The Board designated to make the initial recommendations for casinos in New York released its report on Friday. Although the purpose of the report is to explain fully why the Board recommended three of the bidders for casino licenses, and none of the unsuccessful competing 13 bidders, the report raises as many questions as it answers. At the risk of overstating the obvious, awarding casino licenses tend to be controversial, and this report does little to quell any disputes.
The law authorizing the licensing of non-Indian casinos gave the state’s Gaming Commission the responsibility for overseeing the procurement process and making the final decisions to award licenses. The Commission appointed a Gaming Facility Location Board to issue a request for applications, receive and evaluate bids, and then make a recommendation for awarding licenses in the three up-state regions of the state specified by the law. The Board could recommend a second license in one of the regions, but had no obligation to do so.
On December 17, the Board announced its decision, recommending licenses in each of the three regions, but not a fourth license. The Board stated it would issue a full report explaining its decisions, which it did on February 27. The Board – and the staff from the Gaming Commission – faced a substantial challenge. They had to evaluate a significant amount of material submitted by the bidders detailing their approach to the 20 evaluation criteria mandated by the statute, including a review of financial information and detailed casino plans.
The Board’s Report, available on the Gaming Commission web site, is almost 800 pages long. What should be the meat of the report – explaining why it recommended certain bidders and not others – takes up a mere 27 pages. That is less than two pages per bidder, following a process in which each bidder had to submit a $1 million
licensing application fee and expend additional millions in crafting their bids. In addition, there is a much lengthier review of the bids by the Gaming Commission staff that takes up an additional 269 pages.
It’s not the page count that disturbs me, it is the content of those pages – although being able to reduce an analysis of 20 evaluation criteria to less than two pages is inherently suspect. The essence of a fair and open process is announcing the rules and then abiding by them. In the procurement world, this means that you announce the criteria by which bids are to be evaluated, the respective weight given to each of those criteria, and then a comprehensive analysis that permits the public to meaningfully assess the integrity of the process. This may seem like procurement esoterica, but it is the essence of an open and accountable decision.
The evaluation criteria were established by the law. The weight given to the three broad categories of criteria were also set in the law. Thus, 70 per cent of the evaluation was to consist of the assessment of “Economic Activity & Business Development Factors” such as: maximizing revenues received by the state; providing the highest number of quality jobs; and, building a gaming facility of the highest caliber. Twenty per cent was assigned to “Local Impact and Siting Factors,” with the remaining 10 per cent assigned to “Workforce Enhancement Factors.”
While one might think the Governor and Legislature were fairly specific when they enacted the 111-page casino law, the Board decided to create an additional criterion. There was no public notice of this prior to their announcing it at the December 17 meeting when their decisions were made public. The law gave them this authority, but the Board’s explanation for creating this new criterion was to effectuate the “intent” of the law. Thus was established the notion that a purpose of the law was “providing economic assistance to disadvantaged areas of the State.”
If that indeed was the intent of the law, it is surprising that neither the Governor nor the Legislature thought to mention it anywhere in those 111 pages. But the Board’s additional criterion had a profound effect: it effectively disqualified six of the nine proposals submitted for a license in what is referred to as Region One. Those six were all for a proposal to build a casino in Orange County.
Now if the true intent of the law was that proposals from Orange County should not be considered, the Governor and the Legislature would have done what they did for other counties in the state – specifically exclude them from consideration as they did with all of New York City, Long Island and other counties bordering Orange.
Not only did the Board adopt a rationale for their new criterion based on questionable legal authority, but they decided to apply it differently among the regions, without specifically stating what percentage weight was to be given this new factor. Thus, in Region One, the Board accorded “considerable weight” to its newly established criterion. In the other two regions, it simply “considered” it.
In making its determination that certain counties in the state were “disadvantaged,” the Board identified five statistical measures provided by the Division of the Budget. On page 10 of its Report is a chart comparing those indices for each county in the respective regions. I picked out a sampling of counties (two from each region) and created the following chart:
Median Income % w/ BA Home Prices Unemploy Rate Poverty Rate
$81,000 27 $195,000 5.4% 12.5%
$76,000 29 $198,000 5.7% 13.6%
$75,000 31 $172,000 5.0% 11.6%
$75,000 27 $171,000 5.2% 12.4%
$66,000 21 $147,000 5.1% 12.9%
$63,000 30 $113,000 6.0% 17.3%
I had formatting issues. The first two are “A” and “B.” The next two “C” and “D.” Then “E” and “F.””A” and “B” are different counties from the same region, as are “C” and “D” and then “E” and “F.” The median income and home prices were rounded to the closest $1,000. Percentage of those with at least a bachelor’s degree is designated “% w/ BA.”
