NY Prepares for Potential Casino Competition

One of the last acts of the New York legislature before its 2016 session ended June 18 was to send a message to one of its neighbors: New York is poised to act if New Jersey moves to build casinos near the New York border.

The retaliation, according to a joint resolution adopted by the Senate and Assembly, would likely include stepping up the current timetable envisioned for additional casinos in downstate New York. The resolution didn't state where precisely new casinos might go, but lawmakers have said New York City would be a prime market location to compete with casinos if they are built across the Hudson River in northern New Jersey.

At issue is whether voters in New Jersey in a statewide referendum this fall agree to amend their constitution to permit two casinos to be built in the northern part of the state; Meadowlands, owned by Jeff Gural, is one of the sites being considered. Gural also owns Tioga Downs in New York's Southern Tier region and hopes to turn video gaming and harness racing facility into a full-scale, commercial casino.

The resolution approved by New York lawmakers notes "the importance of protecting New York State's gaming market," as well as the revenue state government gets from casinos and racetracks, and warned "against dilution resulting from new gaming competition in neighboring states."

Lawmakers have said the warning shot has a chief intended target: private financiers considering investments in potential New Jersey casinos. New York officials believe, rightly or wrongly, that investors in New Jersey might be scared off if officials on the east side of the Hudson River were to also permit casinos in such population centers as Manhattan.

The theory is that New York residents, or tourists staying in Manhattan, will have no desire to travel to New Jersey if there is a casino in Manhattan or one of the other boroughs. The strategy, though, has some unanswered questions.

For starters, New York in seven years can award three additional casino licenses, including in the New York City area. The long time period was built into a 2013 law that created the timetable to give four upstate casinos a chance to get off the ground and be prepared for competition.

Three of the upstate casinos are now under construction, and one, near Monticello, could face serious competition if northern New Jersey casinos are open. It could face challenges if casinos were opened in New York City as well.

If New York violates the terms of the 2013 law and awards three casinos license prior to the end of the seven-year period, the state would have to pay the upstate casinos $50 million each; one of the four would get slightly less.

The newly adopted resolution is aimed at protecting video lottery terminal casinos that are attached to Aqueduct Racetrack in Queens and Yonkers Raceway in Westchester County, as well as the under-construction Montreign Resort Casino in Sullivan County in the southern Catskill Mountains. The casino at Aqueduct is run by Genting Group, which also has a major share in the Montreign project. 

If New York went ahead with its casino development in New York City, that, too, could have major consequences for Aqueduct and Yonkers, which get tens of millions of dollars each year from VLTs for operating funds and purses for horsemen. That has led to speculation that New York might consider awarding full casino rights to Aqueduct and Yonkers if New Jersey expands casino gambling outside of Atlantic City.

How that would work, considering the long and expensive bidding process the upstate casino licensees had to go through, is uncertain.

Genting Americas, which runs the Aqueduct racetrack casino, praised New York lawmakers for the resolution aimed at New Jersey.

"The Northeast casino market is a highly competitive environment which is already close to saturated,'' the company said in a statement Sunday.

"It's not surprising that New York state refuses to sit idly by while New Jersey's casino referendum ... threatens thousands of jobs and hundreds of millions of dollars of revenue for the state's education fund—a majority of which is currently generated by Resorts World in New York City,'' the company added. "We thank lawmakers for sending a clear signal that they will stand with us and protect New York revenues and workers.''

The resolution approved by New York lawmakers notes that the new casinos upstate will generate $430 million in annual economic benefits once they open, which includes $238 million in casino tax payments to the state. "This revenue stream is vitally important to New York state's economic future," the resolution states.

The non-binding resolution concludes that if New Jersey voters approve a casino expansion in November, New York lawmakers will ask Gov. Andrew Cuomo to direct the New York State Gaming Commission to perform a market study of the potential impact the New Jersey casinos may have on the state and its existing casino licensees.

"If such constitutional amendment is adopted, then the New York State Senate and the New York State Assembly will assess the aforementioned market study to determine what actions, including the potential for additional casino licenses, might be necessary to protect the significant contribution made by casino operations to New York state's economy," the resolution states.