Officials Have Differing Views on Aqueduct Redevelopment

Addabbo, Pheffer, Braton Call For End to Delays

By Conor Greene

Local officials and community leaders have mixed feelings on whether the Aqueduct redevelopment project should immediately move forward after the governor’s pick has been criticized as politically motivated.

The decision to pick Aqueduct Entertainment Group (AEG) to rebuild the Ozone Park racetrack into a racino featuring 4,500 video lottery terminals has come under fire over the past few weeks. Critics say AEG was chosen in part because of connections between Gov. David Paterson and several of the consortium’s key partners. There are also complaints that AEG was allowed to unfairly revise its bid to beat out the other competi- tors.

According to reports, the U.S attorney’s office has issued a subpoena to the state for all documents related to the bidding process, and federal investigators have been discussing the process with losing bidders.

This week, the Daily News reported that Assembly Speaker Sheldon Silver is waiting until the Inspector General completes his investigation before signing off on the deal. “I think everything should wait until that information is available,” the Manhattan Democrat told the paper. “I think what’s important is we know we’re signing on to something that’s appropriate, and if not, we’re not going to.”

The decision to choose the politically-connected AEG over other bidders with more experience in the casino industry has been widely criticized since it was announced. In an effort to quell the skepticism, Gov. Pater- son last week released certain documents related to the bidding process. However, a recent Siena poll revealed that only three percent of respondents view the deal with AEG as “fair and appropriate”.

However, local officials say, despite legitimate questions over the process, the time has come to move forward on the project, eight years after the state approved video lottery termi- nals at Aqueduct. In a joint statement, Senator Joseph Addabbo, Assemblywoman Audrey Pheffer and Community Board 10 Chairwoman Betty Braton argue that, “two governors later, VLTs are still not up and running at Aqueduct, a community is in a frus- trated limbo, and our cash-strapped state is still not realizing much-needed income.”

In the statement, Addabbo, Pheffer and Braton argue that the same selection process was used this year as last, when Delaware North was initially chosen but backed out after it was unable to provide the state with the promised upfront payment. “There was controversy then, as there is now, about the use of that previous process,” the officials wrote. “That selection was met in the local community with much skepticism... Yet no call for a special investigation or media attack was evident then.”

Now, according to the officials, “the media- driven firestorm now calling for details, criteria used and investigations, is to some, unfortunate and very late.”

Addabbo agreed that the selection process created a year ago is “flawed” due to its lack of transparency and objective criteria. “But what is not fair game is to scrap the entire project at this point... The potential jobs this racino project offers are needed now, not later,” he said in the statement. “The state has to deal with its budget now, not later.” He added that many area residents have been calling for this project to move forward for years.

Pheffer said it is “imperative” that the state moves quickly to finalize the contract with AEG and called the project “an economic engine that is vital to the future of the local economy.” She criticized the attacks on AEG at this point, as there has “been ample time for all the calls for documents from all bid- ders to be released and calls for scrutiny of all investors in each of the bids over the past year.”

While also agreeing that the process employed in Albany is “not the best way to make this kind of decision,” Braton also called for the project to move forward without delay. “Our criteria in looking at the information provided to us by all the bidders could be summed up by five questions,” she said. “Can they build it? Can they run it? Will this proposal mesh well with our community? Will the company be open to working with us to minimize any negative impacts? And will the state realize a big pot of money that will help ease the burden on New York taxpayers? The AEG selection meets our criteria and we can work with them.”

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.”

Local Opposition to Governor's Aqueduct Choice

By Conor Greene

Swayed by the promise of a huge upfront cash payment to the state, Governor David Paterson and the Democratic-led Assembly have chosen a Buffalo-based company to operate a video lottery terminal casino at Aqueduct racetrack.

Gov. Paterson and Assembly Speaker Sheldon Silver announced late last week that Delaware North has been chosen to run the VLT over two other competing firms, Capital Play and SL Green. Delaware North’s plan includes a 330,000-square-foot racino featuring 4,500 video slot machines at the Ozone Park racetrack.

The state anticipates that Aqueduct will attract 20,000 visitors daily and will generate $1 million each day in tax revenue once the VLT casino is built. Construction on the racino is expected to take about one year after Delaware North obtains the necessary approvals.

However, the governor’s announcement has already been met with opposition from Senate Majority Leader Dean Skelos, who says that Delaware North’s plan is not the best option for the community in the long run.

“It appears that Governor Paterson is supporting a bid that only includes plans for a racino and does not include any proposal to generate needed economic development,” said Skelos in statement. “Unlike the other bids, Delaware North’s plan does not include an economic development proposal that would be a greater benefit in the long run.”

