07/06/2010 11:00PM

Two out of three Aqueduct bids disqualified


The long-stalled casino project at Aqueduct was left in a potentially precarious position after the State Lottery on Tuesday disqualified two of the three groups bidding for the right to operate 4,500 slot machines at the New York track because their proposals did not conform to the process.

That decision left Genting New York, a wholly-owned subsidiary of Genting Malaysia, one of Asia's largest casino operators, as the only group still in the running to operate Aqueduct's casino after the State Lottery disqualified Penn National Gaming and the consortium of SL Green, Hard Rock International, and Clairvest Group for attempting to negotiate for terms that were more favorable to them.

Genting Group, which was responsible for helping the Mashantucket Pequots build Foxwoods - the highly successful casino in Connecticut - is the top casino operator in Asia and also has been involved in building casinos in New York, with the Seneca Nation Indian tribe. The group also has casinos in Malayasia, Australia, the United Kingdom, and Singapore.

Steve Wilner, an attorney for Genting New York, declined to comment on the disqualification of his group's competition.

According to the State Lottery, Genting New York's proposal for Aqueduct's casino appears to conform with all requirements of the bidding process.

"It appears right now their bid does conform," said Jennifer Givner, a lottery spokeswoman. "I would say we're still very much in the preliminary stages of the evaluation process; there's a lot of work to be done on our end in terms of vetting and determining eligibility for licenses."

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If, however, during the vetting process it is determined that Genting is ineligible to be licensed, it could set the casino project back well into 2011. The lottery has agreed to make a recommendation of a bidder to Gov. David Paterson by Aug. 3. The recommendation is subject to the approval of Paterson and the leader of the state's Assembly, Sheldon Silver, and the Senate's temporary president, Malcolm Smith.

If Genting is not approved, then, most likely, the bidding process would have to be started from scratch and likely under a new administration. Paterson is not running for re-election this fall.

"If we deem them unqualified, we're sort of back at the beginning of the race again," Givner said.

The winning bidder must pay an up-front, minimum $300 million licensing fee.

According to the State Lottery, if Genting is not approved, neither SL Green nor Penn National will be eligible for reconsideration because of their failure to conform to the requirement of the request for proposals.

Two other groups, Delaware North and Empire City/Yonkers Raceway each paid $1 million to participate in the bidding competition, but then declined to submit proposals because of their unwillingness to comply with the RFP requirements.

The Lottery listed multiple reasons as to why both SL Green and Penn National were disqualified from consideration.

According to the State Lottery, both SL Green and Penn National failed to sign a memorandum of understanding and other documents the lottery requested by the June 29 deadline to submit request for proposals. Also, the bids by both groups contained several alterations to the memorandum of understanding, which were not allowed.

SL Green did not agree to provide interim financing to support New York Racing Association operations until the opening of the casino. SL Green's bid also wanted to be able to make repairs or alterations to Aqueduct without the consent of the state or NYRA and then bill the state or NYRA for the cost of those repairs or alterations.

Penn National's bid did not agree to advance funds to NYRA if construction of the Aqueduct casino is delayed by more than 30 days. Penn National also sought a six-month acceleration of NYRA's loan repayment obligations by eliminating the waiting period already agreed to by the state and NYRA.

Under terms of the casino financing, the winning bidder is required to take over the $25 million loan the state recently gave to NYRA for operations as well as supply up to an additional $2 million a month to NYRA in financing until the casino is open. NYRA must pay that money back by March 31, 2011, or within 30 days of the state reaching an agreement with a casino operator.

NYRA officials on Wednesday declined comment on the casino.

It has been nearly nine years since the state approved casinos for racetracks in New York, and the failure to open one at Aqueduct has cost the state and the racing industry untold millions of dollars.

NYRA and its horsemen are expected to receive about $60 million a year in subsidies from the casino once it is open.