Delaware North is telling officials it won't be able to meet a March 31 deadline to deliver a $370 million payment to the state for the exclusive rights to develop a major casino at a downstate racetrack -- a lapse that could cost the Buffalo company the project.
The Paterson administration, sources said, is threatening to rebid the queduct casino deal if Delaware North does not come up with the money, which the governor is counting on to help the deficit-ridden state balance its books.
The dilemma marks yet another example of the recession's squeeze on the credit market, threatening to scuttle a project that only months ago was considered a certainty.
Delaware North officials last month confirmed that the recession was forcing the company to restructure its financing for the casino, which presents a major expansion for the Buffalo firm into the gambling industry. With 4,500 slot machines, the racetrack casino would be the first legal gambling hall in New York City.
"Since our bid was submitted in October 2007, there has been a deterioration of the credit and equity financial markets in this recession economy which has caused Aqueduct Gaming LLC to restructure the timing for its financial offer," William Bissett, president of Delaware North North's Gaming & Entertainment subsidiary, said in a statement.
With much fanfare by Gov. David A. Paterson, Delaware North last fall won the bidding for the casino deal over two others. Its $370 million, up-front payment to the state was $120 million higher than the next closest bid. But since then, the credit market has collapsed, and Delaware North has found itself in the same situation as other corporations having to scramble for new financing options.
The Paterson administration declined to comment.
Delaware North recently reached out to the Paterson administration to try to change the terms so that it could still pursue the development deal. The company was offering the state the same $370 million, but wanted to push back the payment terms until sometime after the start of the state's 2009 fiscal year, which begins April 1.
The state is losing $1 million a day in revenue-sharing payments for every day the Aqueduct casino is not open. Construction was to have started by now, with work taking a year to complete. Last month, one Queens lawmaker, Assemblywoman Audrey Pheffer, criticized the delays and said if Delaware North could not close the deal then Paterson should look to other operators.
The casino deal was first authorized shortly after the 2001 World Trade Center attacks as a way to bring the state new gambling revenues. Since then, racetrack casinos have opened around the state, including at the fairgrounds in the Town of Hamburg.
The Paterson administration, sources say, is concerned about reopening the terms of the deal with Delaware North for fear it could invite litigation by one of the groups that lost the bid last year.
"Nobody wishes we were further along than us," William J. Bissett, president of Delaware North's Gaming & Entertainment subsidiary, said last month. He was not available to comment today.
Officials in Albany say Delaware North has also been trying to improve the terms of what it would make from the Aqueduct deal if, as Paterson has proposed, another casino is permitted to open at Belmont, another track located a short drive from Aqueduct. Delaware North is concerned the competition would drain money from the Aqueduct casino.
Delaware North officials have said part of the delay in signing a final memorandum of understanding with the Paterson administration was a need to find different financing sources for the deal.