Downstate New York Casino Finalists Nearing Deadline For Blind Bidding On Tax Rates

The four finalists vying for as many as three $500 million downstate New York casino licenses face a 4 p.m. local time deadline Tuesday to submit their tax rates for their proposed venues.

Resorts World, MGM Empire City, Metropolitan Park, and Bally’s Bronx survived the first gauntlet in the lengthy process put forth by the New York State Gaming Commission. The quartet was forwarded to the state agency’s Gaming Facility Location Board (GFLB) for consideration after local Community Advisory Committees (CACs) gauged public support for the respective proposals via two public hearings and written testimony submitted. Another four proposals, including all three angling to build a casino in Manhattan, were rejected.

Resorts World and MGM Empire City are incumbents: They presently offer gaming via video lottery terminals at Aqueduct and Yonkers, respectively, and currently are favorites to receive expanded full casino licenses. The $8 billion Metropolitan Park proposal is fronted by New York Mets owner Steve Cohen and Hard Rock, while Bally’s $4 billion project would build a casino in the Ferry Point section of the Bronx.

Plenty of scenarios to consider

The challenge for the four applicants is proposing tax rates that are balanced and competitive since slots and other sources of gaming — table games and retail sports wagering — are taxed at different rates. The rates have to be high enough to satisfy the state in terms of generating tax receipts, yet low enough so that a licensee can generate realistic profit margins to allow operator sustainability.

This is also a blind submission to the GFLB. The applicants are submitting rates without knowing what their peers are proposing. And the submissions must be concise since the “Amended Executive Summary” must not exceed four pages.

The GFLB is also requesting the proposed rates as part of a dynamic model in which multiple scenarios of license combinations are considered. One rarely — if at all — discussed during the CAC process included the GFLB requesting the applicants provide tax rates based on scenarios in which either Resorts World or MGM Empire City continue to exist as a VLT-only gaming venue.

What the applicants are submitting

The first key figures applicants are submitting to the GFLB are gross gaming revenue (GGR) and their proposed tax rates. The applicants’ revenue figures are to be based on Year 3 of operations, which is relatively close to full maturity.

The revenue figures and tax rates submitted will be based on three potential “competitive scenario” outcomes: a “Low” one in which the board awards all three licenses; an “Average” one in which two licenses are awarded; and a “High” one in which the applicant is the only licensee.

There is also a dynamic model in for consideration in which all three licenses are awarded with one existing venue continuing to offer VLT play, three licenses are awarded in which both Resorts World and MGM Empire City are offered full casino licenses, and two licenses are awarded — one of them being either Resorts or Empire City — and the other continues to offer VLT play.

The base tax rates are 25% on slot revenue and 10% on all other sources of gaming. The expectation is applicants will submit rates slightly higher, though, to guarantee their bids remain competitive across all scenarios.

The applicant is also expected to provide a revenue impact statement for their venues relative to the current downstate gaming scene with Resorts World and MGM Empire City offering VLT play. This will impact submissions by Metropolitan Park and Bally’s: Metropolitan Park’s proposed Citi Field location is nine miles from Resorts World, while Bally’s potential venue is 10 miles from MGM Empire City.

Long-term outlook also required

One other section that does not deal directly with revenue figures is a long-term outlook applicants must provide in which they “submit a description of the competitive environment” over the first 10 years after opening.

They must describe how the venue will succeed in addition to limiting impact at other New York gaming establishments. It also specifies a request with how the applicant “intends to expand the relevant market by bringing in new visitors, as opposed to merely shifting visitors from existing gaming venues in the region.”