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Aqueduct Casino Said Down to Final Three

Winning bidder may put slot machines at Aqueduct racecourse.

Negotiations for an Aqueduct casino operator have stepped up again, with a new flurry of talks between Gov. David Paterson and legislative leaders occurring in advance of a return by the state legislature the week of Nov. 16 to deal with New York’s soaring deficit.

Sources with knowledge of the discussions said the sides have narrowed the selection down to three possible operators: SL Green/Hard Rock Entertainment; Aqueduct Entertainment Group, and Delaware North. That would leave a bid by businessman Donahue Peebles and MGM Mirage, and another by Penn National Gaming Inc., out of contention.

The on-again, off-again movement over the long-delayed Aqueduct video lottery terminal project has seen some musical-chair shifting in recent weeks. In October, the sides had narrowed the choice to SL Green, Delaware North, and Las Vegas casino executive Steve Wynn. But Wynn, without giving any reasons, unexpectedly dropped out of the bidding. And then state officials said they were taking fresh looks again at the Peebles/MGM Mirage and PNGI bids.

Paterson and legislative leaders – Assembly Speaker Sheldon Silver and Senate Democratic Conference Leader John Sampson – held a private meeting the afternoon of Nov. 13 to discuss the Aqueduct bidders and following the session a source said a final decision was not made on the matter.

The governor is said to be favoring the bid by SL Green and Hard Rock, while Senate Democratic leaders have been pushing Aqueduct Entertainment Group, which is a consortium of Las Vegas casino company Navegante Group, construction companies, and a group tied to the Rev. Floyd Flake, a former Queens congressman who is close to Senate President Malcolm Smith. Silver, the Assembly leader, has not, as is often his negotiating style, made crystal clear his choice, but in the past he favored Delaware North.

The discussions come a week after interested bidders had to show evidence they could provide at least $200 million – of whatever their proposed total franchise fee payment would be – to the state within 30 days of signing a contract for the deal. The state is desperate for cash, as officials are in the middle of trying to close a $3.2-billion deficit.

Some bidders privately cried foul following that latest request from Paterson because they were told they could not substantially change their proposed bids. SL Green, however, did up its total bid from $275 million to $300 million. All the bidders confirmed they had the means to make the minimum $200-million payment to the state.

The Aqueduct VLT casino, first approved by lawmakers eight years ago, will be permitted to offer up to 4,500 machines. It is expected to provide the state with about $400 million in annual revenue-sharing proceeds, along with major boosts for purses and a Thoroughbred breeding fund. The winning bidder will run the casino for the next three decades.

Frank Marino, a spokesman for the Peebles/MGM Mirage group, said:

"It's hard to believe that the a team with $1 billion ready to invest, the largest and most successful gaming operator, a community plan that exceeds all others, and the most diverse team that goes far beyond anyone in this competition, would not be one of the leading options," Marino said. "When the final analysis is done, the Peebles/MGM team believes it will win because its concept best serves the objectives of the state and local community over the full life of this project, and is head-and-shoulders above all other bidders."

The situation is fluid, and given the twists of the process over the past year, some veteran observers are not ruling out that the latest developments narrowing the list to three could change again.

Privately, there is rumbling the AEG bid could be problematic if its victory is pegged to its political ties to Smith, who as Senate President legally has to sign off on the VLT casino deal with Paterson and Silver. The SL Green bid is being stirred up behind the scenes because the Seminole Indian Tribe, owner of Hard Rock Entertainment, is having a major fight with the state government in Florida over its casino operations there.

And Delaware North last year won the Aqueduct contract, but had to drop out this spring during the height of the recession when it could not raise the $370-million franchise fee payment for the state.

Later in the day, Penn National officials said they were the highest bidder before SL Green recently upped its offer to $300 million -- and they remain the highest bidder.

Eric Schippers, senior vice president at Penn National, said the company raised its original $300 million in papers filed with the governor more than a week ago. He would not provide specifics on that new level but he said, that "from what we know we are still offering the highest upfront cash amount and we have given certainty on our financing and also agreed to escrow our bid upfront upon selection.''