Moody’s Paints Negative Financial Picture For Del Lago Casino

Moody’s Investor Services has downgraded ratings for Del Lago Casino in the Finger Lakes region for the second straight year.

Moody’s said Del Lago’s ramp up in terms of gross gaming revenue remains well below expectation. It does not believe the casino will generate enough money to cover its financial obligations over the next 12-18 months.

“As a result, without further equity investment of some type — the company contributed about $11 million of cash equity earlier this as part of a covenant amendment — Moody’s is of the opinion that Lago will require a restructuring that involves some level of impairment,” Moody’s Senior Vice President Keith Foley said.

The company said the casino’s key credit challenges include the slower than expected ramp up and the highly competitive nature of the market. Moody’s pointed to Oneida-run Turning Stone Casino, about 75 miles to the east, as well as Seneca facilities to the west as direct competitors.

The tribal facilities have a more favorable tax regime than del Lago. There are also four “racinos” within 100 miles, dipping into the market share.

“The downgrade and the negative outlook consider that despite a slight pickup in Lago’s monthly gaming revenue, this improvement is not enough to alleviate Moody’s concern that Lago will be challenged to support its annual fixed charges of about $50 million going forward,” Foley said.

During the final days of state budget negotiations last year, the casino asked legislative leaders and the governor’s office for assistance, potentially in the form of a lower tax rate. Many lawmakers pushed back on the idea of a “bailout” and it was not included in the budget.

Del Lago officially opened in Feburary 2017.

Bonacic: Del Lago Assistance Not Part Of Budget

State assistance for the struggling del Lago Casino in the Finger Lakes region may not be out of the question, but State Senator John Bonacic said it will not be part of this year’s budget bill. The downstate Republican said the topic is dead for now but he would like to see something done in the remaining months of session.

In the past few days, many members of his conference as well as the governor have railed against the request from del Lago, referring to it as a bailout. Bonacic said he sees it differently.

“It’s all their money to start with, so what are you doing? You’re just, the government is not getting as much of their money as they put in but I don’t see it as taxpayer money at all,” he said.

The casino has argued it did not reach revenue projections in its first year of operation, largely because competing Seneca Nation-run facilities were no longer paying the state and were using the extra money to lure customers. Del Lago pays 37.5 percent of its slot revenue and ten percent of its tables under the current agreement with the state.

It has not said exactly how much assistance it is asking from New York. State Senator Michael Ranzenhofer said he understood it to be a roughly $14 million tax break while Bonacic said the casino is asking for a ten percent market allowance.

Cuomo Not Interested In ‘Bailing Out’ Casinos

Gov. Andrew Cuomo told reporters at the Capitol he’s not interested in “bailing out” financially struggling upstate gaming casinos. This comes in response to a request to the state from del Lago Casino in the Finger Lakes for assistance.

The casino said it wasn’t able to meet projections in its first year of operation because of an uneven playing field which didn’t exist when it won its gaming license. Specifically, it pointed out Seneca Nation-operated facilities, which is not currently paying the state while a dispute is arbitrated, are using the windfall to lure customers away from del Lago.

The governor doesn’t appear to be buying the argument,.

“The upstate gaming casinos are private concerns. They bid. They made an investment and some of them will say they’re not doing as well as they hoped or would’ve expected but they’re private concerns,” Cuomo said.

He said the state has allowed new casinos gaming facilities to generate economic development and create jobs which it has done.

“These facilities have done billions of dollars of construction and they employ thousands of people so to the extent you have a casino saying, well you know what, I don’t think my expectations, I’m not meeting my expectations, I should get help from the state, I’m not sympathetic to that,” he said.

Many Upstate Republicans in the state Senate have been vocal in their opposition to a bailout as well, including Senator Joe Griffo, R-Rome, and Mike Ranzenhofer, R-Amherst, both of whom penned letters to Cuomo about their concerns.


Ranzenhofer Letter to Governor Cuomo by Ryan Whalen on Scribd

Moody’s Has Tough Outlook for New York Casinos

The market for the casino industry is a challenging one for the northeast, according to a report released Monday by Moody’s.

The analysis by the rating agency’s gaming analyst Keith Foley found casinos del Lago in the Finger Lakes region and the Rivers Casino in Schenectady took a chunk of gaming revenue from its closet competitors, Finger Lakes Gaming and Vernon Downs, as well as Saratoga Springs.

“This trend, where newcomers are stealing share from incumbents, is consistent with what has been occurring throughout US gaming markets, particularly in the Northeastern portion of the US,” the report found. “We expect this to continue in eastern part of upstate New York, where another large casino, Resorts World Catskills, is scheduled to open this March.

The challengers go further than that, too, as the revenue from casinos has been lower than initially projected.

“The opening of two new large casinos in upstate New York – del Lago Resort Casino and Rivers Casino Schenectady – have helped grow state monthly gaming revenues by about 30%. However, while del Lago Resort Casino has substantially grown total gaming revenues generated in its primary market area, the property’s revenue ramp-up so far has been well below our expectations,” Foley said.

