After decades of false starts, a proposed Constitutional amendment to authorize casino gaming was approved earlier this month by New York State voters. Implementation of the amendment, including the process for siting of the casinos and selection of casino operators, will begin shortly in accordance with legislation enacted during the 2013 legislative session (the “Gaming Legislation”).

The Constitutional amendment allows up to seven private casinos across the state. Under the Gaming Legislation, however, the New York State Gaming Commission (the “Gaming Commission”) is only authorized to award up to four gaming facility licenses in three specified regions located in the upstate zone: the Catskills, Southern Tier, and Capital Region, which includes Albany and Saratoga Springs. While the Commission is authorized to award up to two licenses in a region, it may do so in only one region. Moreover, the Commission is expressly prohibited from awarding licenses in the downstate zone, which includes the City of New York, Nassau, Suffolk, Westchester, Rockland and Putnam counties. It is widely anticipated that the Commission will license two casinos in the Catskill region, and one in each of the other two regions.

The Gaming Legislation provides a convoluted process for the siting of casinos and for the selection of the casino operators. Under the legislation, the Gaming Commission is required to name a five-member board, to be known as the New York State Gaming Facility Location Board (the “Board”), which will conduct a “competitive” selection process in accordance with the Gaming Law’s detailed requirements, including competence and character, demonstration of local support, capital investment commitment, the amount of which is to be set by the Board, labor peace, etc. In addition, the determination of the Board of whether an applicant is eligible for a gaming facility license is to be weighted by 70% based on economic activity and business development criteria, 20% based on local impact and siting factors and 10% based on “workforce enhancement” factors. Each of these factors, as well as the other requirements for licensure are subdivided into numerous individual criteria, each significant in their own right. Consequently, a potential casino operator should thoroughly understand these requirements before committing to this process. Upon selection by the Board, the entities selected must then be licensed by the Gaming Commission.

The New York State Governor has indicated that requests for proposals for the casinos will be issued early in 2014. It is important to note that the legislation provides that contact with government officials regarding the siting and selection process will be severely restricted once the request for proposal process begins. The selection process is expected to last for most of 2014. Casino operators selected can receive an initial license to operate the casino for a period of 10 years. Renewal periods are to be determined by the Gaming Commission. Once granted a license, casino operators have 24 months in which to commence gaming activities.

The Gaming Legislation provides for a tax to be imposed on the casinos ranging from 37-45% of gross gaming revenues from slot machines. This rate mirrors the current tax rate on racinos located in each region. The tax rate for table games is set at 10%. Revenues from the operation of the casinos will be distributed as follows: 80% for K-12 education and property tax relief; 10% to be distributed equally between the host municipality and the host county; and, 10% to be distributed to counties in the host region for real property relief and education.

As noted previously, the Gaming Law specifically provides that the Gaming Commission is prohibited from licensing a casino in New York City. With respect to the remainder of the downstate region, it is not expected that a casino will be sited for at least seven years after the commencement of gaming activities in the upstate region. In addition, the Gaming Law provides that Native American tribal casinos with tax agreements with the State shall have exclusivity in their region. Thus, no private casinos may be located in those regions while those tax agreements remain in place.