New Bid Proposals for Aqueduct Casino Project

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New York state officials are preparing as early as this week to release new bid proposals for the delayed Aqueduct casino project, with a winner expected to be selected possibly by the end of June, according to government sources.

After heavy criticism – and two pending state and federal investigations – of the way a recently scuttled Aqueduct bidding process was run, Gov. David Paterson and legislative leaders have tentatively agreed to re-do the bidding to more closely mirror how other state government procurement bids are handled.

“We’re putting together a process that we think would be a lot faster,” Paterson said of the new bidding plan.

The last process, which saw Aqueduct Entertainment Group initially selected and then rejected a month later, came under fire by some bidders because they were permitted to amend their proposals and, to their surprise, submit a final and best offer. The selection of AEG is the subject of probes by federal prosecutors and the state inspector general’s office.

One significant aspect of the new process is that it would permit new bidders to enter the competition or existing ones to form partnerships to bolster their bids.

A Paterson administration official, speaking on condition of anonymity, said leaders of the Assembly and Senate have signed off on the proposal to release a new Request for Proposal process. A draft of the new process is still being reviewed, but the RFP could be released later this week.

The new process will be strikingly different from the one recently scuttled. For starters, much of it will be public. Bidders will also be banned from lobbying, either directly or with lobbying firms, either the executive of legislative branches. To join the process, all bidders will have to pay a $1 million entrance fee, which will be refunded to losing bidders.

All bidders must be able to demonstrate they can pay at least a $300 million upfront, franchise fee payment to the state, which must be paid in full within about 10 days of being selected and a memorandum of understanding signed with the state. The governor and legislative leaders would like to count that revenue number in the state’s financial plan as part of current talks over the unresolved 2010 budget, which has a $9.2 billion deficit.

Unlike the previous process, there will be no negotiating the MOU. One week after the RFP is issued, all bidders will be invited to a conference run by the Lottery Division, which will run the bidding, to get answers about the bid and the MOU, which will be issued with the RFP. At some point soon after the meeting, the MOU will be made finalized, and anyone interested in the casino must agree in advance on the terms of the document.

“There is no negotiation,” a Paterson official said.

Officials said they do not know if any new bidders – beyond those remaining from the previous process, which includes SL Green/Hard Rock Entertainment, Penn National Gaming, and Delaware North – will be attracted to the new round of bidding.

The administration considered picking from one of the remaining bidders that lost out to AEG, but officials said terms imposed by Assembly Speaker Sheldon Silver – which included requiring that every casino investor, no matter how tiny the investment, go through a licensing procedure – would be unattainable by the remaining firms. The new process establishes a “practical standard” for licensing investors of the bidding groups, a source said.

Under the new plan, a specific set of criteria will be used to provide an “apples to apples” set of benchmarks that will permit the lottery agency to apply a ranking system to the bids. An outside investment bank, which already has a contract with the governor’s budget division, will verify the financial details of the bids. The bidder scoring the highest will be forwarded to Paterson, who will have to accept that bid as the winner.

From there, it would require the unanimous backing of the leaders of the Assembly and Senate.

The new process will also, at the request of Senate Democratic Conference Leader John Sampson, require additional minority and women-owned business participation and bidders will be required to show they have a record of good community relations in other areas in which they do business. Also, Paterson and the legislative leaders would have to unanimously agree if any aspects of the winning bid are changed after selection.

The bidders will also be required to use a footprint for the casino project that is based largely on previously approved plans for the site. Officials said that process would avoid the winning bidder having to go through lengthy environmental and other review procedures.