds to NYRA at this point, with no racino in sight. If the deal is scuttled, what then? As NYRA runs out of money, will we then see front page headlines in the Post and the News that read: DEADBEAT DAVE: State reneges on its written obligation to fund NYRA tracks in absence of racino?
I didn't think so.