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Friday, September 26, 2014

Friday Casino News and Notes

Traveling for a few days, so I'm a bit behind....but here's a good recap of the third and final day of the public comment hearings; this one for the three Southern Tier applicants, which took place in Ithaca on Wednesday. Opposition seemed scarce for the Traditions project near Binghampton (a reference to a "small grassroots group") and Tioga Downs - just one opponent out of around 20 speakers.

That Tioga speaker noted that "Everything there seems to be less," and that could be a concern for Gural. Remember, the board got him to admit under questioning that only 900 of the 1200 job number would be new positions. So Tioga surely lags in that area as compared to the other two....though Gural's political connections may very well render that moot. I don't think that Gural would have built a new parking garage if he didn't think he has this in the bag.

The Casino Free Tyre group was out in force to make their case against the Lago Resort and Casino proposed for their little town. However, Wilmorite was able to rouse 33 people to speak in support of that project....a stark difference to Capital View in East Greenbush, who didn't even try, for whatever reason to bring supporters, perhaps, as this reader suggested, because they don't have to. Still, when the location board members look back fondly on their three day marathon, I would think that the three groups who spoke out forcefully - those in East Greenbush, Tuxedo, and Tyre will stand out from the others and leave a significant impression. Unless of course the political outweighs the practical; and in the case of Tuxedo, the sheer scale of the Sterling Forest proposal dwarfs all of the other factors....both those pertaining specifically to this project, or with respect to the whole question of Orange County vs the Catskills, and what the real priorities of the casino law is as interpreted by this board.


Genting CFO Christian Goode poo-pooed the notion that Sterling Resort would significantly hurt Yonkers. He called racino customers "convenience gamblers" with a modest budget.

"When you start thinking about that, if somebody's got $60 or $80 to spend, you can easily assume today with gas prices and tolls, that you're going to take 25 percent of their spending power. We don't think that person's going to go up here," he said. [Journal News]

(That's why I think that the cannibalization of Saratoga harness may not be as bad as people are saying.) And speaking of poo-poo, that's been the attitude by Genting all along to the ruling by the Palisades Insterstate Park Commission that they can't build a new Thruway exit there.

Goode said the commission "acted prematurely," and the state Thruway Authority would control whether an exit were built. Having the exit is central to the casino project, and Genting is confident it would be built, he said.

Maybe they know something that we don't.

- A minority owner of Vernon Downs, which is also majority-owned by Gural, says that a casino in Tyre would hurt his racetrack-racino, "putting its entire existence into question."

Tyre is closer to Syracuse than either Tioga Downs or the town of Glen. Greenberg says Gural wouldn’t have supported the state approving commercial casinos last year had he known then there would be a competitor as close as Tyre. [Daily Sentinel]

Well, I think he probably would have anyway.. And it may not be as bad as he is saying, at least according to the Genting theory explained above.

- Republican Attorney General candidate John Cahill says that he will use that office's organized crime task force to vet the casino applicants should he be elected.

"These are sophisticated deals, potentially involving offshore investments, foreign players and incredible sums of money," Cahill said. "The organized crime task force has the expertise and the personnel to make sure New Yorkers are safeguarded from fraud, crime or even terrorist activities." [Albany Times Union]

As we've mentioned, we haven't seen that level of scrutiny, as there was in Massachussetts....enough to dq Caesars there because of an alleged tie to an alleged mobster. The location board is required to use the State Police to investigate, which I imagine will only take them so far. However, Cahill would take office on Jan 1 should he upset incumbent Eric Schneiderman. That might be too late. After the location board announces its recommendations, it's up to the Gaming Commission to actually award the licenses. You can bet that, should Cahill win, the governor will see to it that the job is done before New Year's Day.



Anonymous said...

For Sterling Forest Resort, there may be another potential wrinkle. Both Genting and the town of Tuxedo have been behaving in a way that suggests the validity of the host community agreement between them is in doubt.

