East Coast politics strikes again in Aqueduct slots deal

Feb 2, 2010 5:02 PM

Burnt Offerings by Stan Bergstein |

Gaming taxes at center of double deals


Question? Comment? E-mail me at: Stan Bergstein

Two mind-numbing, absurd and illogical developments out East jarred one’s thinking this past week.

In a society in which nothing should be a surprise, these developments were explosive in their stupidity.

Both involved stacked decks.

In New Jersey, a state "transition team" appointed to study and offer suggestions on how to improve the state’s racing industry, a major contributor to environment and employment, decided the best solution might be to do away with it.

In New York, after nine years of non-action and political squabbling and stagnation, the governor finally settled the racino at Aqueduct issue by relying on the most glaring examples of cronyism one could imagine.

Both actions were almost stunningly unbelievable.

The New Jersey report first said the team’s "ultimate goal is to continue to have live racing at a venue where the Sports Authority and its off-track wagering system can operate without a subsidy." Then it said, in sharp contradiction, that making the Authority "at least revenue neutral to the taxpayers may include discontinuing racing at the Meadowlands and restructuring the industry in New Jersey." That included, in the eyes of the team, replacing horse racing with NASCAR racing. Either the team did not know, or ignored, the disaster in Chicago where auto racing replaced horse racing at Sportsman’s Park, with both the track and its racing cars disappearing in oblivion.

The team blamed the decline of racing at the Meadowlands on slots at tracks in adjacent New York, Delaware and Pennsylvania, but included not one word about letting New Jersey’s tracks have them as a logical solution to that problem.

This double-talk is best understood when the composition of the team is considered. Three casino representatives – the senior vice president and general counsel of Borgata Casino & Spa, the CEO of Trump Entertainment and a vice president of Harrah’s Entertainment – are on the panel, but not one racing executive, thoroughbred or harness racing. The only racing man in sight is Mike Gullota, a former Wall Streeter who now operates a major harness racing breeding farm in the state, and he filed a strongly-worded dissent to the team’s report.

In New York the governor, David Paterson, is losing credibility day by day. This latest ploy, in which he rewards friends and neighbors in Queens and overlooks experienced giants like Penn National Gaming, Delaware North, MGM MIRAGE, Harrah’s, Mohegan Sun and Hard Rock, is so blatant it is likely to be challenged in court.

Penn National Gaming had offered $300 million in upfront guarantees to Paterson. The winning group had offered only $200 million. But Paterson skipped over the $100 million discrepancy by allowing the winners to make up the difference after the fact. You and I could have raised it once we had the license in hand.

The winning group, a cobbled-together consortium called Aqueduct Entertainment Group, consists of several big builders in New York, some political cronies led by the Rev. Floyd Flake, a powerful political leader, and the Navegante Group out of Vegas. Navegante is headed by Larry Woolf, former chairman, CEO and president of MGM Grand and now operator of the Sahara casino, three casinos in Elko and Reno’s Grand Sierra.

Other than Woolf, the winning AEG has no gaming background or experience. Woolf last year promised that the Aqueduct racino will not resemble a Strip resort, saying it would be a neighborhood-friendly operation that will have "Corona, Italian Ice and hotdog vendors, like a New York City neighborhood." AEG plans also call for restaurants, bars, a 2,000-space garage and ultimately a hotel and other entertainment options.

The crassness of the award led a formidable voice in New York, the New York Post, to launch a series of expose-type stories that included questioning the charity status of Queens’ figures who are involved in AEG and sizeable amounts of money that the paper suggested may have gone into private pockets, and a late blast charging that funds approved by Albany legislators who backed the award that were intended for Katrina victims never got to New Orleans.

Bottom line, the Aqueduct award will not fly without further fanfare. The nine years of doing nothing now has been replaced with doing something that already has raised serious questions, and will raise more before Aqueduct and Queens see its racino.