Competitors claim foul as governor imposes even higher guaranteed payment

Like most  things connected with the bidding process for the slots license at New York City's Aqueduct Racetrack, the winning bid was surprising and controversial.

Aqueduct Entertainment Group, a consortium of seven companies that includes the Navagante Group of Las Vegas, led by former MGM Grand executive Larry Woolf, was the winner, but only after New York Governor David Paterson raised the stakes once again, boosting the up front "buy in" for the license from $200 million to $300 million. That demand forced AEG to match the high offer from Penn National Gaming. Other stipulations inserted at the last minute include a vetting and licensing of all partners.

"After an extensive review of the five remaining bids to operate the video lottery terminals at Aqueduct racetrack, I have chosen and the (legislative) leaders have agreed upon the organization that best fulfills our selection criteria," Paterson said in a statement. "AEG has both the financial viability and ability to pay the required upfront licensing fee."

The AEG choice is purportedly the end of a nearly 10-year process that resulted in two different choices and two disappointments. MGM Mirage was originally chosen as the operator in 2001 but backed out after the company saw effective tax rates in New York rise to more than 75 percent. While the tax rate has been somewhat mitigated over the years, it remains one of the highest in the gaming industry. A second choice in 2007 of Delaware North collapsed when the economy slumped and Delaware North as not able to line up financing for the $370 million deal.

The latest round resulted in six bidders, but did not include Wynn Resorts, which backed out after Paterson inserted the $200 million payment.

"All of the groups have valid proposals, but AEG presented a comprehensive bid that enjoys community support and also offers strong marketing appeal," Paterson said.

In addition to Navegante, the AEG partners include: GreenStar Services Corporation, a New York-based construction contractor; Turner Construction Company, another New York company founding in 1902; Levine Builders, a Queens-based company that provides general contracting and construction management services; the Darman Group, a minority company from New York City that provides consulting and real estate services led by Queens powerbroker, the Rev. Floyd H. Flake; Long Island-based Paulus, Sokolowski and Sartor (PS&S), a architectural firm that will design the project; Siemens AG, an international electronics and engineering firm based in New York City; and Clairvest Group Inc., a Canadian-based merchant bank.

Other bidders for the project included Hard Rock International and SL Green Realty Corp., which included a strategic alliance in the venture with Caribbean CAGE LLC and its owner, Robert L. Johnson, majority owner of the NBA's Charlotte Bobcats and the founder of Black Entertainment Television. Minority developer R. Donahue Peebles was in partnership with MGM Mirage. And Penn National Gaming and Mohegan Sun of Connecticut and Delaware North were the final bidders.

Paterson needed the agreement of the state's important legislative leaders. Originally expected to be decided in October, the long selection process had its ebbs and flows, including the withdrawal of Wynn Resorts. Assembly Speaker Sheldon Silver and Senate Democratic Conference Leader John Sampson weighed in on the choice, with Silver finally being convinced by the added stipulations placed on AEG.

According to Jeffrey Levine, the founder and CEO of Levine Builders and a partner in Aqueduct Entertainment Group, "Aqueduct Entertainment Group is honored to have been selected to operate the video lottery terminals at Aqueduct racetrack. As we have said since day one, Aqueduct Entertainment Group has the best team to design, develop and operate the facility. We know we will be a great partner with the state and the residents of Queens for years to come. We look forward to completing the memorandum of understanding and beginning construction."

But it still may not be over. Penn National Gaming is apparently steamed that its higher guarantee was simply transferred to AEG rather than allow Penn to take the deal. In addition, all partners

We were extremely shocked and dismayed by the governor's announcement given we offered over $100 million more to the state than AEG in our bid," Penn National Gaming said in a statement. "In addition, our proposal complies with the conditions outlined by the (Assembly) Speaker for the winning bidder.

"We remain committed to this project, and will await further details about the selection process before commenting further."

Sampson, the Senate leader, said it was time.

"New Yorkers have waited long enough for the Aqueduct agreement to be reached, and now we have to ensure the real work begins as soon as possible," he said.

By Staff