10/22/2008 11:00PM

Delaware North gains support for Aqueduct slots

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New York Senate Republicans have reversed course and approved the selection of Delaware North Companies as the operator of a long-stalled casino at Aqueduct Racetrack in Queens, according to officials involved in the process.

The approval ends seven years of uncertainty regarding the casino, which is expected to generate $500 million a year in net revenue and inject tens of millions of dollars into the racing industry as subsidies for Aqueduct's operator, the New York Racing Association, and its horsemen. The casino is expected to be up and running with 4,500 slot machines late in 2009.

Under New York law, Gov. David Paterson, assembly speaker Sheldon Silver, and senate majority leader Dean Skelos were required to approve the operator. Paterson and Silver had announced two weeks ago that they favored Delaware North's proposal among three bids, but Skelos rejected the selection on the grounds that the other two bids included more investment in "entertainment-oriented" facilities at the track.

According to a representative of Skelos, Scott Reif, senate Republicans changed course after meeting with officials of Delaware North earlier in the week. As a result of the meeting, Delaware North agreed to explore the development of "restaurant, retail, and hospitality offerings suitable to a world-class casino destination," according to a memo prepared for the senate by the company.

"However, our initial focus continues to be on the primary objective of opening the [gambling] facility as soon as possible . . . in order to maximize revenue to the state," the memo said.

Delaware North is a large conglomerate that principally operates hotels and gambling facilities. Among its properties, the company owns Finger Lakes Gaming and Racetrack in upstate New York and operates casinos at harness tracks in Saratoga Springs and Buffalo.

Two other companies made bids on the Aqueduct casino. The first was a partnership of SL Green Realty and Hard Rock Entertainment, and the other was a partnership between Capital Play - an Australian bookmaking company - and Mohegan Sun, the owner-operator of a huge Connecticut casino. All three companies employed scores of high-priced lobbyists to make their case.

Delaware North offered the state $370 million as an up-front fee to operate the casino. The SL Green partnership offered $250 million, while Capital Play offered $100 million. New York is facing a budget shortfall of at least $2 billion, and that shortfall is expected by many economists to grow rapidly as the nation - and Wall Street, in particular - slides into a recession.

Initially, NYRA will retain approximately 7 percent of the net revenues from the casino, and horsemen will receive 6.5 percent, but those percentages both grow marginally over time. NYRA only recently emerged from bankruptcy, and is currently using a $30 million grant from the state to fund its operations until the casino is generating cash.

Slot machines were legalized at nine New York racetracks late in 2001, but the Aqueduct proposal hit delay after delay because of political and economic considerations revolving around the franchise to operate NYRA's three tracks. Earlier this year, NYRA was given a 25-year extension to operate Aqueduct, Belmont, and Saratoga.