State lawmakers March 10 urged Gov. David Paterson, who is considering pulling the plug on Aqueduct Entertainment Group’s casino deal at Aqueduct, to pick from one of the remaining bidders if the AEG contract is scuttled.
Government sources said the plan is to break off the AEG deal as early as March 11. Aides to Paterson and legislative leaders were in talks over how to proceed to keep the Aqueduct project from being halted, which, with Paterson not running for election this fall, threatens to push off a new bidding round until at least next year.
"It's dead,'' a government source said of the recent decision to award the Aqueduct casino to AEG.
“We need to move from the other choices available. There’s no reason to start from scratch again,’’ Sen. Eric Adams, a Brooklyn Democrat and chairman of the Senate’s racing committee, said if Paterson and legislative leaders kill the AEG deal.
The state’s Lottery Division has told aides to Paterson that it does not believe AEG can obtain the licenses it needs from the agency to run the Aqueduct casino.
Sources said the agency, among it concerns, raised issues with Karl O’Farrell, an Australian businessman who ran Capital Play, which bid on a previous Aqueduct casino project. AEG officials have sought to assure lottery officials that O’Farrell has no role with its current bid.
AEG officials have also submitted documentation showing that groups and individuals holding a total equity share in the group of 4.56% have dropped out since AEG was selected for the Aqueduct casino. Sources close to the bidding group said all those remaining partners can all be licensed by the lottery agency.
The process by which AEG was selected by Paterson and the leaders of the Legislature is already subject to investigations by federal prosecutors and a state inspector general’s office. Assembly Speaker Sheldon Silver, a Manhattan Democrat, also imposed conditions on the AEG bid, including a refusal to give a final sign-off until the process is cleared by the two investigations.
AEG says it is prepared to write a check to the cash-starved state government for $300 million—the upfront franchise fee it promised when it won the casino deal. Final approval is contingent upon a memorandum of understanding signed by Paterson and the two state legislative leaders.
Paterson, who has removed himself from the decision-making on the advice of lawyers because of the ongoing investigations, said again March 10 that the state was not counting on the $300 million to help close out the state’s current fiscal year that ends March 31.
“If the Lottery has found AEG to be unlicensable, then we wouldn’t be able to move forward,’’ Paterson told reporters. He said he would “wait for the lottery to make a decision rather than speculate.’’
If AEG is dropped, it could—given the many criticisms the casino bidding process was hit with over the months—force officials to begin anew the jockeying among private groups looking to run the lucrative casino.
Or, given the state is losing $1 million in casino revenue-sharing proceeds for every day there is no casino operating at the track, the governor and lawmakers could pick from the bidders that lost out to AEG. That could put a partnership led by SL Green and Hard Rock Entertainment at the top, officials say, especially since that group was being pushed by top aides to Paterson and had the private, initial okay from Silver. Other bidders include Penn National Gaming and Delaware North.
Adams, along with Assembly Racing Committee Chairman Gary Pretlow, a Westchester County Democrat, both said March 10 that the bidding process should not be started over if AEG is dropped. Neither expressed a preference among the remaining bidders.
“My only concern is to get the project done,’’ Adams said. “If Lottery says that any group is not qualified, then let’s go to the next one. We need to get a shovel in the ground.’’
The Aqueduct project was first approved by the Legislature in 2001, and has since been through failed or now possibly stalled bidding procedures by three gubernatorial administrations.
If AEG is dropped, Pretlow said, “The governor should expand the selection process to who he thought was number two on the list and get this process over. Select from who’s left. We don’t have to go through this whole thing again.”
Adams, the Senate committee chairman, said the Aqueduct project has become too important to the racing industry to start the bidding clock over again. He noted the casino issue comes as the New York Racing Association, which runs Aqueduct, says it risks running out of money early this summer, and is counting on some sort of state assistance or up-front payments from the casino bid winner.
“We cannot bailout NYRA,’’ Adams said, citing the state’s worsening deficits and planned cuts to a whole range of popular government programs. “So we need to get a casino project at Aqueduct.” If AEG doesn’t work, he added, “Let’s move to the next.’’