Four Casino Resort Licenses on the Table in Upstate New York – Time to Place Your Bets

by Goodwin
Contact

You’ll need more than a good poker face and a lucky roll of the dice to win one of the four new gaming licenses that became available in New York State in January 2014. So that casino and hotel developers and operators bidding for these lucrative licenses are not just spinning the roulette wheel during the highly competitive application and approval process, we summarize key aspects of the new law and the licensing process below.

As we discussed previously, Governor Cuomo signed the New York Gaming Economic Development Act of 2013 (the “Act”) (links: here and here) into law on July 30, 2013, authorizing the licensing and development of four new casino resorts in the Catskills, near Albany and along the New York/Pennsylvania border, plus two new video gaming facilities on Long Island. A related amendment to the State constitution authorizing non-tribal casinos was approved by voters on Nov. 5, 2013, and the Act became effective on Jan. 1, 2014.

The Gaming Facility Location Board was originally scheduled to be appointed by the end of January, but the members have not been appointed at the time of this Alert. Governor Cuomo expects that the Board will be established shortly, a request for proposals will be issued in March, the bids will be due in June and the locations and winners of the licenses will be announced in early fall.

Four New Casinos in Upstate New York:

  • The New York State Gaming Commission (the “Gaming Commission”) is tasked with licensing four gaming facilities, one in each of the regions shown below, with a fourth license up for grabs in any of the three regions, in addition to the two video gaming facilities that will be located in Long Island:

Map 02_03_14

  • The Gaming Commission will establish the New York State Gaming Facility Location Board (the “Board”), a five member panel of independent financial and economic experts with a designated chairperson, to review applications and determine the license winners.
  • Each license will last for 10 years and the licensee must commence gaming activities within 24 months after receiving the license.
  • There is a 7-year lock-out period during which no new additional casinos licenses may be granted in the State. Following that time, the New York State Legislature may permit the Gaming Commission to offer three additional licenses. Additional licenses beyond seven will require a constitutional amendment.
  • No licenses will be awarded in areas near current Indian-run casinos, pursuant to tribal exclusivity agreements made with those tribes.

Bidding Procedures

  • The Board will issue a Request for Applications within 90 days of a majority (i.e. three) of the Board members being appointed by the Gaming Commission.
  • The Board will assist the Gaming Commission in determining bidding procedures, evaluating applications and selecting licensees, including contracting with an outside consultant to perform a gaming industry market analysis.
  • The Act does not specify a deadline by which the Gaming Commission must appoint the five-member Board.

Application Requirements:

  • The applications will require, among other things, the following information:
    • Identity of each person having a direct or indirect interest in the business, including limited partners or beneficiaries;
    • An independent audit report of all financial activities and interests, including any contributions, donations, or loans to or from a gaming entity or operator in the past five years;
    • Evidence of financial stability, including bank statements and tax returns;
    • Information and documentation to demonstrate that the applicant has sufficient business ability and experience to create the likelihood of establishing and maintaining a successful gaming facility;
    • Designs for the proposed gaming facility, including a detailed timeline of the stages of construction;
    • Description of ancillary entertainment services and amenities to be provided;
    • Market impact studies and reports which will, among other things, require an examination of the proposed gaming facility’s economic benefit to the region and state, as well as its likely impact on host and surrounding communities.
    • Location of the proposed gaming facility, with full land records, appraisals, disclosure of ownership interests and any other information that the Gaming Commission may require;
    • The number of hotels and rooms, restaurants and other amenities located at the proposed gaming facility and how they measure in quality compared to other area hotels and amenities;
    • A plan to address problem gambling concerns; and
    • An affirmative action program establishing specific goals for the use of minorities, women and veterans in construction jobs, which must be approved by the Board.
  • The applicant must also undergo a character and fitness review.
  • Applications for licenses will be public records; however, trade secrets, competitively sensitive or other proprietary information, the disclosure of which would place the applicant at a competitive disadvantage, may be kept confidential.

