Delaware North Out of Aqueduct Casino Bidding

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Bids are due June 29 for the long-delayed Aqueduct casino project, and already one of the bidding groups is dropping out.

Delaware North, a Buffalo company, and its partners are informing New York state government officials of its pullout from the bidding for the casino and its 4,500 slot machines.

Delaware North was one of six groups that recently submitted a $1 million refundable fee to get a stake in the bidding process. Sources say others are also considering pulling back their bids later today, which would make for a small field for Gov. David Paterson and legislative leaders to choose from by their early August deadline.

Delaware North officials did not immediately return calls for comment. Officials at the state Lotttery Division, which is overseeing the bidding process, also were unavailable.

But sources say Delaware North has concerns about the unpredictability of the Aqueduct project. For starters, a bidder selected in August must agree to pay at least $300 million to the state – even if final negotiations with the state do not result in a deal.

Moreover, a state budget bill expected to pass June 29 in Albany will lower the payments that vendors receive at racetrack casinos across the state by at least 1% as a way for the state to keep more of the proceeds. Such a move is worrisome, Delaware North believes, for an Aqueduct contract that will span 30 years.

Delaware North is also not confident the state will be able to do a $250 million borrowing to help the winning bidder construct the casino, and is concerned statutory payments to the New York Racing Association from the vendor could rise in the years ahead given NYRA’s financial troubles.

Also, all the vendors are concerned, sources said, about recent talk by the Shinnecock Tribe on Long Island to try to build a casino in the region, possibly just a dozen miles away at Belmont Park--a move that would dilute the business of any casino at Aqueduct.

Delaware North in 2008 won a previous Aqueduct bidding process with the state, but dropped out several months later when it could not raise a $370 million upfront franchise fee payment for the government. A subsequent bidding process--which awarded the deal to Aqueduct Entertainment Group-- was scuttled earlier this year and is now the subject of federal and state investigations.

Gov. David Paterson has since begun what is now the fourth bidding process over the years for the casino, which was first approved by the Legislature back in 2001. The “expedited’’ process is more transparent, includes specific scoring benchmarks for bidders unlike the more mushy ways of the previous bidding process, and has set deadlines for decisions.

The other five bidding groups facing a 4 p.m. deadline of June 29 for their bids are: Penn National, S.L. Green Realty Corp., Empire City Casino/Yonkers Raceway, Genting New York, and Clairvest Group.