Under the agreement, Genting promised to make about $50 million of cash payments to Tuxedo. The first $1.5 million installment was due upon the later of Genting applying for its casino license (that happened on June 30) or Tuxedo delivering a legal opinion confirming that the town had duly authorized and executed the host agreement. It's a standard opinion that's normally delivered on the date of signing (which was June 27). If the opinion had been delivered, the $1.5 million would have been due on July 1 at the latest.

Well, there must be a problem because Tuxedo still hasn't received the money. At a town board meeting earlier this week, the board said the money was being placed into an escrow account subject to finalizing the terms of the escrow arrangement with Genting. Escrow? That means that either there was an issue with the town's authorization of the agreement back in June (which would have precluded the town's law firm from delivering a "due authorization and execution" opinion), or there is some other concern about the enforceability of the agreement.

If the agreement is in fact invalid, the town will have to convene a town board meeting to authorize a new one. I'd love to sit in on that one. At this point there's so much local opposition that it's bound to be a slugfest.

Steve in NC said...

Having lived in Binghamton (no P in Binghamton), I would think that if any casino is put in the Southern Tier, it would go to Traditions.

This is a relatively sparsely populated region and not a major tourist destination. So it makes sense to put one in the area's main population center of the Triple Cities (Binghamton, Endicott and Johnson City, where Traditions is).

There is very little near Tioga Park. It is in farm country a full half hour out of the city, where I would imagine most of the customers would come from.

The population of the Triple Cities (about 75,000 and more if you include Vestal, which you should) is 3 times that of Elmira, which is the "city" closest to Tioga.

The idea that roughly 1000 jobs could be created by Tioga seems really far fetched unless Gural is also going to ship in thousands of foreign tourists every week. And why would they want to go there?

The farm country of the Southern Tier has a kind of lonely (at least to a city guy like me) beauty. But I don't think that's what casino goers are looking for.

When Tioga opened, it was hard to imagine very many people driving out there for harness races with tiny purses, and few did. But Gural must have envisioned a future of simulcasting, and off-track handle now dwarfs the tiny on-track handle.

That model won't work for a casino. So this will have to a relatively modest casino drawing the local population. If Gural gets the license, it will quickly become obvious that he has overpromised on jobs and economic impact.

Tradition, right where the population actually is, makes more sense, although any enterprise based around people staring at video screens hoping to win huge sums from machines pre-programmed to fleece them is more an indictment of our culture than an economic development strategy.

Anonymous said...

Interesting observation regarding the Host Agreement. I read the Host Agreement, and I don't recall seeing anything requiring the $1.5 million payment to go into Escrow.

Question - regarding the SEQRA. If the $1 million payment to the Lead Agency (Tuxedo) is contingent upon completion of the SEQRA Process and a Determination as defined in the Host Agreement), how can there be assurance that the determination will not be bias. Sure, the Agreement doesn't say a negative declaration is required, but I am hard pressed to believe that a Lead Agency will be inclined to issue a positive declaration under these circumstances.

The irony, if Genting is not awarded a license at Sterling Forest, is that this entre process, could cause Genting to lose a lot more from damaging there reputation and goodwill with NYS, than they would have otherwise lost in revenue at Resorts World from a casino being sited upstate (as in actual upstate).

KT Lim obviously so gold when NYS included a county that stretched below the entire county of Putnam, well into Westchester, and borders rockland and NJ. Essentially, they found a loophole in the exclusionary zone, and tried to take advantage of it.

But again, the bus loads of people from NYC wearing green t-shorts (who never even heard of Sterling Forest), the PR debacle paying people to attend the hearing with a green t-shirt, the $450 million offer, the amount of money they are throwing around in one of the most affluent communities of NYS, and the just the sheer arrogance of the Genting team in general...they may very well be screwing up their shot at a license in NYC in 7 years on account of their actions right now. If NYS wasn't familiar with how Genting operates before, you sure are now.

