Investments in casinos give hint at likely value
An exciting competition is underway.
And though we don’t know who will win, we know that they will be wealthy. And that winning would make them wealthier.
Right now, there are 22 entities vying to open four casinos in New York. They aren’t scrappy upstarts with big dreams. They are deep-pocketed investors undeterred by the state’s $1 million application fee, or the high cost of building a casino.
Earlier this week, the New York State Gaming Commission pegged the minimum investment prospective casino owners will need to make to get a casino license in the Capital Region at $182.25 million; in the Catskills, the minimum investment is approximately $350 million. The Saratoga Casino and Raceway, which is partnering with the owners of Churchill Downs in Kentucky, has unveiled plans for a $300 million casino in East Greenbush.
That isn’t exactly chump change.
Now, I don’t object to the high cost of entry to the state’s casino competition. It makes sense to weed out fly-by-night operators — the people who don’t belong at the table with serious investors with real plans, or have the means to follow through on their ideas — but I refuse to be impressed or awed by the huge figures being cited in connection with the casinos.
Gaming proponents often make it sound as if building a casino is essentially an act of charity, a way to bring jobs and revenue to cash-strapped upstate communities and spruce up blighted neighborhoods and communities. But any investor willing to commit hundreds of millions of dollars to an enormous, highly scrutinized project obviously expects something in return.
Las Vegas-style casinos will undoubtedly generate revenue for schools and local governments. I don’t question that. A state analysis released last fall estimated that four upstate casinos would generate $439 million in school aid and property tax relief statewide. About $238 million would be generated annually for education or property tax relief, while approximately $192 million would be directed toward annual local government aid. The Capital Region would receive $35.5 million annually, with the casino host city receiving $11.4 million.
These are great-sounding numbers, and they were used to convince voters to support Gov. Andrew Cuomo’s casino referendum. Which is why it’s worth pausing for a moment to consider how much money casino operators expect to make once they open their doors.
Presumably, they’re hoping to multiply their investments. Once you understand this, the $1 million application seems extremely reasonable. As one of my friends likes to observe, “If you want to make money, you’ve got to have money.”
Under the state’s guidelines, the new casinos will be required to share 45 percent of slot machine revenue with the state, as well as 10 percent of table game revenues. In addition, an annual fee of $500 for each slot machine and table in use in a casino will be collected.
This will no doubt add up to a lot of money for the state, but not nearly as much as it will for casinos.
Now, I couldn’t afford to build a casino in New York, and neither could you. But for a wealthy investor, building a casino in New York might seem like a pretty good bet.