By Howard Koplowitz
Aqueduct Entertainment Group, which was awarded the controversial contract to install and operate 4,500 video lottery terminals at Aqueduct Race Track in Ozone Park, was in last place out of five bidders in terms of how much revenue the machines would generate for the state until it changed its projections three months later and was catapulted into first place.
State budget official Jim Sherman sent an analysis of the bids to the governor’s office Nov. 12, which was released last week by Gov. David Paterson in response to the intense scrutiny of the AEG proposal that captured the VLT contract.
The analysis showed AEG was initially in fifth place out of the five bidders in terms of the estimated revenue from the 4,500 machines through fiscal year 2022-23, which was roughly $400,000 less than the highest projection.
In June, AEG said it expected that the VLTs would bring in $2.9 billion to the state during that span, below the $3.17 billion average of the five bidders.
Under that analysis, SL Green indicated it could bring in the most revenue to the state with $3.295 billion.
Delaware North, which was awarded the VLT contract back in November 2007, was second with $3.288 billion . But the deal fell through after the Buffalo-based company could not come up with the $370 million upfront payment it had promised the state, .
Penn National was slightly behind Delaware North with $3.285 billion, followed by the Peebles Corp. with $3.078 billion.
But AEG revised its projections Sept. 23 while the other bidders’ numbers stayed the same, according to the analysis. Its winning bid was announced publicly Jan. 29.
Under the new projection, AEG came out on top with $3.614 billion, up by more than $700,000 from its original projection.
“Our previous … numbers were very conservative and were baseline for budgeting purposes,” AEG explained in a Sept. 23 e-mail to a state budget official. “We believe these [new] numbers more accurately reflect the market conditions and revenue potential that our group can bring to the state.”
The documents also showed that AEG promised the state the lowest upfront payment of $151 million, which was increased to $200 million in June at the request of Paterson.
State Assembly Speaker Sheldon Silver (D-Manhattan), who along with Senate leader John Sampson (D-Brooklyn) and Paterson is responsible for signing off on a VLT bidder, further demanded the upfront payment be changed to $300 million, which AEG said it would comply with.
The selection of AEG by Paterson and the state’s legislative leaders has been called into question due to the entity’s ties to the Rev. Floyd Flake, one of the group’s investors.
Flake, the politically influential minister of the Allen AME Cathedral in Jamaica, has a 0.6 percent interest in AEG.
Three days after Paterson selected AEG for the VLT contract last month, the governor met with Flake, who had indicated he was open to supporting state Attorney General Andrew Cuomo if Cuomo decided to challenge Paterson for governor in November.
A Siena College poll released Monday showed 3 percent of those polled believed the VLT contract was “fair and appropriate” and about 33 percent said they thought the deal was “politically motivated.”
Amid the controversy, state Sen. Joseph Addabbo (D-Howard Beach), Assemblywoman Audrey Pheffer (D-Rockaway Beach) and Community Board 10 Chairwoman Betty Braton are calling for the VLT selection to move forward.
“The media-driven firestorm now calling for details, criteria used and investigations is, to some, unfortunate and very late,” the two legislators and Braton said in a joint statement.
“There has been ample time for all the calls for documents from all bidders to be released and calls for scrutiny of all investors in each of the bids, over the course of the past year,” Pheffer said. “Further delays now in moving this project forward will hamper efforts to ease the state’s financial crisis, create further problems for the future of horse racing in the state and at Aqueduct and lose the opportunity of witnessing thousands of quality jobs open up in the area.”
Meanwhile, state Comptroller Thomas DiNapoli warned Monday the state’s current budget deficit could reach $2 billion, due in part to the likelihood the $300 million upfront fee would not be paid in time for this year’s budget.
“The controversy associated with the governor’s recommended franchisee could further delay the receipt of this revenue,” he said.
Reach reporter Howard Koplowitz by e-mail at hkoplowitz@cnglocal.com or by phone at 718-260-4573.
