by Jason Gershman
In Sam Raimi’s thriller, "A Simple Plan," the lives of three men unravel after they discover a bag of money in the woods and decide to keep it. Minus the murder and mayhem, the same lesson ("there’s no such thing as a free lunch") is playing out in Albany. The bag of money is the gambling facility that New York has spent nearly a decade trying to develop on the site of the decaying Aqueduct Racetrack in Ozone Park, Queens.
The story behind the racetrack casino ("racino") is the plight of two troubled institutions — horse racing and state government. Both are mired in debt and clinging to the notion that a few thousand souped-up slot machines will deliver relief.
To Albany, racinos aren’t just a business but — in Blagojevich-speak — a valuable thing. Slots have generated windfalls at Empire City in Yonkers and the handful of other video-lottery operations. And Aqueduct serves a dense urban area, so this contract has an even greater lucrative potential — a goody that Gov. Paterson and legislative leaders aren’t giving away for nothing.
The first question — and the first problem — is: To whom? The debate isn’t over public or economic policy, but which pols can reward their allies with the prize. Naturally, Paterson, Assembly Speaker Sheldon Silver and the ruling clique of senators (John Sampson, Malcolm Smith and Eric Adams) don’t see eye to eye about picking a winner.
Close observers think Paterson favors a consortium of investors that include SL Green, Seminole Hard Rock and BET founder Robert Johnson. The Senate junta is said to be leaning toward the Aqueduct Entertainment Group, led by Vegas casino operator Larry Woolf.
Silver appears to be a swing vote. He was instrumental in the selection of Delaware North in 2008, but that deal collapsed last year after the Buffalo company couldn’t come up with the upfront payment of $370 million it had promised the state during rosier economic times.
Now, Silver is rumored to be warming up to SL Green. Penn National, which claims to be dangling the most money before the state but lacks the cozy political ties of other bidders, is another possible player.
The whole process has been tainted by charges of cronyism. Former Senate majority leader Malcolm Smith has been lobbying for AEG — whose investors happen to include one of Smith’s former business partners and his closest political ally, Floyd Flake, a powerful figure in southeast Queens.
SL Green’s hiring of Bill Lynch, one of Paterson’s top political aides, as a lobbyist has only reinforced the sense that the final decision won’t be on the merits.
And the longer Albany delays, the more time the politicians have to hold out for political donations and other benefits.
Still, we’re not talking about a complex development — just the installation of 4,500 Nintendo-style gambling machines. There’s probably not a lot of difference in the bids.
But the end result, say Albany leaders, is a new pool of state revenue (estimated at $1 million a day) for public schools, a source of jobs in a struggling neighborhood and a boost to a money-losing track that the New York Racing Association may otherwise be forced to shut down.
Again, it’s not so simple.
Aqueduct isn’t going to be a gambling-resort destination — racinos don’t tend to draw out-of-state gamblers. And New York’s super-high tax rate (70 percent of revenue is captured by the state, racing purses and NYRA) means that the winning bidder won’t have a lot of extra money to spend on marketing and first-rate entertainment facilities.
"You’re not really bringing any new income into the picture. You’re really just redistributing income within the region," says Bill Eadington, a gambling-industry expert at the University of Nevada at Reno.
As for jobs, racinos aren’t as labor-intensive as table games. "There’s not a big job component," says Eadington. Racinos benefit horse owners by inflating purses and attracting more competitive horses, but they haven’t been shown to increase the handles at the tracks. Instead, they are just another subsidy for a fading industry. And they’re an especially inefficient one: A study by the Maryland Tax Education Foundation estimated it at $37,000 a year per saved job.
"Rather than give a gaming monopoly to tracks for the sake of ‘saving jobs,’ New York could just as easily assign slot machines to ailing airlines or health-care facilities," stated the report.
But for New York and other states, the attraction to racinos is irresistible. Why? They’re a less controversial way to expand gambling. But more important, they can rake in more tax revenue without seeming to raise taxes.
But again, it’s not so simple. Some lawmakers now want to ramp up a push to approve a racino at Belmont — a development that may give the Aqueduct bidders second thoughts about the profitability of their venture.
In "A Simple Plan," the protagonist ends up burning the money, which turns out to be worthless anyway. In New York, we’re headed for a different ending. The politicians are making out pretty well. New Yorkers, meanwhile, are left holding the bag.