“The success of Resorts World also relies on the growing gaming market and attracting players from existing competitors. However, unlike del Lago and Rivers, Resorts World is located within reasonable driving distance from the densely populated New York metro area and has the downstate portion of New York as one of its primary market areas. That said, like del Lago, we expect Resorts World will be entering a very tough gaming market.”

The legalization of table-top casino gambling in New York was approved by voters in 2015 through a constitutional referendum, which Gov. Andrew Cuomo framed as an economic development push for upstate communities.

But the casinos have struggled with revenue amid a challenging northeast market, a trend gaming analysts had expected to see revisited in New York.

Vernon Downs Postpones Opening Day Citing Casino Competition

Vernon Downs has postponed its April 21 opening day for harness racing, pointing to increased competition from three casinos in the region.

At the same time, American Racing and Entertainment Chairman Jeff Gural in a statement on Thursday called on the state to give the racetrack a tax break in order to shore up its finances due to the lost revenue.

“A tax break for Vernon Downs would not cost the taxpayers any money as taxes from gaming revenue lost from Vernon are currently being generated at our four main competitors in the region. Worse yet, including the horsemen, Vernon has the highest tax rate of its competitors,” Gural said.

“Lowering the tax rate is a way that New York can ensure that properties like Vernon Downs that do not have table games can remain competitive and continue to be an asset within the community. Since reopening Vernon as a racino in 2006 we have given almost $150 million to the State for education. My hope is that New York State will step to the plate to save the three hundred jobs of those that Vernon Downs currently employs in addition to all the jobs and benefits related to racing.”

Vernon Downs, Gural said, has lost an average of $150,000 a month since November. Three table-top gaming casinos have opened within driving distance of the track: Yellow Brick Road, operated by the Oneida Indian Nation, and the commerically run Lago and Rivers casinos.

Gural has been an outspoken businessman and successfully sought a fourth casino license after project proposals for the Southern Tier region failed to win approval from state gaming regulators.

Gaming Commission Approves Casino For Tioga Downs

As expected, state gaming regulators on Tuesday approved a casino license for the Tioga Downs Casino in the town of Nichols — adding a fourth casino to upstate New York.

The vote at the state Gaming Commission in Saratoga Springs was unanimous.

Initially, state officials in late 2014 would only issue three casino licenses for regions north of New York City in Schenectady, the Finger Lakes town of Tyre and in Kiamesha Lake in the Catskills. At the time, the state’s casino siting board questioned the financial viability in a fourth region that would have qualified for a casino: the economically troubled Southern Tier.

But the Southern Tier region the same day of the casino announcement was also shut out from another revenue source, high-volume hydrofracking, which Gov. Andrew Cuomo’s administration moved to ban.

At the urging of state lawmakers and from Tioga Downs itself, Cuomo called for a new casino siting and licensing process for the Southern Tier. The sole applicant was Tioga Downs.

The Gaming Commission touted the economic benefits of bringing table-top gaming to the Southern Tier, including $25.6 million in statewide school aid as well as $3.2 million for Tioga County and the Nichols town government.

“Tioga Downs’ expansion will foster hundreds of new jobs and spur much-needed economic development in the Southern Tier, plus generate millions of dollars for public schools and local governments – with all private money and zero taxpayer dollars,” Commission Executive Director Robert Williams said in a statement.

Gaming Commission Issues Temporary Fantasy Sports Permits

State gambling regulators on Monday issued the first temporary permits for fantasy sports companies to operate legally in New York.

The New York State Gaming Commission issued the permits for companies DraftKings, FanDuel, Yahoo, FantasyDraft and Draft.

“As the newly enacted law requires, the Commission regulates all aspects of interactive fantasy sports, including ensuring the operators put important consumer protections in place,” said Commission Executive Director Robert Williams. “While the Commission continues work on formal regulations for these games, these temporary permits get companies up and running in New York State while assuring resident players that safeguards are in place.”

State lawmakers in June approved legislation that regulates and legalizes fantasy sports in New York after Attorney General Eric Schneiderman challenged the legality of the activity, forcing major operators to suspend business in the state.

It’s estimated $4 million in revenue is expected from fantasy sports regulation in New York.

DraftKings Files New Legal Brief

As part of its ongoing legal battle with New York state over fantasy sports, DraftKings issued another brief in its effort to overcome a challenge from Attorney General Eric Schneiderman.

“Today’s filing emphasizes what the legal precedents, and undisputed evidence, make clear, and what experts, fans, and policymakers are saying in state after state—daily fantasy sports are skill-based games that are, and should be, legal,” said DraftKings attorney David Boies. “Our contests are no less legal than season long fantasy sports, which the Attorney General has repeatedly conceded are legal. We look forward to arguing our appeal so that the merits of our case get the fair hearing we deserve. As this matter plays out, we will preserve the status quo and continue to engage with the New York legislature, as we are in dozens of states around the country.”

