Cuomo Adds Details to Casino Expansion Plan

He wants upfront $50 million franchise fees for first three facilities in upstate.

Unveiling further details on his casino expansion plans, New York Gov. Andrew Cuomo proposed the first three of seven Class III gambling facilities be located in upstate regions and that successful developers pay an upfront $50 million franchise fee to the state.

The governor also proposed a tax rate on the new casinos of 25% of gross gaming revenues, a far lower rate than what the state's nine racetrack-based casino operators pay in annual revenue sharing paymentsa move already privately causing concerns in the racing industry.

The Cuomo administration defended the lower, 25% tax level for the possible Class III operators, saying the high capital expenditures and number of jobs the new facilities could create place "significant requirements on the casinos that make up for the tax rate.''

Officials noted that the Vernon Downs racino in central New York voluntarily entered the gambling market even though the Oneida Indian Nation's Turning Stone casino, which has been paying no taxes to New York, was already running just five miles away.

"In short, racinos are already prospering next to casinos that are essentially untaxed,'' an official said, citing another racino in the Buffalo area that is near a Seneca Nation casino.

The 207-page bill still needs to be negotiated with the Legislature, which has its own ideas for how casino expansion will work. It would then need to be approved by voters in a statewide referendum that Cuomo hopes will occur this November.

The measure keeps competitors away from the New York Racing Association's successful Aqueduct casino for at least five years, and maintains purse and breeding payments from existing VLT operations at "the same dollar level realized in 2012'' with adjustments for future inflation.

The legislation allows tracks to bid on full-blown, Las Vegas-style casinos with the potential to offer table games and real slot machines beyond the VLT-only licenses they now have from the state.

The legislation specifically states that no casinos will be allowed in New York City, meaning any change in that prohibition would require a separate "enabling'' bill at some point down the road. It means Aqueduct would be barred, under Cuomo's plan, from going to full Class III status. But casinos could be located on Long Island and the northern New York City suburbs beginning five years after the first upstate facility opens.

In the biggest change from a plan first floated last month by Cuomo, the governor calls for letting a casino locate in a large Western New York area in which the Seneca Nation of Indians now operate three Class III casinos based on a geographic exclusivity arrangement under the terms of a 2002 compact with the state.

But the Cuomo administration and Senecas have been in a worsening dispute after the tribe several years ago stopped paying annual revenue sharing proceeds to the state. The Senecas claim the state let new forms of compact-banned gambling into the area's track-based casinos, which includes Finger Lakes Thoroughbred track. The tribe, in all, has withheld about $600 million to the state.

The Cuomo plan would also permit two VLT-only facilities, not based at racetracks, to be located in the Western New York area now claimed by the compact as a Seneca gambling exclusivity zone.

The governor said the only way the additional Class III and two VLT facilities would not go into Western New York is if the Seneca casino compact is in "good standing.'' He has not defined what that means and he Senecas have long maintained Cuomo cannot unilaterally make such a determination.

Other regions upstate eligible for one "destination resort'' casino, as the Cuomo bill calls them, would be the southern tier area, the lower Hudson Valley including the Catskills, and the greater Albany area, including Saratoga Springs. Two large areascentral and northern New Yorkwere taken out of the running by Cuomo because of recent deals he has cut with Indian tribes already operating casinos in those areas.

Making the operator selections would be the state Gaming Commission or a separate board to be appointed by the commission; while the gaming commission has come to life, its board of directors still have not yet been appointed more than a year after legislation creating the new agency was approved.

Not included in the plan, as sought by Senate Republicans, was permission for Long Island to open two VLT facilities.

The legislation calls for selection of operators to be based on a set of conditions. Sixty-five percent of a site decision will be based, for instance, on the economic impact a casino will bring a region. Bettors must be 21 years of age and older to gamble in the casinos and smoking will not be permitted, unlike the practice now at Indian-owned casinos in the state.

The legislation also proposes to ban political contributions by casino applicants to statewide or state legislative officials, and a new inspector general's office would be created within the Gaming Commission.

Track operators were largely silent on the new plan. The New York Gaming Association, which represents tracks with casinos, declined immediate comment.

But Foxwoods Resort, the Indian-owned casino in Connecticut, and its partner Muss Development, issued a statement saying they appreciate the governor's "leadership and his vision to create destination resort casinos.'' The partnership group is looking to open a casino on a 500-acre site in the Catskills.

Another casino developer said Cuomo's plan barring casinos in New York City will make development upstate more financially attractive.

"The draft legislation out of the governor's office today further defines the landscape for non-tribal gaming. Excluding New York City in its entirety for any of the seven licenses makes the Hudson Valley/Catskill region that much more attractive, as does the proposed 25 percent tax rate,'' said Michael Treanor, managing partner of the new owners of the Nevele hotel in the Catskills, where a casino is also being proposed.