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In Casinos, New York Faces Uncertain Returns

Published: January 29, 2010

Gov. David A. Paterson announced Friday that he had selected a casino operator for the Aqueduct racetrack in Queens. It would be the ninth racetrack casino to open in the state since 2001.

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Richard Perry/The New York Times

Empire City at Yonkers Raceway. Revenues for New York's eight racetrack casinos are still rising.

The Shinnecock tribe on Long Island, meanwhile, expects to get federal recognition later this year, and it wants to promptly build a casino, possibly at the Belmont Park racetrack just a few miles from Aqueduct.

And there is yet another push by Senator Charles E. Schumer, Governor Paterson and elected officials in the Catskills to allow Indian tribes to build two Las Vegas-style casinos in Monticello, 90 miles northwest of Manhattan.

But for all those wishing to further exploit gambling revenues — from the state’s chief executive to casino operators themselves — there are sobering realities: falling revenues at any number of the New York area’s gambling sites, the effects of a deep recession and the threat of what amounts to market saturation.

At the Monticello racetrack casino in the Catskills, for instance, gambling revenues (after prizes) fell by more than 9 percent in the first three quarters of the current fiscal year. And gambling revenues at the Seneca tribe’s three full-scale casinos in the Buffalo-Niagara Falls area dropped 7.2 percent last year, prompting the tribe to shut down the expansion projects at its once booming resorts.

In Connecticut, where two massive Indian casinos have long attracted New Yorkers, as well as in Las Vegas and Atlantic City, there have also been substantial declines in profits and revenues.

“It’s probably wise to err on the conservative side when projecting revenues from gambling,” said Robert B. Ward, deputy director of the Rockefeller Institute and co-author of a national study on the drop in gambling revenues.

New York’s embrace of gambling, to be sure, has had its upsides in recent years, and the combined revenue from the state’s eight racetrack casinos is still on the rise. But the outfits that run those casinos won the right to take a larger percentage of total revenues and have been sending less money to the state’s dedicated education fund — down by nearly 10 percent in 2009.

Morgan Hook, a spokesman for Mr. Paterson, said, “Moving forward with a gaming facility at the Aqueduct racetrack will not only bring real jobs to the metropolitan New York City region, but will spark economic development in surrounding neighborhoods, send sorely needed dollars to public schools and stimulate the important agriculture and racing industries upstate.”

A new casino at Aqueduct, with 4,500 electronic slot machines but no table games, would sit in a densely populated part of Queens, something the developers competing to operate it find attractive.

Analysts say that Aqueduct could generate more than $1 million a day in revenues for the state.

On Friday, Governor Paterson said he had selected the Aqueduct Entertainment Group from five bidders to run the casino. The move played well with State Senate leaders and with Queens leaders, including the Rev. Floyd Flake, who is a member of the A.E.G. consortium.

But the long awaited decision could still run into trouble from rival bidders, including Penn National, which said it was “shocked and dismayed” by the governor’s decision because it had submitted the highest offer for an upfront payment, $300 million.

Assembly Speaker Sheldon Silver said he had agreed to the governor’s choice providing that A.E.G. met a series of conditions, which includes raising its upfront bid to $300 million.

Jeffrey E. Levine, a Queens developer who is part of the A.E.G. consortium, said the group had agreed to all the conditions. State officials said they expected to complete an agreement in 30 days with A.E.G., which plans to open the casino within six months.

“I’m thrilled to bring these jobs and this financial windfall to our borough, our city and our state in these desperate times,” Mr. Levine said.

“We are ready to hit the ground running.”

But some analysts say an Aqueduct casino may wind up stealing customers from the Empire City Casino at Yonkers Raceway, the state’s best performing slots hall.

The Aqueduct casino, in turn, would come under siege if the Shinnecock tribe builds a casino at nearby Belmont, or on its reservation in Southampton.

And Las Vegas-style casinos in Monticello “would take business from Yonkers, Tioga and Aqueduct,” conceded Jeffrey Gural, who owns the racetrack casinos at Tioga and Vernon Downs.

Monticello is currently struggling to compete with Yonkers to the east and the Mount Airy casino to the south, in Pennsylvania.