Schneiderman last year filed a legal challenge to major fantasy sports operators, arguing the companies in New York act as “games of chance” — outlawed under the state’s Constitution.

State lawmakers, meanwhile, have debated over the last several months whether fantasy sports operations like DraftKings and FanDuel should be regulated as other allowable gambling entities. It’s likely, however, the Legislature will wait for the outcome of the court dispute before moving to regulate fantasy sports in the state.

In addition to New York, several states are challenging whether to allow fantasy sports and if they should be regulated as gambling.

2015_453054_People v DraftKings Inc_DraftKings Inc_appbrf by Nick Reisman

Moody’s: Lago Presents A ‘Competitive Challenge’ To Existing Rasinos, Turning Stone

The Lago Resort & Casino complex being built in the Finger Lakes community of Tyre will be stiff competition for existing gambling outlets in central New York, a report from Moody’s Investors Service released on Friday found.

The report pointed to advantages Lago will have over its competition, such as the Batavia Downs and Finger Lakes racinos, including location and a favorable tax structure for slot machines and table gaming.

At the same time, Lago is expected to peel of some gamblers who would otherwise go to Turning Stone casino, which is operated by the Oneida Nation of Indians.

“Our expectations for the success of Lago assume that the new casino is able to cannibalize a portion of the Turning Stone’s Syracuse customers with the lure of a new project with many non-gaming amenities,” the report found.

The Oneidas have raised sustained objections and filed a legal challenge to Lago receiving one of the three commercial casino gaming licenses in the first phase of construction.

Turning Stone exists within an exclusivity zone, which Lago does not lie within. Nevertheless, the Oneida Nation has argued Lago’s existence represents a threat to their business in central New York.

“We are excited about and focused on building the best resort and casino in upstate New York to create jobs, increase tourism and generate real economic opportunity and growth for the Finger Lakes region,” said Lago spokesman Steve Greenberg. “We are increasing the pace of construction and look forward to opening early in 2017 as a new regional draw for visitors from near and far.”

Meanwhile, Lago has the advantage of taxes as well: The resort is subject to a 10 percent tax rate on table game revenue and a 37 percent rate on slot machines. At Finger Lakes, the tax rate currently being paid is 70 percent.

Gaming revenue at racinos in New York overall has rebounded last year after declining in 2014, Moody’s found, increasing by 2.3 percent overall. Vernon Downs was the only racino last year to post an overall reduction in revenue.

But that doesn’t mean the gambling industry overall is healthy, given a number of casinos due to open in the northeast market in the coming years.

“This improvement does not suggest any material improvement in sector fundamentals at a time when we are about to see a major increase in gaming supply in the northeast US,” the found.

Oneida Indian Nation Sues To Block Lago Casino

As expected, the Oneida Indian Nation on Tuesday announced it will take the state Gaming Commission to court over its decision to award a casino license to the Lago Resort and Casino in the Finger Lakes town of Tyre.

The Oneida Indian Nation over the last several months has argued the Lago project, which state regulators formally approved this month for a casino license along with two other developments, will “cannibalize” existing casino operations, including Turning Stone, which they operate.

“When the Oneida Indian Nation and a majority of New Yorkers supported the measure to expand gaming, we supported a very clear law — one that mandated a review formula requiring new gaming facilities to prove they will create new jobs, rather than simply cannibalizing local economies,” the Oneida Indian Nation said in a statement. “That new law did not empower the Gaming Commission to create an arbitrary make-it-up-as-you go licensing process that allows commissioners to change their review criteria on a whim. This lawsuit is simple: we are asking the court to force the gaming commission to enforce and respect the law that it is responsible for upholding.”

Lago spokesman Steve Greenberg dismissed the filing of the lawsuit as a non-event, given the Oneida Indians have been telegraphing plans to do so for months.

“Apparently, the Oneidas have decided they are not going to let the facts get in the way of another expensive and misguided lawsuit,” Greenberg said. “This is the seventh lawsuit brought against this project – most of which have been largely or completely funded by the Oneidas to preserve their monopoly and ignore New York’s commitment to expand economic opportunity in the Finger Lakes region. Like previous lawsuits, this one too will prove to be unsuccessful.”

In the suit, the Oneidas argue the selection process was “subjective” when it came to which licenses would be awarded. The suit claims the casino siting location board did not use an objective weighting analysis that was required under the state law allowing for commercial casino gaming.

At the same time, the Oneidas claim the location board on the one hand eliminated casino applicants that were based on factors “completely ignored” in the Lago project.

The push back to the Lago project began last year, but several months after the casino siting location board recommended the Lago project be approved. Gaming regulators approved the licenses in a formal adoption earlier this month.

The Oneida Indian Nation, along with the state’s Indian tribes that operate casinos, agreed to exclusivity and revenue sharing deals with the state. The Lago project is being built outside of the exclusivity zone set aside for the Oneidas.