Breaking Down The New York GFLB’s Casino Selection Document

It’s just about all over but for the screaming.

Barring a stunning turn of events, all three applicants forwarded to the New York State Gaming Commission (NYSGC) on Monday by its Gaming Facility Location Board (GFLB) are expected to be awarded downstate casino licenses before the end of the year.

Queens-based incumbent gaming venues Resorts World and greenfield project Metropolitan Park, along with Bally’s Bronx, are one last set of approvals from commencing plans to tap into the expansive New York City market. The trio are not in Manhattan proper — three such bids were rejected by local Community Advisory Committees — but make no mistake: They will see to it the city that never sleeps spends some of those waking hours at the slot machines and playing blackjack, craps, and roulette among other table games.

The stakes are enormous, starting with the minimum $1.5 billion in fees the NYSGC will collect if it indeed awards all three licenses. Billions of dollars in projected tax revenue earmarked for education and the cash-strapped Metropolitan Transit Authority (MTA) are also in play as each applicant offered plans to generate gaming revenue detailed by the GFLB in its selection document accompanying Monday’s announcement.

The GFLB was tasked to determine the suitability of the applicants based on four factors, with Economic Activity & Business Development Factors weighing heaviest at 70%. The selection document specifically noted the board “did not include such matters as the integrity or character of the applicants or their owners,” leaving that to the commission.

So what exactly did the board see beyond the dollar signs that warranted sending all three applicants forward? And is there anything that could be a late and surprising disqualifier?

Resorts World

The decision by Resorts World to offer jaw-dropping tax rates of 56% on slots and 30% on table games — well above the state-established baselines of 25% and 10%, respectively — loomed large in the board sending its application forward. It had fired a warning shot across Resorts’ bow with regard to potentially asking for lower tax rates to match those of Bally’s and Metropolitan Park, urging “the Commission and elected officials at the state and local level to resist any back-tracking on the tax rate contained in the bid, relied upon by the Board, and undoubtedly a factor in the Community Advisory Committee’s decision to approve the application.”

The GFLB’s consultants projected Resorts, which had a $7.5 billion price tag, generating more than $4 billion in tax revenue over 10 years, but also noted those totals were lower than estimates Resorts provided via its study from Spectrum Gaming. It is unknown if the board specifically included this response to Resorts’ claim in its supplemental material that it successfully met its higher revenue projections when applying for its current video lottery terminal (VLT) license in 2010. Resorts expects to conduct an extensive outreach to the Asian community as a means of generating notable table games revenue, mainly through baccarat.

The board also suggested Resorts scale back its scope of expansion. It proposed having 10,800 total gaming positions at full strength with 6,000 slots and 800 table games offering six positions per table. The board countered with a recommendation of licensure with 4,635 slots and 534 table games, consistent with provided illustrations of gaming configurations “to ensure the quality of visitors’ experience.”

That expansive scope was something the board attempted to balance between the positives of the “extensive development experience” Resorts’ owner Genting Group has in generating multi-billion dollar revenue at domestic and international locations against the fact Genting has a track record of projects “delivered late or over budget, often due to scope increases.”

Overall, the board saw as its biggest positive Resorts’ speed to market in being able to generate tax revenue for at least three full years before either Bally’s or Metropolitan Park open. It also felt the commitments to job creation — including diversity, transit, and traffic infrastructure — and increased park space at its venue were “all to be satisfactory.”

Lastly, the board wanted to see more definitive and aggressive efforts from Resorts regarding local hiring and benefits for local business.

Bally’s

Bally’s has been the little casino proposal that could, though not all that little with a $4 billion price tag. Soo Kim’s gaming company has gone from the fringes of a possible finalist in June when the original eight applicants submitted proposals to front and center with the potential to have two casinos in the three largest U.S. cities by 2030.

Its ongoing construction for a permanent casino in Chicago, slated to open next September, and other recent international acquisitions present a double-edged sword, according to the board. Bally’s operates a temporary casino in the Windy City, but the board noted its “limited experience with large greenfield development.”

Bally’s construction of its permanent venue in Chicago is funded and on schedule, though the GFLB still expressed its concern about Bally’s “high leverage” and expressed a desire for it to “oversee its liquidity carefully.” The risk of execution for a New York-based casino is mitigated to a degree with strong financial backing, but its proposed IPO for the Ferry Point location was labeled “aggressive” considering Bally’s fell well short of a $250 million target for its Chicago venue with a closing value of $96.7 million.

The board’s consultants projected Bally’s to generate $2.3 billion in tax revenue over a 10-year period, which it noted was higher than Bally’s own estimates. It appeared impressed with Bally’s stated target of having 70% of its 15,000 proposed full-time workforce be Bronx-based, but also noted it is a “strong pledge that will require substantial and sustained effort from Bally’s and its contractors.”

Bally’s is also expected to match its Chicago-based workforce representation of 45% women and 80% minorities, which exceeded its original targets set there. The board also found its proposed traffic improvements, most notably the expansion of Ring Road and calls to improve bicycle and pedestrian connection points spanning the casino, Ferry Point park area and waterfront all as “significant positives.”

Metropolitan Park

The Hard Rock Metropolitan Park proposal fronted by the Seminole Tribe and New York Mets owner Steve Cohen has the biggest price tag among the three applicants left standing at over $8 billion. It would also be comparable to Resorts World for the number of gaming positions (7,250) if the Genting Group follows the board’s recommendation.

The board straightaway noted the financial heft of Hard Rock and Cohen and also Hard Rock’s “strong development track record” of creating integrated resorts at its Hollywood and Tampa properties in Florida. The GFLB also cited Hard Rock’s ability to deliver projects on time and on budget while also enjoying “strong post-opening” performance.

The board’s consultants estimated Hard Rock would generate $3 billion in tax revenue, which is slightly below the figure Hard Rock provided the GFLB. Both figures, however, may be ambitious targets given the casino would not be operational for the first 3½ years of the 10-year period.

Hard Rock estimates 55% of its workforce will be from Queens, but getting to that percentage in its early stages may prove tricky. The gaming company noted potential staffing shortages would be addressed by transferring people from existing properties, but the board also recognized Hard Rock’s commitment to the issue by retaining the services of McKissack & McKissack, which is the oldest minority/women-owned professional design and construction firm in the United States.

The board’s biggest takeaway in sending Metropolitan Park forward looks to be the potential of it tying everything together as an entertainment destination ranging from sporting events to gambling at a casino. It would also create “job opportunities and access to world class amenities to the residents of the housing already built and planned nearby.”