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DRAWING TO QUEENS
NEW YORK--When a decision has taken eight years to make, one might expect a blare of trumpets to accompany the long-awaited announcement. The musical notes were decidedly off-key last week when Gov. David Paterson alerted the horseracing world that Aqueduct Entertainment Group (AEG) has been awarded the 30-year contract to operate 4,500 video lottery terminals at the first racino within the five boroughs.
The largest legally authorized betting operation in the city was handed to an entity with no gaming experience.
Paterson came to office in the sordid wake of the Elliot Spitzer sex scandal. His popularity is so anemic that fellow Democrat President Obama discouraged him from running for election at the end of his term. However, Paterson has decided to go "all-in" with the political chip that has dropped into his lap by granting the license to operate the racino to a politcally connnected group based in Jamaica, Queens. Negotiations were conducted in closed-door sessions that afforded very little input from horseracing people who will have to succeed or fail for many years based on this decision. It is interesting to note that Paterson's predecessor, George Pataki, could have decided to whom he would grant the right to operate the racino at any time during his eight-year term but chose not to do so.
It appears on the surface that the current governor has shored up his potential support during the next election in exchange for the right to decide the distribution of enormous amounts of potential revenue and a large number of jobs. The head of AEG is Rev. Floyd Flake. The fact that Flake's group has no experience operating anything remotedly resembling a massive and complicated gambling operation didn't dissuade Paterson from authorizing AEG to go forward with their plan. Paterson didn't have direct approval over which group would be granted the contract. He did have a tremendous amount of influence, though.
Veteran casino operator Steve Wynn had expressed keen interest in operating the Aqueduct racino, as had a group that included Penn National. Wynn dropped out of the selection process several months ago out of frustration over the lack of clarity in the scope of the racino and the seemingly capricious requirements expected of the successful bidder. Optimistic estimates have suggested that the facility might draw as many as 20,000 people daily who would generate revenues in excess of $1 million every time the gates opened.
It is important to note that much of the data upon which these estimates are based was collected and parsed in a more robust economic climate. Still, Paterson has made a decision affecting thousands of people who work in the racing industry and determining who will benefit from billions of dollars over the next three decades.
Horseracing in New York is struggling just like the rest of the industry. The New York Racing Association has hinted that it may not be able to fund the last leg of the Triple Crown this year, the Belmont Stakes. OTB is considering several radical solutions to its operating difficulties due to increased overhead costs and declining revenues, including opting for bankruptcy. ATM-like betting kiosks around the city, anyone?
This may not be the last chapter in the winding tale of the Aqueduct racino. Republican representatives and long-time political observers are doubtful that AEG will successfully meet the stated criteria in order to actually begin operations of the facility. For example, AEG must pay the state $300 million upfront before the first dime can be wagered at the Aqueduct racino.
It appears that, once again, an interested observer might draw a comparison between the capitals of New York state and the Commonwealth of Kentucky. Frankfort and Albany are two small cities that sometimes make very curious political decisions that reverberate profoundly in the larger cities that fund their aspirations.
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