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Jonathan ZaunApril 07, 2018

New York Governor Rejects Struggling Casino’s Request for Subsidies

Five years after signing an ambitious casino expansion bill into law, New York Governor Andrew Cuomo rejected Del Lago Resort & Casino’s request for financial concessions.

Cuomo championed the gambling expansion effort in 2013, calling for seven full-scale commercial casinos to compete with the state’s existing tribal casinos. In February of 2017 – after projecting revenue of $226 million in its first year of operation – Del Lago opened near Rochester to great fanfare.

But with three other casinos opening in upstate New York since the law went into effect, Del Lago recorded first-year revenue of only $151 million.

Having significantly missed the mark, Thomas Wilmot – Rochester real estate developer and Del Lago’s principal owner – spoke with the Rochester Democrat & Chronicle about the revenue gap:

“I think we need some help at this point, and what the future holds, time will tell.

We’re paying the bills.

Long term, it isn’t going to be sustainable without some help.”

While Wilmot neglected to specify the sort of “help” Del Lago would need, the likely target would be a reduction in the 37 percent tax on slot machine revenue paid to the state.

Wilmot’s comments were made while he visited the State Capitol building in Albany, where Cuomo was collaborating with lawmakers on the state’s 2018-2019 budget. With the new fiscal year beginning on April 1, Cuomo wasted no time in rejecting Del Lago’s request during a scheduled press conference:

“The upstate gaming casinos are private concerns.

They bid, they made an investment and some of them will say they are not doing as well as they hoped or would have expected.

But they’re private concerns, and I don’t want to get into the business of bailing out private concerns.”

Moody’s Investor Service responded quickly to the news, downgrading Del Lago’s credit rating to “negative,” while warning investors that the casino could fail to repay outstanding debts.

Cuomo wasn’t interested in the casino’s plight, telling reporters that the new industry – including struggling venues – has served its stated goal by contributing to local and state coffers:

“We did casino gaming to create facilities, generate economic development, create jobs – and it has done that.

To the extent you have a casino saying, ‘Well, you know what? I’m not meeting my expectations. I should get help from the state.’

I’m not sympathetic to that.”

Del Lago isn’t alone in its struggles, as both Rivers Casino and Resort in Schenectady also whiffed on its first-year revenue projections. After telling lawmakers that the venue would generate between $181.5 million and $222.2 million in year one, Rivers recorded only $81.8 million since opening in February of last year.

One reason for the mutual shortfalls is the concept of “cannibalization,” or closely clustered casinos sharing ever smaller portions of the state’s gambling market.

That’s what Clyde Barrow – a college professor based in Texas who authored several reports on upstate New York’s gambling industry – predicted back in 2014. While analysts for Del Lago forecasted $226 in first-year revenue, Barrow projected $158.1 million – less than $7 million off the actual total.

In an interview with NewYorkUpstate.com, Barrow offered a blunt assessment of Del Lago’s remaining options:

“It’s called bankruptcy.

In business, you take a risk, you make a mistake, the solution is often to declare bankruptcy.

They made a mistake.”

For their part, Del Lago representatives have cast blame on the Seneca Nation of Indians, a tribe with several competing casinos operating in the region.

According to Steven A, Greenberg, spokesman for Del Lago, the Seneca’s decision last year to stop sending $50 million in payments to the state has tipped the scales:

“Del Lago can compete on an even playing field but not one that’s tipped so heavily toward the Senecas.

All del Lago is looking for is a fair, competitive marketplace.”

 

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