Casinos Are Coming! Well, Not So Fast

, New York Law Journal

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Robert J. McLaughlin
Robert J. McLaughlin

On Election Day in November 2013, New York voters took the unprecedented step of approving non-tribal casino gaming in the state. By the addition of 17 words to the state constitution, the dream of casino gaming—a dream many have been waiting more than 40 years for—became reality. But, it is 2014 and there are no casinos yet. Where are they? This article discusses the road map created by the governor and the Legislature to bring the "dream" of casino gaming to the Empire State and when it will occur.

Where Have We Been?

Article I, Section 9, Subdivision 1 of the state constitution makes it clear that no gambling can occur in New York:

no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling…shall hereafter be authorized or allowed within this state; and the Legislature shall pass appropriate laws to prevent offenses against any of the provisions of this section.

This provision has been amended by vote of the people on three occasions—the first permitted "pari-mutuel betting on horse races…from which the state shall derive a reasonable revenue for the support of government…." The second authorized "lotteries operated by the state and the sale of lottery tickets in connection therewith as may be authorized and prescribed by the Legislature, the net proceeds of which shall be applied exclusively to or in aid or support of education in this state as the legislature may prescribe…"

Both of these exceptions defer the methods of operation of the pari-mutuel betting and of the lottery to the Legislature. Accordingly, the Racing, Pari-Mutuel Wagering and Breeding Law governs all horse racing and betting in the state and Article 34 of the Tax Law governs the operation and sale of lottery tickets in the state.

The November 2013 referendum approved by the voters added the following as a third exception to Subdivision 1:

and except casino gambling at no more than seven facilities as authorized and prescribed by the legislature….

Much has been written that casinos will bring revenue to the state, to local municipalities and to education—but unlike the two prior gambling exceptions, this provision leaves the Legislature to determine not only "how" casino gambling is implemented, but also "where" the revenue is to go.

Why Seven Casinos?

In championing the move to authorize casino gambling in the state, Governor Andrew Cuomo correctly stated that gaming is all around us already. During the past 10 years, casino gambling has been authorized or expanded in Connecticut, Pennsylvania and Massachusetts—and even in New York. The Legislature has noted that New York already had pari-mutuel racing, the lottery, nine "casinos" at racetracks operated by the lottery and five tribal casinos (operated by the Seneca Nation of Indians, the Oneida Indian Nation and the St. Regis Mohawk Tribe). In fact, the Legislature found that New York had more electronic gaming machines than any state in the Northeast.1

While the lottery and its "casinos" have been successful, raising an average of $3.5 billion annually for education, the governor believed, and the Legislature agreed, that the state did not fully capitalize on the economic development potential of legalized gambling; that moneys from the state were flowing to border states. Why not keep that revenue within the state to benefit the people? Why not use that revenue to assist the economically distressed areas of the state, especially in the upstate region?

The governor and the Legislature negotiated the number of seven casinos as a balance between the state becoming a "mecca" for casinos on every corner of the state and having too few to achieve the state's revenue goals. But once they reach the number seven, where exactly do they go?

Where Are We Now?

The Upstate New York Gaming Economic Development Act of 2013 (UGEDA) was signed by Cuomo as Chapter 174 of the laws of 2013.2 UGEDA is the Legislature's road map for the implementation of the 17 words added to the constitution. It grants the New York Gaming Commission authority to implement casino gaming within the state.3 The commission, created by the Legislature in 2012, now reviews, governs and implements all gaming and gambling, including the lottery, pari-mutuel racing, charitable gaming and casinos.4

UGEDA first established the purpose of casino gaming.5 The act's legislative findings include that upstate tourism constitutes a "critical component" of the state's economic infrastructure.6 Four upstate casinos will attract non-New York residents and bring downstate New Yorkers upstate.7 This attraction will in turn "boost economic development, create thousands of well-paying jobs and provide added revenue to the state."8 Revenues from these casinos will be used to "increase support for education beyond that of the state's education formulae and to provide real property tax relief to localities."9

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