With New York facing a budget deficit between $8 billion and $15 billion, expediting downstate casino licenses would bring in more money than any other gaming expansion according to a gaming market study.
The study, conducted by Spectrum Gaming Group at the request of the New York State Gaming Commission, shows that downstate casinos would make a huge impact on job creation, upfront and annual revenue for the state, and overall economic growth.
By beginning the downstate casino process in the next fiscal year, New York could capture $1.5 billion in upfront revenue. Tax revenues from adding new casinos to the New York City market could range from $471 million to $842 million.
Background on New York casinos
The 2013 Upstate New York Gaming Economic Development Act allowed for four commercial casinos to open upstate.
Those casinos opened in 2016 with Del Lago, Resorts World Catskills, Rivers Casino Schenectady, and Tioga Downs.
A possible second phase of development allowed for three casinos in the New York City metro area.
The act creates a seven-year moratorium for awarding downstate casinos in order to give upstate casinos a head start. The moratorium ends in 2023.
But given the state of the New York economy as a result of the coronavirus pandemic, the state could use the immediate infusion provided by expediting downstate licenses.
Upstate casinos are on board with awarding the downstate casino licenses earlier. The 2013 act includes a provision allowing them to apply for a pro-rated refund on their license fee if the moratorium is broken. But the new licensees could cover those fee reimbursements to the upstate casinos.
Benefits of adding downstate casinos
Spectrum enumerated the many economic benefits New York could enjoy by adding downstate casinos.
Adding downstate casinos could grow gross gaming revenue in the state by as much as $4.5 billion.
Without downstate casinos, downstate residents will spend an estimated $681 million in Connecticut, New Jersey, and Pennsylvania casinos in 2025.
Construction jobs from VLT conversions could total 3,300, while new casino constructions create between 3,400 and 4,100 jobs.
Three new casinos could add nearly 60,000 permanent jobs.
With one new casino and two VLT conversions, New York’s economy would grow by an average annual amount of between $3.7 billion and $4.6 billion.
Where to put additional casinos
Spectrum analyzed different options for placing casinos, including construction of new resorts in Manhattan, Brooklyn or Queens.
Two video lottery terminal (VLT) facilities have expressed interest in converting to full casinos. They are Empire City in Yonkers and Resorts World New York in Queens.
Spectrum expects that the existing VLT facilities could convert to full casinos in nine months. According to the study:
“This advantage in speed to market allows the State to begin receiving possible benefits in taxes and economic impacts sooner than if it waits for three new (resort casinos) to be sited, permitted, and built.”
Allowing three new-build casinos creates more annual state tax revenue in the long run. But that wouldn’t help the state out of its current financial troubles. Spectrum notes:
“The present value of gaming taxes generated from 2022 through 2024 must be weighed against the present value of gaming taxes that may not materialize until the latter half of the decade.”
A new Manhattan casino along with casino conversions for Empire City and RWNYC could create $556 million in annual tax revenue for the state. Put the new-build casino in Brooklyn and Spectrum projects $54 million less in state revenue, Queens $70 million.
Downstate casinos license fees and process
Spectrum finds $500 million to be the sweet spot for an initial license fee.
The study explains:
“While a license fee of $500 million would be significantly higher than any such fee assessed anywhere else in the United States, this fee is representative of the potential untapped value of a full-service integrated casino resort in the New York City region.”
Empire City and Resorts World New York already expressed interest in paying that amount at a Senate Racing, Gaming and Wagering Committee hearing.
Spectrum believes they still would despite the coronavirus pandemic having a major impact on casino profits over the past year.
“With respect to how the economic downturn caused by the pandemic could impact the ability of prospective Downstate casino developers to afford Spectrum’s recommended $500 million license fee, we conclude that if gaming operators are faced with a choice of coming up with $500 million quickly as a license fee or losing out forever on the prospect of operating a full-service integrated resort in or near New York City, they are more likely to find a means to secure the funding.”
What the study means for the future of downstate casinos
New York Gov. Andrew Cuomo did not include plans for downstate casinos in his executive budget. This despite presumably having seen the Spectrum study before doing his budget proposal.
But it does authorize the Gaming Commission to issue a request for information for the purpose of soliciting interest regarding the downstate casinos.
Sen. Joseph Addabbo Jr. and Assemblyman Gary Pretlow have told PlayNY that they will continue pushing for downstate casinos in the budget. But Addabbo called the request for information unnecessary. He knows the interest in downstate licenses is there.
New York must finish the state budget for the next fiscal year by April 1.