What could a casino make in Times Square? What about by the Coney Island boardwalk, or next to the United Nations headquarters, or in the parking lot of the Mets' Citi Field in Queens?
Developers liked their odds, and with New York finally offering up the licenses it approved for casinos in New York City in 2013, the table was set for a high-stakes bidding war.
Casinos promised higher and higher sums for community benefit projects. Jay-Z and Nas were involved, as was celebrity chef Marcus Samuelsson. Broadway theaters lit up their marquees with the phrase "
The pot is finally right, the bids are in, and the state is weighing who will win — and what they'll pay. But a casino isn't a reliable bet for revenue.
New York state began the process more than a decade ago, when voters amended its constitution to expand gambling in 2013. The state decided to award seven casino licenses, four upstate and three in the New York City region, S&P Global Ratings analyst Jeff Zemetis said.
When applications for downstate casinos finally opened last year,
The councils approved four of the casinos. One of the developers, MGM, withdrew its bid.
Now, the New York Gaming Facility Location Board will decide whether to grant licenses to the three remaining bids.
The process has been "a disaster," said Roger Gros, the publisher of Global Gaming Business Magazine.
Major companies decided not to apply or withdrew their bids because "they couldn't make the dollars work," Gros said. "The New York situation has become really untenable in terms of return on investment."
The three bids
Resorts World New York City, at the Aqueduct Racetrack in Queens, has said that, if approved, it could open its doors as soon as next year.
Aqueduct is already a "racino," with slot machines next to its racetrack. The company said it could
Aqueduct already makes $1 billion of revenue every year and projects that adding a casino could more than double its revenue to $2.2 billion by 2027, according to Politico.
Resorts World also owns
The golf course is designated as state parkland, so Bally's had to obtain
The casino would cost $4 billion to build and
Metropolitan Park at Willets Point, Queens, would be built in the parking lot of Citi Field. The project, led by billionaire Mets owner Steve Cohen and Hard Rock, would also turn part of the parking lot into parkland.
The resort would take at least half a decade to build and cost $8 billion, but by year three of its operation, the company projects it would bring in $3.9 billion of annual revenue. Its proposal claimed it could generate
Like Bally's, Metropolitan Park also had to be approved by the state legislature for its bid, as the Mets' parking lot was technically state parkland.
Although there are three proposals and three licenses to be awarded, Gros said, there's no guarantee that the Gaming Facility Location Board will approve all three. When granting upstate casino licenses, the state awarded three, and took an extra year for the fourth.
If the GFLB only grants two licenses, Gros predicts they would go to Resorts World and Metropolitan Park. The companies associated are a higher quality, he said, and more financially stable.
"Bally's has a lot going on right now," Gros said. "They've got a
If the casinos are approved, each license will cost $500 million. New York requires that they
Each casino negotiates its own tax rate. New York has lowered the upstate casinos' rates over time. Some casinos' slot machine revenue has been taxed as high as 45%.
The revenue projections
When New Jersey first legalized gambling in Atlantic City, Gros said, the state projected a modest amount of revenue. Instead, it hit the jackpot.
Atlantic City brought in more than triple the tax revenue that New Jersey predicted for the first couple years, Gros said.
"That was only because that was the only market open on the East Coast at that point," Gros said. Now, "whenever a jurisdiction legalizes casinos, they usually estimate way, far more than they actually receive."
New York has already fallen victim to this phenomenon.
In 2019, New York Comptroller Thomas DiNapoli reported, the four upstate casinos brought in just
Resorts World Catskills had the highest projection, with $20.7 million of state tax revenue, but collected just $11.2 million.
In New York, casinos seemed to have only a "modest" impact on the region's economy and the state's revenue, according to DiNapoli.
"New York leads all other states in total revenues from legal gambling, collecting nearly $3.7 billion in state Fiscal Year 2019-2020," DiNapoli wrote in the report. Yet the majority of that revenue came from the state's other forms of legal gambling.
Casinos generated $188 million of state revenue in 2019 — 0.2% of total state operating fund receipts, DiNapoli said.
"Some of that revenue likely resulted from gaming activity that previously occurred at [video lottery terminal] facilities, reducing the net fiscal benefit to the state," DiNapoli wrote.
Casino revenue is also sensitive to economic conditions, Gros said, as the industry learned in the Great Recession.
They were also vulnerable to a pandemic. New York's casino revenue
Gros expects that New York City's casinos will also underperform their projections.
He doesn't think they'll draw people into the city.
"Why would you drive into New York City when you could hop on a bus and go to Atlantic City?" Gros asked. "Or take a nice, short ride to the Connecticut casinos, which are spectacular."
The gambling industry refers to competition as "
The problem has emerged over the last 20 years, S&P analyst Victor Medeiros said, as more and more states tried to cash in on the revenue that Atlantic City was generating.
Often, a region will see "short-term budgetary economic gains from the licensing, and maybe the novelty of going to those casinos," S&P analyst Tom Zemetis said, but those gains don't always have longevity. That leaves some towns exposed to revenue volatility and economic dependence.
In New York City, the three proposed casinos are less 20 miles from each other. Two of them are in the same borough.
Resorts World told investors that winning a downstate casino license would help entice people to its upstate casino, but some in the Catskills
Whether a casino will bring in tourists is also dependent on economic factors. Las Vegas has seen declines in tourism and casino revenue this year, Zemetis said.
Also undermining casinos' profits, Gros said, is the community benefit spending bidding war that they went through to appease New York's lawmakers.
"I think that's what soured some of the bigger companies that have left," Gros said.
Metropolitan Park promises to renovate the nearby Mets-Willets Point subway station. Resorts World is offering a
The companies have also spent billions of dollars every year on
The city's share
New York keeps 80% of its casino revenue at the state level, and spreads the remaining 20% among the towns and counties in each casino's region, according to DiNapoli. The impact of that money varies.
In three of the towns that hosted a casino, the casino revenue made up between 30% and 65% of their budgets in 2021. In Schenectady City, which hosts the fourth casino, the revenue was less than 3% of its revenue.
Relying heavily on casino revenue presents risks, DiNapoli noted. Tyre, one of the casino host towns, lowered its property taxes by 42% when it began receiving casino revenue. In 2020, when the pandemic impacted casino operations, the town had to raise its property taxes by 243%.
New York City won't be as exposed to the volatility, Zemetis said. The city has income, corporate income, property and sales taxes.
"While this adds another wrinkle of revenue diversification to the city, we don't think that it would be a significant mover of the needle in terms of how they're pre-programming their budgeting, to account for these new revenue sources," Zemetis said.
That means the city also won't be exposed to the risk that the deals fall through — a serious possibility, according to Gros, given how taxing the approval process has been.
