Poker Face: Who Wants An Upstate Casino? [Updated]

Gov. Andrew Cuomo surprised lawmakers last month with his proposal to allow only three casinos in New York—all to be located upstate—while the other four casino licenses that would be authorized if gambling is made legal this year would be put on hold indefinitely.

The governor offered an outline for how he wants the siting process to play out, but so far he has provided few details. He wants his new gaming commission to determine the casinos’ locations and operators, and to give local communities input—though it remains to be seen how much. Instead of identifying clearly defined regions that would compete for a casino, as he did with his regional councils to select economic development projects, Cuomo has only hinted that the Hudson Valley, the Finger Lakes and the Adirondacks would be good casino locations. In addition, the Albany area and the Catskills have been rumored as potential casino sites, and an administration source reportedly said the Niagara Falls area—and a fourth casino—could also be in the mix.

Furthermore, it is possible that New York City, which the governor hasn’t ruled out entirely for a casino, could be on the table, but there is no timeline for one to be introduced.

So if the governor’s “phase one” plan goes forward as is, which operators might fit the bill? For many companies, lobbyists and experts, it is simply too early to tell who might want to compete for a license.

“You tell me what the tax rate is, what the license fee is, what the location is, and I’ll be able to answer your question,” said James Featherstonhaugh, the president of the New York Gaming Association. “Anybody who answers it without knowing those three things is just playing with you.”

Still, even at this embryonic stage, some operators and locations appear to be better positioned to land a casino than others.

Genting, the Malaysian casino conglomerate whose Resorts World Casino in Southeast Queens has quickly become the state’s most profitable racetrack casino since opening its doors in 2011, was once seen as a strong contender for a full-fledged casino. The governor called for a massive new convention center to be built at the site in his 2012 State of the State address, which was seen as a signal that it was in line to get one of the state’s licenses, but the deal fell apart as Genting reportedly lobbied for exclusive rights for a casino in New York City.

In this year’s State of the State, Cuomo changed course and dropped New York City from the conversation entirely. Like Genting, other top casino companies have been paying close attention to the effort to legalize full-scale Las Vegas-style casinos in New York, though after the governor proposed to wait on New York City, several have indicated that they may stay on the sidelines.

Some leading gaming companies could still compete for a smaller casino in the upstate area, perhaps as a way to gain a foothold in the state and a better position to land a site in the five boroughs.

The New York Gaming Association, which represents the state’s racetrack casinos, has been pushing for all nine of them to upgrade to full-scale casinos. But while seven of the racinos are located in upstate New York, few are in the areas the governor has mentioned so far.

One existing racino that satisfies the governor’s geographical allotment is the Finger Lakes Casino in Farmington. A challenge for that racino and for two others in Western New York, however, is that they sit within the Seneca Nations’ exclusivity zone for casinos. The Native Americans have accused the state of violating its 2002 gaming compact with the tribe by allowing the racinos to run electronic slot machines, and the dispute is in arbitration. When a Cuomo administration source recently raised the possibility of a fourth upstate casino in Niagara Falls, an area the governor had indicated would be off limits, some observers saw it as a way to punish the Senecas for withholding tens of millions of dollars in revenue to the state and to pressure the tribe in arbitration proceedings.

Much of the Adirondacks, another region the governor indicated would be well suited for a site, overlaps with another exclusive casino gambling zone, this one belonging to the Mohawk Indian Nation. The tribe, which operates the Akwesasne Mohawk Casino, has also been withholding payments to the state.

In the Hudson Valley, the Monticello Casino and Raceway is another strong candidate for a license. Its operators plan to move from the current site to the old Concord Hotel in the Catskills. Several other casino projects are also in the works in the Catskills, including at the old Grossinger’s and Nevele Grand Hotel resorts. And the Catskills region has an ace up its sleeve: John Bonacic, the influential chairman of the State Senate’s Racing, Gaming and Wagering Committee, who has long pushed for multiple casinos in the economically depressed area, which he represents.

The Gaming Association’s Featherstonhaugh, a longtime lobbyist in Albany, is also part owner of the Saratoga Casino and Raceway, which could make the enterprise one of the stronger contenders for a casino license among the state’s racinos. Other than Resorts World in Queens and the Empire City Casino in Yonkers, Saratoga is the most profitable of the racinos and the most lucrative one outside of the downstate region.

“I like to think that Saratoga is in the foothills of the Adirondacks, and there’s a perfectly good casino there that could profit by having table games [and] help the state’s economy,” Featherstonhaugh said.

If some of the country’s biggest casinos, like Wynn Resorts, Las Vegas Sands and Caesars Entertainment Corp., do not determine an upstate casino to be a profitable proposition and choose to wait to compete in New York City, other midsize companies like Boyd Gaming and Penn National could also be among the top competitors.

Of course, there’s still a possibility that lawmakers will persuade the governor to take up the question of downstate casinos this year before a vote on the constitutional amendment. Lawmakers have a strong incentive to deal with the geographic distribution of casinos across the entire state now, since they may lose their leverage once they vote on the constitutional amendment. While Assembly Speaker Sheldon Silver has ruled out a casino in Manhattan, some observers expect him to push for a casino at Resorts World and at Yonkers Empire City Casino. Sen. Dean Skelos, the Republican majority leader, has said that Belmont Park in Long Island should also be part of the discussion.

Cuomo has called for casinos to be developed as “destination” resorts, but with no specifics on how much revenue they would have to share with the state it is hard to tell at this point who would want to build one and whether upstate areas will be profitable enough to satisfy the governor’s ambitious vision.

Karl Sleight, who heads the racing and gaming industry team at the law firm Harris Beach, said the sector now is looking less at destination casinos than at casinos in highly populated areas.

“The demographics are much more people who are willing to drive on a Thursday, Friday, Saturday to their local casino than might otherwise spend traveling to a place like Las Vegas or Atlantic City if they can,” said Sleight, who noted that Resorts World in Queens is bringing in huge profits even though it is limited to slot machines and has no Vegas-style table games. “It’s just the nature of where the industry’s going,” he said. “The proof is in the pudding.”

This story has been updated to reflect that MGM Resorts International is not interested in a casino in upstate New York. An earlier version of this post indicated that some leading casino companies, such as MGM, may still compete for a smaller casino in the upstate area.