Important to note! These guys got thrown out of Miami for the very reasons stated above...the politicians down there felt Genting was way too aggressive, and declined the boat loads of money they offered to influence the process.

Anonymous said...

Anonymous, that's an interesting tidbit about Miami. And I agree with your SEQRA point. I think, however, there may be an internal inconsistency in the agreement with respect to the $1 million payment you mentioned. Or maybe it's intentional.

Section 3.A of the agreement says that Genting has to make the payments listed in Exhibit A on the dates listed in Exhibit A. Exhibit A says that the $1 million payment is due upon completion of the SEQRA process and the issuance of a determination, so it sounds like the town would get the money regardless of what determination was made. BUT, Section 3.C.(iii) says that Genting's obligation to make any of payments listed in Exhibit A (other than the initial $1.5 million payment) is subject to Genting's receipt from the town of all approvals that are required to build and open the casino. So it sounds like the town doesn't get the $1 million if the SEQRA determination prevents the project from going forward because the approvals would not be issued by the town.

With respect to the initial $1.5 million payment, as noted earlier if Genting failed to pay it when due because the town failed to deliver the legal opinion confirming that the host agreement was properly authorized and executed, then that could mean that the town's approval of the agreement had a technical defect (such as improper notice of the meeting at which the agreement was approved) and may be invalid. If that's the case, then then town's entire resolution in support of the project (which is required by the gaming commission) could also be invalid, because the resolution in support of the project and the resolution authorizing the host agreement were adopted at the same town board meeting.

Anonymous said...

Interesting observation. I wonder if the issue of improper notice (or some other procedural error of sorts) was one of the claims in the Article 78?

Did you see the force Majeure provision? I personally, would never sign off on language like that in a Force Majeure provision. It seems to go too far in that it provides Genting an "out" if there is a substantial downturn in the gaming industry. Which then bring s me to my next question. How much experience with these sorts of transactions, and experience dealing with entities like Genting, does the Town Attorney have? I know nothing about the Town attorney, ad maybe I am completely off the mark, but agreeing to that type of language in a Force Majeure provision could suggest they may not be best suited to represent the town in their negotiations with Genting, at least under the circumstances.

Anonymous said...

I believe the Article 78 proceeding only challenges SEQRA compliance.

As far as I know, no one has yet challenged the authorization of the host agreement or the resolution in support of the project. Genting's failure to make the initial $1.5 million payment seems to be a red flag, though. Given that the payment is now three months overdue, you would think the town board would be offering some sort of explanation. The lack of transparency is troubling.

As for the town's counsel, I think the town may have already retained its special counsel from NYC prior to entering into the host agreement, so hopefully that firm negotiated it.

The force majeure definition is very broad, but under the agreement force majeure events mainly operate to delay the parties' obligations, as opposed to absolutely relieving them. The main exception is a force majeure event that prevents Genting from performing its obligation for more than 180 days -- under those circumstances Genting may terminate.

Anonymous said...

It's also interesting that the Tuxedo town board didn't convene a public meeting to authorize the town's entry into the escrow arrangement for the $1.5 million.

The June 25 board resolutions authorizing the host community agreement granted the town supervisor the authority to execute the agreement with any non-material changes that he may deem appropriate after consultation with counsel, but the resolutions don't appear to authorize him to subsequently amend the agreement or to enter into any other arrangements in furtherance of the agreement. Perhaps the authorization is buried elsewhere?

The Tuxedo town board regularly holds public meetings to authorize minor things like a $45,000 snow removal contract, so you would think a $1.5 million escrow arrangement would warrant the adoption of an authorizing resolution at a public meeting.

Anonymous said...

Executive Session in Tuxedo tomorrow night to receive advise from counsel on Sterling Forest Casino. We could be in store for a big announcement, perhaps regarding the host agreement (as previously discussed).