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Little luck in efforts to expand gambling

ALBANY — The expansion of gambling in New York is having a streak of bad luck.

The recession has interrupted more than $900 million in construction work on a Seneca Indian casino in Buffalo and a gambling-themed resort in the Catskills.

New York officials have yet to persuade federal officials to reverse a Bush administration ruling that has blocked the long-planned debut of Indian casinos in the Catskills.

And a contract to introduce video lottery terminals to Aqueduct Racetrack in Queens appears shaky amid an investigation into how it was awarded.

All of these projects would bring revenue into a state starving for money, whether from the $300 million Aqueduct franchise fee or a cut of the proceeds from new and bigger gambling operations. None of the projects are dead, but it’s also unclear how long they will be in limbo.

“Because of the economic realties that all gaming operators are faced with, our large-scale construction projects remain suspended indefinitely,” said Kevin W. Seneca, chairman of the Seneca Gaming Corporation.

New York has been increasing its stake in gambling for decades. State-run lottery games have expanded from daily drawings and scratch-off tickets to rapidly regenerating Quick Draw games and video lottery machines at harness tracks. The state also is home to five Indian casinos, three of them run by the Seneca Nation in Buffalo, Niagara Falls and near the Pennsylvania border in Salamanca.

The Seneca’s current casino in Buffalo is a temporary, prefabricated structure. The Nation had planned to build a $330 million permanent casino and hotel near the waterfront. But work was halted in 2008 along with an expansion of the Salamanca casino because of the economic downturn. The Buffalo site now features a skeleton of steel frames near the temporary casino.

Across the state in the Catskills, work also has stopped on what was once promoted as a $1 billion mega-resort featuring video lottery terminals and a harness track at the site of the Concord, the largest of the old “Borscht Belt” hotels. Westchester County developer Louis Cappelli, promising jobs and other economic benefits for the struggling area, landed special financial incentives from the state Legislature in 2008, only to run into financing trouble with the worldwide economic meltdown.

Still, developers at both ends of the state sound upbeat.

The Senecas note that despite the work stoppage on the permanent casino, they are spending $9 million to expand the temporary casino and double the number of slots to 445. As for restarting work on the permanent casino, Seneca officials say no decision yet.

“We are committed to making fiscally prudent decisions on our future expansion projects,” Seneca said in a prepared statement.

Cappelli said he expects to announce a financing deal soon to restart work on the now-$600 million Catskill resort project.

“It’s been 10 years. I’m motivated and determined to see it through,” Cappelli said.

The delays are particularly frustrating in the Catskills, where some locals see casinos as a way to recapture the old tourist boom from the region’s time as a prime vacation spot for New York City-area Jewish families.

Efforts to land an Indian casino there over the past decade have been star-crossed, with seemingly surefire deals falling apart. The biggest blow came in 2008, when the Bush administration’s Department of Interior rejected plans for separate Catskill casinos involving the St. Regis Mohawks of northern New York and the Stockbridge Munsee of Wisconsin. Federal officials noted the great distance between the two tribes’ reservations and the casino sites.

Sen. Charles Schumer and other elected officials hope the Obama administration will ease the rules on off-reservation gambling, despite opposition from some western senators. The New York Democrat told

The Associated Press this week that he is encouraged as he continues to work with Interior Secretary Ken Salazar and fellow senators.

“I am working with my Senate colleagues to forge a compromise that will allow gaming in the Catskills to go forward,” Schumer said.

In recent months, the best bet in the mix looked like the $300 million licensing fee due to the state by March 31 from Aqueduct Entertainment Group, the politically connected group that was chosen by state leaders to operate video lottery terminals at the Queens horse track of the same name. But that deal appears on hold pending an investigation by the state Inspector General.

Gov. David A. Paterson said this week he did not expect the state to receive the fee right away.

The Aqueduct delay underscores the problem of states relying on gambling revenue, especially during downturns. The Nelson A. Rockefeller Institute of Government in Albany reported last fall that nationwide state and local gambling revenues from lotteries, casinos, and “racinos” dropped by 2.6 percent in fiscal 2009.

Robert Ward, director of fiscal studies for the institute, noted the overall budget tends to grow by 5 to 8 percent a year, while gambling revenue generally will grow by a fraction of that.

“So the risk is that depending on more gambling this year will make budget problems worse in the years ahead,” Ward said.