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Bellone raises concerns over Suffolk OTB's casino deal with Delaware North

OTB and Delaware North are working to finalize

OTB and Delaware North are working to finalize site selection and undertake construction for what OTB officials concede now is an unlikely September casino opening. This slot machine was getting a workout on July 27, 2012, at Resort World Casino in Jamaica, Queens. Credit: Nancy Borowick

Suffolk County Executive Steve Bellone is looking to change the just-signed contract between Delaware North and bankrupt Suffolk Off-Track Betting Corp. over the financing of a $65 million slot machine casino.

Thomas Garry and Lee Woodard of Harris Beach PLLC, the county's bond attorneys, filed papers in federal court April 7 to have the county become a party to bankruptcy proceedings and, according to a Bellone spokesman, "reserve the right to object to the final approval" of the financing plan.

"We are comfortable with the management aspect of the contract, but we are exploring through counsel . . . whether the $65 million loan is the most cost-effective financing for OTB," said Justin Meyer, Bellone's spokesman.

Meyer said Bellone wants to make sure the county gets its "fair share sooner rather than later" when the bankruptcy court begins "distributing money out to creditors and other people getting a piece of the pie."

Bellone first raised concerns over the deal in a closed-door meeting late last month.

Phil Nolan, Suffolk OTB president, said: "We continue to work to strenuously make a casino right in Suffolk County a reality for our residents."

Bellone's move comes as OTB and Delaware North are working to finalize site selection and undertake construction for what OTB officials concede now is an unlikely September casino opening. The county has budgeted receiving $4 million this year, but no site has yet been chosen. A former movie multiplex near Exit 64 of the Long Island Expressway in Medford is a leading contender among several options.

Under the contract, approved in court April 9, Delaware North would pay the upfront cost of buying land and constructing a casino with 1,000 video lottery terminals. Suffolk OTB will begin repaying the gaming operator at a rate of 4.75 percent interest the first year and .75 percent more each year until the rate caps off at 7 percent in the fourth year.

OTB officials say they expect to be able to refinance the debt at a lower rate once the casino begins to generate substantial revenues.

Woodard, in court papers, said it is hoped all parties can "find the best financing arrangement . . . through a properly proposed plan of adjustment and not a series of piecemeal sub rosa plan type motions."

County Attorney Dennis Brown would not provide any details of financing options or how much could be saved because the issues are part of "ongoing negotiations" with "various parties," though he declined to say whom.

What makes Bellone's entry unusual is that two of his high-level aides, Labor Commissioner Sammy Chu and Economic Development Commissioner Joanne Minieri, were part of the unanimous vote for Delaware North's selection and were consulted during contract talks.

Brown also acknowledged the court has not yet ruled whether the county has standing in the bankruptcy proceeding

Despite bankruptcy, OTB paid Suffolk $1.6 million last year from a 5 percent surcharge levied against all bettors, plus what was left from the betting handle after payouts to bettors, tracks and other agencies and OTB expenses.

In the meantime, Suffolk OTB officials say they have received a new $2 million line of credit from Commercial Bank of Long Island at an interest rate of 8 percent, a result of their financial condition. OTB also expected to close on the sale of its Bay Shore betting branch within the month, which will net OTB $1.35 million.

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