Required Minimum Capital Investment:

  • The Board will establish the minimum capital investment necessary for a gaming facility by region. The Board must require the licensee to invest in, at a minimum, a gaming area, at least one hotel and other amenities. The Board will determine if land and infrastructure costs will count towards the minimum capital requirements. The Board may consider private capital investment made prior to the effective date of the Act (i.e. January 1, 2014), but may, in its discretion, discount a percentage of the investment made.
  • Each applicant must detail its proposed capital investment in the application, including the stages of construction and the deadline by which the stages and overall construction and any infrastructure improvements are expected be completed.
  • The applicant must demonstrate that it will own or acquire the land within 60 days of being awarded a license, which may include a long-term lease with a term lasting at least 60 years beyond the expiration of the gaming license.
  • The application must also address the infrastructure and service costs to the host municipality, such as increased police presence, and commit to a community mitigation plan to help defray these costs.
  • The winning applicants must deposit 10% of the proposed capital investment with the Gaming Commission, to be applied to the final stage of the approved construction plan. Should the applicant be unable to complete the gaming facility, the deposit will be forfeited to the State. In place of a cash deposit, the Gaming Commission may allow for an applicant to secure a bond for the deposit amount.
  • A licensee who fails to begin gaming operations within two years after the date specified in its construction timeline shall be subject to suspension or revocation of the gaming license and, if found to have acted in bad faith, may be assessed a fine of up to $50 million.

Picking the Winners:

  • The Board will make its decision based on the following criteria:
  • 70% weighted towards economic activity and business development factors, including maximizing state and local revenues, job growth, value to patrons, efficiency of construction, quality of the facility, and general benefits to the local markets.
  • 20% weighted towards local impact and siting factors, including mitigating potential negative impact on local communities, gaining public support for the plan, partnering with and promoting local hotels, restaurants and retail facilities, and supporting local entertainment venues that may be impacted.
  • 10% weighted towards workforce enhancement factors, including entering into an agreement with and gaining the support of organized labor unions including hospitality services, implementing an affirmative action and equal employment opportunities hiring plan, utilizing sustainable development and conservation principles including obtaining green energy and design certifications, and purchasing domestically manufactured slot machines where possible.
  • Certain key employees, general gaming employees, vendors and junket operators must be registered with and approved by the Gaming Commission.
  • The games permitted to be played and the gaming equipment permitted to be used, including the expected payouts, will be determined by the Board. Cash management and exchange services at the casinos will also be regulated.
  • The minimum gambling age will be 21 and no smoking will be permitted in the gambling resorts.

Fees (start counting your chips…):

  • There is a $1 million application fee, and the applicant must agree to pay any additional costs that may be incurred by the Gaming Commission in reviewing the application.
  • The Board will determine a one-time licensing fee to be paid within 30 days after the award of the license.[1] The Board may also require an annual renewal fee in conjunction with the annual evaluation of the licensee.
  • Annual license fee of $500 for each slot machine and table game, which may be adjusted annually for inflation after five years.
  • Regulatory costs will be distributed among the gaming licensees in proportion to the number of gaming positions at the facility.
  • A tax on gross gaming revenues (gaming revenues after prize payouts (excluding free merchandise) but before expenditures) in the following amounts, to be paid monthly:
    • The Catskills:
      • 39% of gross gaming revenue from slot machines.
      • 10% of gross gaming revenue from all other sources
    • The Albany region:
    • 45% of gross gaming revenue from slot machines.
    • 10% of gross gaming revenue from all other sources.
    • 37% of gross gaming revenue from slot machines.
    • 10% of gross gaming revenue from all other sources.
    • The Southern Tier:
    • The licensee may agree to increase this tax rate as part of its application, in which case it will be bound to the increased rate.
  • Payments to support racing activity and horse and breeder organizations.

State’s Use of Funds:

  • The State will continue to make payments and reimbursements to certain Indian tribes.
  • The State will set up a Commercial Gaming Revenue Fund to collect the fees, taxes and other payments from the licensees.
    • 80% of the funds will be allocated to elementary and secondary education.
    • 10% will be paid to the host municipality and host county.
    • 10% will be disbursed to the other counties in the region on a per capita basis to be used for property tax relief and educational assistance.
    • The revenue from the annual $500 per slot machine or table game fee will be used for problem gambling education and treatment.

New Video Lottery Gaming Facilities on Long Island:

  • In addition to the casino gaming facilities, the Gaming Commission will establish two video lottery gaming facilities on Long Island. These off-track betting locations, one in Nassau County and one in Suffolk County, will each have up to 1,000 gaming machines.
[1] To get a sense of the potential amounts, the Act originally specified a minimum $50 million license fee, but the minimum amount was removed in the version that was signed.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.