Why did the gaming commission offer only a 15-year license?
MGM says that their bid was “predicated” on obtaining a 30-year license – a plan that was squashed with the state’s offer for a 15-year. The gaming commission set the 15-year term for the casino in a rule first issued Aug. 1. The tiered licensing approach called for license terms dictated by the investment amounts involved – the MGM project fell under the second tier of up to $5 billion. The larger competing projects fall under the 20-year tier. The commission ruling noted that many states offer licenses of under 10 years. The longest license issued in any US state is for 20 years. Foreign casino projects often receive much shorter licenses. Nevada, which has no limit on the number of licenses that can be issued, renews licenses annually. When contacted about MGM’s statement that it expected a 30-year license, a gaming commission spokesperson noted: “There is no casino in North American with a 30-year license.”
Is the existing racino really doomed?
Spano’s stark warnings about the future of the existing business are unfortunately confirmed by the experience of other regions where new full scale casinos compete with racinos. Studies of gambling markets have shown that there is a major cannibalization effect. When Ohio introduced casino gambling, neighboring states saw a significant decline in video lottery terminal revenue. When New York opened casinos close to the PA border, there were also declines. Racinos can stay alive by cultivating strong local connections and by offering enhanced amenities, but the potential for three nearby competing full scale casinos makes the Empire City situation considerably more problematic.
What does the racino mean for MGM?
The Yonkers casino would have been a relatively small undertaking. MGM has annual revenue of about $17 billion and annual profits of about $750 million. It operates a number of the most iconic resorts in Las Vegas, other regional US resorts, and international assets in Macau and Japan. And the company operates fast growing businesses in sports and i-gaming markets. The company went on a bit of an investment binge between 2010 and 2019, but has since pared down its capital expenditures. Expenditures in 2024 were $982 million – well below the contemplated Yonkers investment.
From a Wall Street perspective, MGM likely made a smart move by backing out of the Yonkers expansion. The biggest risk was the possible “competitive saturation” of the NY gambling market. “The withdrawal from the licensing process provides more capital allocation flexibility and theoretically frees up $500 million, the NY license fee minimum, plus the incremental $1.8 billion of capex MGM would have incurred over the next two years for construction,” noted one analyst.
MGM Resorts bought the 97-acre raceway and slot machine property from the Rooney family for $850 million in 2019. MGM then sold the property itself to VICI Properties, a real estate investment trust specializing in “experiential properties,” as part of a $17.2 billion 2021 mega deal involving many casino properties.
What do we know about the Trump connection to Bally’s and MGM?
Given the Trump administration’s murky boundaries between government policy and family business, Spano’s allegation that MGM may have bailed in order to do Trump a favor may not be that far-fetched. It’s certainly true that an award of a license to Bally’s in the Bronx will put another $115 million in Trump’s pocket.
Back when Trump was a struggling Atlantic City hotel developer, he engaged in a rivalry with Bally’s. Yet after Trump exited Atlantic City, many of his executives moved to Bally’s. MGM developed connections with Trump during his first presidential term, notably through an intensive lobbying campaign to get help from Trump to block the development of a tribal casino in CT that would have competed with an MGM property in neighboring MA.
