State Reopens Aqueduct Bidding Process

By Patricia Adams

Gov. David Paterson, along with Senate Majority Leader Malcolm Smith and Assembly Speaker Sheldon Silver, announced last week the re-opening of the solicitation process for the Video Lottery Terminal facility at Aqueduct racetrack. In the wake of the collapsed deal with Delaware North, officials are seeking developers in a new bidding process. Applications are due on Friday, May 8 by 5 p.m.

After defaulting on their $370 million deal, Delaware North President, William Bissett cited deteriorating credit and financial markets in the recession economy for the failed bid and maintains that his company will be back. “While we disagree with their conclusion that a re-bid is necessary,” said Bissett “we nonetheless remain interested in developing Aqueduct and look forward to continue work with the administration to achieve that goal.”

State Senator Joseph P. Addabbo, Jr. said: “I am more optimistic today about the future of Aqueduct and our surrounding communities now that the VLT solicitation process has begun. I intend to inform my residents and ensure their involvement in the process that pertains to protecting Aqueduct.”

Assemblywoman Audrey I. Pheffer said: “After countless delays and false starts, I am happy that VLT’s at Aqueduct are finally back on track. We will learn on May 8th, the companies that have a true and realistic plan for Aqueduct. I remain committed to ensuring that our community’s vision for the “new Aqueduct” becomes a reality.”

As with the original proposal, the selected operator will be chosen by a unanimous agreement between the Governor, Majority Leader of the State Senate and the Assembly Speaker. “Growing our economy through job creation and economic development projects such as the implementation of VLTs at Aqueduct will move our state toward the type of new economy New York needs to get back on track,” Senate Majority Leader Malcolm Smith said. “Though it is disappointing that the process has been slowed due to the struggling economy, I am confident that we can find a new partner to build Aqueduct into a gaming location that bolsters the local and state economy.”

Developers expected to bid in the second round will most likely match those from the first time around, and will probably include Delaware North, Capital Play and SL Green. According to a press release issued by the governor’s office the winning bidder would pay the full amount of their proposed up-front franchise fee no later than ten business days following the execution of the new Memorandum Of Understanding (MOU).

The State would issue personal income tax bonds through the Empire State Development Corporation in the amount of $250 million in order to finance eligible VLT project costs. The net amount borrowed would be advanced to the selected bidder to be used for project capital costs incurred in the construction of a VLT facility at Aqueduct. The VLT facility would be constructed by the VLT Vendor, which will be responsible for its design and construction subject to the terms of the MOU and applicable laws and regulations. Neither ESDC nor the State will be responsible for construction or cost overruns.

The State would enter into an agreement with the winning bidder for a fixed period of 30 years, with a possible 10-year extension based on the attainment of reasonable benchmarks that ensure satisfactory performance.

Vendors may propose modifications to this MOU as part of their bids. Their proposed changes will be considered by the Governor, Majority Leader, and Speaker in making their selection.

Along with Delaware North, Capital Play and SL Greene, are expected to enter bids in the new process. SL Green, thought to be the frontrunner in the last bid, this week filed a lawsuit against Delaware North. Lawyers for SL Green say that the Buffalo based firm teamed up with them in the first round to get inside information and essentially used trade secrets for their own purposes.

According to published reports, this lawsuit alleges Delaware North “agreed to non-competition, confidentiality, and exclusivity restrictions” when it joined with SL Green in 2006. Although Delaware North ultimately did not remain with the SL Green effort, the suit alleges that prior to Delaware North’s departure "SL Green gave DNC access to confidential and proprietary business information... " It goes on to allege that since at least October 2007, Delaware North improperly competed with SL Green for the video lottery terminal rights at Aqueduct.

As has been the case throughout the lengthy process to establish a racino at Aqueduct, rumors continue. Delaware North partnered with R. Donahue Peebles and his development company in their quest to win the bid last year. Among the current batch of rumors is one that indicates Peebles is exploring forming a new team to bid on the project now. If true, that has the potential to further muddy the waters as another similar lawsuit could loom depending on what the terms of Peebles’ partnering with Delaware North involved.

The Governor’s announcement of the reopening of bidding for the VLT rights at Aqueduct and the lawsuit are the latest developments in what has been a long process to redevelop the racetrack. “We thought the VLT development would finally get underway when Delaware North was selected back in October. It took years to get to that selection in a process that began in the early part of this decade.

Community Board 10 Chairperson Betty Braton said, “Although we preferred the proposals put forth by others, with Delaware’s selection in the fall we thought that finally all the delays were over, and we were willing to accept them despite our misgivings due to the State’s pressing financial situation. We’re concerned that apparently Delaware will be allowed to participate in this new bidding process. This time around, the Community Board’s opinion is simply: ‘not Delaware North’ – and we have expressed that to Senator Addabbo and Assemblywoman Pheffer.”