02/17/2010 12:00AM

Aqueduct casino files shed little light on deal

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New York Gov. David Paterson on Tuesday night made available documents related to the process to select an operator for a casino at Aqueduct racetrack, but the documents shed little light on how political leaders made the lucrative choice.

The documents, which were posted on Paterson's website, include the original request for proposals issued by the state, the responses of six bidders to the request, supplemental information provided by the bidders, and an analysis by a consulting group of the bidders' estimates for cash flow from the casino.

Paterson posted the documents after state Rep. Sheldon Silver, the speaker of the house, asked the Inspector General of New York last Thursday to conduct an inquiry into the process. Silver was one of three state political leaders who three weeks ago selected one of the bidders - Aqueduct Entertainment Group, a sprawling partnership of politically connected real-estate and casino companies - to operate the Aqueduct facility. The others were Paterson and Senate Democratic Conference Leader John Sampson. All three are Democrats.

The Inspector General's office has said that it will not comment on Silver's request.

The documents provide little new information regarding the process. In the documents, the bidders outline their general plans for the casino, provide estimates for the performance of slot machines at Aqueduct, identify major partners in the plan, and attach caveats to their proposals. In follow-up submissions, all of the bidders promise that they will pay the state $200 million as an upfront licensing fee as a response to Paterson's inclusion of the fee in his proposal for the state's two-year budget. New York is trying to close a $5 billion deficit in the budget.

Aside from an analysis on casino revenues, the documents do not include any evaluations by the state of the bidder's proposals.

Morgan Hook, a spokesman for Paterson, said that the governor based his recommendation of AEG on the materials that were made available. As for any documents describing evaluations of the bids, Hook said that any internal memoranda regarding the bids were "confidential" and that the governor was not provided with any documents that "ranked" the proposals.

"He was provided a summary of the bids, and it was up to him to make the decision," Hook said.

Austin Shafran, a spokesman for Sampson, said that the documents released Tuesday represented the "sum total" of what would be released about the process. Shafran said that if Sampson relied on any other documents to evaluate the bids, such as memos prepared by his legal counsel, those would not be released, though he said he did not know if any documents such as those existed.

Representatives of Silver's office did not respond by late Thursday afternoon to requests for comment about the documents Silver had reviewed, if any.

Slot machines were approved by the legislature for Aqueduct and eight other racetracks in New York late in 2001. With the exception of Aqueduct, all of the casinos are currently up and running. The selection of an operator for the Aqueduct casino has been delayed persistently by political considerations and an earlier deal with Delaware North Cos. that fell apart in 2008 after the company reneged on a promise to provide the state with a $370 million upfront licensing fee.

In an analysis of the cash flows estimated by the bidders, a New York-based consulting company, Public Financial Management, said that reasonable estimates for the casino's annual net revenues would likely top $550 million a year, though the company said the estimate was somewhat conservative.

Of the casino net revenues, the operator will receive approximately 31 percent. However, Public Financial Management also concluded that the operator will benefit from the state Lottery Division's 10 percent allotment of the net revenue because the funds will be used to purchase and maintain the slot machines, an expense typically incurred by casino operators in other states. The operator also will receive an additional 8 percent allotment from the net revenue for marketing.

According to the documents, Aqueduct Entertainment Group, the winning bidder, estimated that the casino would generate $574 million in its first full year of operation; Delaware North estimated $612 million in revenue; a partnership of SL Green and Hard Rock estimated $767 million for a "branded casino" and less for a nonbranded property; Wynn Resorts, which dropped out of the process, estimated $657 million; a partnership of Peebles Development and MGM Grand estimated $586 million; and Penn National estimated $576 million (after one full year of operation).

The New York Racing Association, which operates Aqueduct, would receive approximately 7 percent of the net revenue for capital expenditures and operating funds. Horsemen would receive approximately 6.5 percent.

The documents can be found on the New York state government website, .