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Comptroller says state failed to bill commercial casinos for millions owed Albany

ALBANY – The state failed to bill four commercial casinos in upstate for state-performed work intended to ensure those facilities are operating in compliance with New York laws and regulations, a new audit by state Comptroller Thomas DiNapoli has found.

The audit, revealing that oversight payments were made by video lottery terminal and Indian casino operators but not the four commercial casinos, comes as some of those new casinos are seeking special state tax breaks to try to make up for the underwhelming financial performances they have seen since opening.

"The costs to regulate casinos in New York State is supposed to be shouldered by the casinos themselves, but the state Gaming Commission has let some of them slide on this responsibility. That has unfairly shifted expenses to taxpayers. The commission should bill all casinos for oversight costs in a timely manner and come up with a plan to handle disputes with casinos over these charges as soon as possible,'' DiNapoli said in a statement about the audit obtained by The Buffalo News.

The state Gaming Commission has employees on duty at 19 betting facilities whenever they are open to ensure that the state’s laws and rules pertaining to casino betting are obeyed. In turn, the facilities’ owners are supposed to pay – per state law or compact deals – for the costs associated with such state oversight.

But the regulator failed to collect $13 million in required reimbursements by four commercial casinos – located in Seneca, Tioga, Schenectady and Sullivan counties – since the state authorized such payments in 2014. DiNapoli’s audit said the money, had it been collected, could have grown through interest-bearing accounts or been added to state education aid payments.

The audit said the commission could also shore up the way it assesses how Indian tribes make quarterly revenue-sharing payments to the state. Such payments come under deals that gave the tribes some casino gambling exclusivity arrangements in large areas around their tribal casinos. The audit did not specifically look at the Seneca Nation because it has held up revenue payments to Albany for its three casinos as part of a dispute it has had for several years with the Cuomo administration.

In the three fiscal years ending last March 31, the DiNapoli audit found that the Gaming Commission collected $144.8 million from VLT casinos – such as those at Hamburg and Batavia – and $8.9 million from Native American casinos. But it collected zero dollars from the four commercial casinos because the agency “had not billed” them.

The agency told DiNapoli’s auditors that the collections weren’t made because regulations had not yet been adopted to charge the fees to the casinos. Such rules weren’t put in place until long after the first of the four commercial casinos opened.

“We found the commission is not adequately overseeing the reimbursements of regulatory oversight costs," the audit said.

The chief problem with the situation: Instead of the four casino companies paying the costs of the oversight, as required by law, it left “the state to subsidize the commission’s regulatory functions,’’ the audit said.

In a written response to DiNapoli, the commission agreed that it should bill the casinos in a timely manner. It said the rule permitting the oversight billing to the casinos is in place and billing has been carried out, according to the Dec. 30 response by the agency to the audit.

“The Commission will continue to bill in a timely manner going forward,’’ the agency wrote DiNapoli’s auditors.

In a statement Tuesday afternoon, the agency said that DiNapoli's implication that the state failed to collect regulatory costs "is patently false and they know it, as all such expenses have been secured by the Commission-used license."

The agency added: "The Commission appropriately waited for the conclusion of the regulatory process, which established rules and methodologies for regulatory fee assessment, before issuing its invoices."

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