The Board looked at this data and reached some surprising conclusions. In the region in which “A” and “B” submitted bids, the Board gave “considerable weight” to the criterion it established. It then determined that the economic indicators of “economic distress” were “less severe” in county “A” than in county “B.” County “A” is Orange.
When comparing proposals in a different region for counties “C” and “D,” the Board decided that county “C” “was more strongly positioned economically” than the other county. It further concluded that County “D” had below average home prices when compared with County “C.” County “C” is Rensselaer, County “D” is Schenectady, the site of the successful bidder.
In its justification for recommending a license for the proposal in County “E,” the Board cited that “median home prices were far below the New York State average.” Of course, this bidder was not competing against the rest of New York state, but against other proposals in its region. The Board’s failure to compare the proposal in “E” with the median home prices in “F” that were 23 per cent lower is a glaring omission. County “E” is Seneca, site of the successful bidder, while County “F” is Broome.
Now setting aside whether the statistical measures provided by the Division of the Budget are the best ones, and setting aside the possibility of wide disparities within a county, the above chart demonstrates that measuring economic distress is not as clear as the Board apparently thinks. That it appears to be the basis for the Board’s decisions is troubling at best.
Then there are the actual assessments made by the Board of competing proposals. I decided to pick two for comparison. I went with the Region One winner, Montreign, and the unsuccessful proposal from Genting for a facility in Orange County. (I am not suggesting that Genting should have prevailed, particularly since there are legitimate environmental concerns, and the reality that they have not been a particularly good partner in their joint venture on the Aqueduct property. I use them only to review how the Board assessed the competing bids.)
One of the “70 per cent” factors is “providing the highest number of quality jobs.” (One thing I have learned in following the casino debate is that all casino jobs are “quality” – at least according to the casino operators.) Montreign proposed 1,209 full-time positions and 96 part-time ones. Genting bid 3,129 full-time and 1,614 part-time ones.
Regarding state revenues, the Board approvingly cited Montreign’s commitment to pay an additional $1 million in addition to the required $50 million licensing fee. You cannot find what Genting proposed in the Board’s summary, and have to go to the Gaming Commission’s analysis, where you learn that Genting promised an additional supplemental licensing fee of between $240 million and $380 million. It is little wonder the Board decided to omit that tidbit from its summary.
Then there is the another “70 per cent” criterion of “building a gaming facility of the highest caliber.” Now I have only been to a casino (as opposed to racino) once, and made no wagers and could not wait to leave. But the Gaming Commission’s description of what Genting proposed was actually enticing. Montreign’s? Not so much.
This is not to say that the Board made the wrong decision. It may have, but it has a lot more explaining to do. Tossing an impressive proposal because you decide to create a last-minute evaluation criterion does not actually inspire confidence in the fairness – let alone integrity – of your decision.
Regrettably, the Board has also demonstrated it is willing to buckle to political pressure. After releasing its recommendations on December 17, Governor Andrew Cuomo asked the Board to consider granting another license in the so-called “Southern Tier,” citing – you guessed it – the “intent” of the law. Here is what the Board said in its December 17 report on awarding a fourth license:
The Board has declined to select a fourth Applicant in the belief that a second competing new gaming facility in any of the regions would make it significantly more difficult for any gaming facility to succeed in that region.
That straightforward statement of resolve dissolved as quickly as the Board could convene a meeting and thump their chests about the great process and how agreeing to the Governor’s request did not mean a new license would be recommended. Right.
There are additional aspects of the process that gives one pause. One is that Attorney General Eric Schneiderman’s staff is interviewing disgruntled bidders. The other is a report from Gannett’s Jon Harris that a law firm retained by the Gaming Commission as a consultant under a $4.9 million contract had previously represented each of the winning bidders. The potential conflicts were disclosed, and the Commission concluded there was no conflict.
Now nothing in the preceding paragraph means there was any inappropriate conduct. But the reason for following standard procurement practices is to ensure the public that everything is above board, and that government decisions are fair and accountable. Unfortunately, there is enough to indicate that the Gaming Facility Location Board has not done an adequate job of either documenting its decisions, or adhering to generally-accepted government contracting practices. And the political interference by the Governor only adds to reasonable skepticism that this is a decision New Yorkers can be proud of.