NY Officials Discuss Aqueduct Casino Operator

Lawmakers expect to possibly pass a measure to erase the state's $3.2 billion deficit

Top state officials in New York are still discussing options for an operator of the long-delayed Aqueduct racetrack casino, but negotiators appear split on whether a final announcement needs to be a part of talks now underway to resolve the state's deficit.

Lawmakers are leaving the Capitol Nov. 19 and expect to return Nov. 23 to possibly pass a measure to erase the state's $3.2 billion deficit. Officials are counting on at least $200 million payment in the next several months by the Aqueduct winner to help close that gap.

"We're working on deficit reduction," Assembly Speaker Sheldon Silver said this week in suggesting the Aqueduct issue can wait.

Gov. David Paterson still is leaning towards a bid offered by SL Green and Hard Rock Entertainment. The Democratic-led Senate has been pushing Aqueduct Entertainment Group, a consortium of gambling, construction, and finance interests, though sources today indicated a possible Senate softening in its AEG backing. For his part, Silver has not specifically promoted a group, but he has in the past leaned to a group led by Delaware North.

"We'll have to come up with a compromise, which we haven't been able to reach as yet," Paterson said this week.

Senate president Malcolm Smith put the blame on the governor for the delays.

"Ask the governor," Smith said when asked why no decision had been made on Aqueduct. "I was hopeful that we would have made this decision a month ago," he added, noting, in fact, the original plan called for a decision in August.

"We're ready to go," Smith, a Queens Democrat, said. He noted the $1 million a day the state is losing in revenue-sharing proceeds from the future casino and its 4,500 slot machines. "It's a loss, and I would hope that he would make a decision very quickly," the Senate leader said.

Smith declined to discuss who the Senate Democrats are favoring. "I don't want to get where we are with anyone, but we are prepared to sit down and come out of a room with a decision. It¹s taken too long," said Smith.

Officials involved in the talks said there is a renewed effort in the past several hours to resolve the Aqueduct matter as part of the deficit talks that negotiators hope to resolve before lawmakers return to Albany in four days. Another negotiator cautioned the winning bidder is still very much up in the air. "No one is locked into their particular position. It's very much up for grabs and anyone saying anything otherwise is wrong," the government official said.

Paterson, Silver, and Smith have to unanimously agree on the Aqueduct winner.

Still pushing hard to get its bid considered is Penn National Gaming. Its bid got a boost Nov. 19 when Senate Minority Leader Dean Skelos, a Long Island Republican who does not have a vote in the matter, said Penn National has revealed to state officials  they are prepared to immediately write an upfront payment check for $301 million, which is $101 million more than the governor has asked bidders to verify they can pay if selected.

Penn National supporters have pushed the company's bid as not only the most generous to the state but also the least politically complicated since Penn National has not tied up its bid with political insiders as some of the others vying for the casino development rights.

Word of the latest talks comes as e-mails have been selectively making the rounds at the Capitol showing that individuals and entities tied to the old Empire Racing Associates, a consortium of racing entities that lost a previous bidding round to obtain the franchise to run Aqueduct, Belmont, and Saratoga racetracks, are in line for payments from the SL Green group if it wins the Aqueduct casino contract.

One e-mail from last March from an SL Green executive to Jeff Perlee, the former CEO of Empire, said the Manhattan real estate developer has "no obligation to make any payments" to Empire if it is not selected and signs a contract for the Aqueduct project by June 30, 2010. Also, the e-mails note that "bonus" payments are due from SL Green to Perlee, along with Justin McDonald, former vice president of Empire, if SL Green gets the Aqueduct deal.

SL Green was one of the partners in Empire. Sources say SL Green and any payments it might make are in keeping with its obligation to live up to its contractual obligation that it made with Empire, along with Perlee and McDonald, when it was a part of the Empire group; Perlee and McDonald also worked as consultants last year for SL Green during a previous bidding round for the casino. SL Green, following the breakup of Empire, obtained a deal allowing it to use parts of the old Empire proposal for its Aqueduct casino plan, sources said.

Perlee and McDonald are in line to get approximately $100,000 apiece if SL Green is successful, one source said. (Former Empire official Dennis Brida, a one-time executive director of the New York Thoroughbred Breeders, was due to get about $102,000, but he voluntarily terminated his Empire contract to take another position, an e-mail said).

Empire, which formed in 2006, eventually included a who's who of equine interests, including breeders and owners along with Magna Entertainment, Churchill Downs, Woodbine Entertainment, and Delaware North. One source close to the matter could not say how much money is possibly on the table, but said any possible payments are intended to try and pay back some expenses of the original Empire shareholders.

Supporters of the SL Green bid blamed Aqueduct Entertainment Group for the email leaks and what they claim are false suggestions that there are silent partners in the SL Green offer. An AEG spokesman declined comment.

An SL Green spokesman said the company made all the required disclosures to the state. "The state did not require details of compensation agreements to be submitted. And it does not prohibit contingent bonus arrangements, other than for lobbyists. If it did, we would comply," the spokesman said.