Skelos noted that “only recently” did Delaware North hire The Pebbles Corp to design plans for other amenities to be built at Aqueduct in the future, including a $15million hotel and conference center and a 3,000-seat boxing and concert hall. Skelos noted that Donahue Pebbles has “yet to provide a plan that could be reviewed and vetted by state and community organizations.”

In contrast, Capital Play, an Australian-based company, had partnered with Mohegan Sun on a plan that included restaurants, shopping, entertainment and a hotel and conference center. SL Green had teamed up with the Hard Rock brand to create a full entertainment destination featuring a hotel, restaurants, a spa, high-end retail and outlet shopping and an entertainment industry.

In announcing the decision, Governor Paterson cited Delaware North’s successful track record as a partner in upstate racing and gambling ventures and called the agreement “the best deal for all New Yorkers” in a statement released by spokeswoman Risa Heller.

“Of the bids put forth, Delaware North presents the strongest financial proposal with an up front payment of $370 million,” said Heller. “Combined with their successful track record… and with vast experience operating VLTs, Delaware North will build and operate a successful facility… which will provide additional vital resources for the Queens community, the upstate economy and education throughout the state.”

Skelos argued that Delaware North’s proposal will fail to make Aqueduct a “true destination venue [that] would create more jobs and generate more revenue for education in the long run” compared to the two other options. “It appears that in an effort to close the budget deficit, Governor Paterson has made a choice that may not be in the best long term interests of the state or for the communities that surround Aqueduct,” he said.

In response, the Governor’s office accused Skelos of attempting to “stall a significant economic development project” that would provide an important revenue stream. “In this time of a financial crisis, every day we delay hurts New York,” said Heller.

Senator Serf Maltese (R-Glendale) said in a statement this week that Delaware North “has all along been nearly everyone’s third choice” and noted that residents living and working near the racetrack “are deeply concerned” about its future and should have a say in the process.

“Aqueduct has enormous potential to be a major tourist attraction and destination venue and we must not lose sight of that fact in making any decision,” said Maltese. “The surrounding communities have lived for years with problems caused by Aqueduct and now that such a major undertaking is finally coming close to fruition, those same communities… should be the ones to share in the benefit.”

Another bone of contention for local officials is that Delaware North has said they will build the VLT facility first and, depending on its performance, might build hotels, shopping and other economic development plans sometime in the future, while Capital Play and SL Green have both presented simultaneous economic development plans to the community several times.

Capital Play's plan includes a $400 million casino along with an additional $70million economic development plan featuring hotels, retail and convention space totaling more than $1 billion in economic development for southwest Queens.

According to sources with knowledge of the process, SL Green and Capital Play are furious that Delaware North has been allowed to modify its proposal to add Peebles (who has not been vetted by the Lottery Commission - a requirement of the state for the other bidders) since their presentations to the Governor's panel in Albany in April.

As a result, legal challenges are expected since the state apparently did not adhere to its own rules by allowing Delaware North to add change its proposal and add Peebles after the three bidders submitted their final proposals. That could mean further delays in starting the VLT's at Aqueduct.

Some now question whether NYRA, which was recently bailed out of bankruptcy by the State at a cost of over $300 million, might not survive if the VLT's do not start producing revenue soon, perhaps requiring another bailout.

Senator Maltese and Assemblywoman Audrey Pheffer (D-Rockaway) have both expressed concerns at local meetings in recent weeks that since the State is losing out on a million dollars a day in revenue due to the delay in getting the VLT operation at Aqueduct up and running, Delaware's upfront offer of more money might sway the Governor's decision.

Local leaders have also indicated disagreement with Governor Paterson's position. At the most recent meeting of Community Board 10 earlier this month its chairperson, Betty Braton, voiced the community view that both of the other proposals, from Capital Play and SL Green, offered more over the long-term to the State and that both groups had provided far more information regarding their plans than Delaware.

"We've had the opportunity to talk with them on a number of occasions, both entities, Capital Play and SL Green, have gotten involved with local community activities, both have been accessible and have provided information over the last year or so as this process has moved forward," Braton said. "Unfortunately that has not been the case with Delaware, which raises concerns for us at the local level as we are the people who will be most directly affected by what happens at Aqueduct."

On another front, Mitchell Ettess of Mohegan Sun, which has partnered with Capital Play, is on record as stating that their world class entertainment destination plan would generate $6.0 billion more for the State for education. He said he is perplexed as to why the state would seek more money up front at the expense of billions of dollars more offered under the Capital Play Plan. An SL Green spokesperson is also perplexed by the choice of Delaware North.

Others in the area have voiced concerns that Delaware North will build a “down market slots in a box” facility providing only “one shot” quick fix for the State budget, that they believe will lead to problems with gambling addiction and crime in southwest Queens.

Many locals are strongly urging the Governor and legislative leaders to reconsider the choice of Delaware North and put the people of Queens and the state of New York first and choose either Capital Play or SL Green.