ALBANY—The Paterson administration broke off a deal with Delaware North to develop a large casino at a downstate racetrack after the Buffalo company on Tuesday said it would be unable to meet a March 31 deadline to deliver a $370 million payment to the state for the exclusive rights to build the sprawling gambling hall.
Several hours after Delaware North announced its troubles meeting the deadline, the Paterson administration announced it would be rebidding the entire project. Besides a major setback for Delaware North, the scuttled deal also blows an additional $370 million hole in the already deficit-ridden state budget, which had been counting on the money to help balance the books.
The dilemma marks yet another example of the recession’s squeeze on the credit market, threatening to scuttle a project that only months ago was considered a certainty.
Delaware North executives last month confirmed that the recession was forcing the company to restructure its financing for the casino at Aqueduct, which presents a major expansion for the Buffalo company into the gambling industry. With 4,500 slot machines, the racetrack casino would be the first legal gambling hall in New York City.
“Since our bid was submitted in October 2007, there has been a deterioration of the credit and equity financial markets in this recession economy which has caused Aqueduct Gaming LLC to restructure the timing for its financial offer,” William Bissett, president of Delaware North’s Gaming & Entertainment subsidiary, said in a statement.
With much fanfare by Gov. David A. Paterson, Delaware North last fall won the bidding for the casino deal over two others. Its $370 million, up-front payment to the state was $120 million higher than the next closest bid. But since then, Delaware North has found itself in the same situation as other corporations having to scramble for new financing options.
Industry insiders believed the Paterson administration, recognizing it could not get another $370 million offer for the casino given the current state of the economy, would bow to Delaware North’s offer to delay the payments. But Tuesday night, officials made clear no such deal is in the works.
Errol Cockfield, a Paterson spokesman, said the administration is “disappointed” that the economy prevented the firm from finding financing for the deal. “Nonetheless, the state remains committed to ensuring that Aqueduct is redeveloped. In cooperation with the Legislature, we will commence a new process for selection of the operator for the video lottery terminal facility at Aqueduct Racetrack,” Cockfield said.
Bissett said the company is “very disappointed” the state is unwilling to let it delay the payment. He said the deal was in the state’s best interests “given the condition of the financial markets, our progress in finalizing the memorandum of understanding, our phased development plan approach, and our commitment to stand by our $370 million payment.”
Bissett said the company is still interested in the Aqueduct project, even if it believes a rebid is not necessary.
The state is losing $1 million a day in revenue-sharing payments for every day the Aqueduct casino is not open. Construction was to have started by now, with work taking a year to complete.
Republicans wasted little time blaming Paterson. Senate Minority Leader Dean Skelos called the situation “another example of the governor’s failed leadership.”
He said the “losers” are the taxpayers “who will have to make up for the $370 million in lost revenues” and the $1 million a day in lost casino revenue for the state.” He noted the deal also included new jobs in both Buffalo and Queens.
The casino deal was first authorized shortly after the 2001 World Trade Center attacks as a way to bring the state new gambling revenues.
The Paterson administration, sources say, is concerned about reopening the terms of the deal for fear it could invite litigation by one of the groups that lost the bid last year.
Officials in Albany say Delaware North had also been trying to improve the terms of what it would make from the Aqueduct deal if, as Paterson has proposed, another casino opens at Belmont, another track located a short drive from Aqueduct. Delaware North is concerned the competition would drain money from the Aqueduct casino.