Islandia’s Jake's 58 casino will add more machines as cash pours in

Suffolk OTB’s video lottery casino has become one of the state’s most successful gambling facilities — just three months after opening in an Islandia hotel — and operators are set to add 273 machines by next weekend.

Figures from the state Gaming Commission show the betting parlor, Jake’s 58 Hotel & Casino in Islandia, makes more money per machine than all but one of the other 10 VLT facilities in New York.

Last month, the average terminal at Jake’s generated $778 in daily earnings for Suffolk OTB — more than double the statewide rate of $326 per day.

Officials at Suffolk OTB — which filed for bankruptcy protection in 2012 and owes about $15 million to creditors — have pinned their fiscal solvency hopes on the Islandia casino.

Gaming opponents question whether the Islandia casino’s success is sustainable in the long run, pointing to studies showing that VLT facilities peak in their first years before seeing revenue drop in later years as their novelty wears off.

Suffolk County Regional Off-Track Betting Corp. officials say they are not surprised by the revenue generated by the casino, pointing to Long Island’s affluent market and what they say was a pent-up demand for electronic gaming in Suffolk.

“We’re very pleased with what has happened so far, and we have done very little promotion, actually,” Suffolk OTB president Phil Nolan said in an interview. “The market is very strong. People enjoy spending their entertainment dollar on the VLTs, as we expected.”

The facility, which opened Feb. 27 with 265 electronic gaming terminals, added 35 terminals in March, and 427 machines on May 1. With the additional terminals, Suffolk OTB earnings at the casino jumped 33 percent, from $1.56 million during the last week of April to $2.1 million in the first week of May, Gaming Commission figures show.

Buffalo-based Delaware North, which runs the betting parlor for Suffolk OTB, is rushing to finish installing 273 additional gaming terminals as soon as Monday, in hopes of capitalizing on the early success.

The new section, in the hotel’s former swimming pool area, will give the casino 1,000 video terminals, the maximum allowed under the 2013 state law that authorized VLT casinos in Suffolk and Nassau counties.

State Gaming Commission records show that Suffolk OTB earned a total of $14.03 million from the Islandia casino in March and April. Most of that revenue is paid to the state public education fund, the Gaming Commission, vendors and marketing. The remaining 35 percent of OTB’s take is used to pay its operating expenses at the casino.

Jake’s 58 general manager Chuck Kilroy said he hopes the casino revenue rises in the summer if visitors traveling to and from East End vineyards and the Hamptons stop at the hotel.

Before the casino added more terminals, some customers complained they had to stand in line to wait for a terminal to become available, Kilroy said.

“We’re not seeing that now that we’ve expanded,” he said during a tour of the casino. The expansion is on schedule, though the heavier-than-anticipated demand makes completion more urgent.

“We had it all along that we wanted to push things . . . to be ready for the summertime,” Kilroy said.

The only New York VLT operation more successful than Suffolk’s on a per-machine basis is Nassau County Regional OTB’s 464 machines in the Resorts World casino at Aqueduct Racetrack in Queens.

Nassau’s daily earnings there averaged $1,589 per machine last month, almost twice as much as Suffolk made in Islandia. The other 5,100 machines at Resorts World averaged $410 per day.

Nassau OTB president Joe Cairo attributed the agency’s success in Queens to a funding formula in the 2013 casino law that pays more revenue to operators than a 2001 state law that authorized Resorts World and eight upstate casinos. Nassau OTB plans to double the number of its machines in Queens “in the next several months,” he said.

Cairo said Nassau’s VLT operation has not been hurt by the Islandia casino. Nassau has a “nice working relationship” with Suffolk OTB, and the two betting parlors are far enough apart — about 43 miles — that both can succeed, he said.

“Islandia is going to get some business from Nassau, absolutely, but I don’t see people fleeing from Nassau,” Cairo said. “I think it’s big enough that we can coexist.”

Cairo said VLT earnings have helped the agency reduce its debt to the New York Racing Association from $8 million to $6 million. Nassau OTB pays the county $3 million per year from its VLT earning.

Resorts World operator Genting New York LLC pays Nassau OTB $9 million annually until the number of Nassau machines there reaches 1,000, Cairo said. Genting’s annual payment to Nassau OTB will increase to $25 million when it has 1,000 machines there, or by 2019, whichever comes first, Cairo said. When that happens, OTB’s annual payment to the county escalates to $20 million.

Nassau OTB has no employees and virtually no expenses at Resorts World, he said.

“For us, it’s a risk-free revenue stream,” Cairo said. “We just collect money.”

In Suffolk, the county is guaranteed a total of $13 million for the casino’s first 10 years of operation, including $2 million the first year and $3 million the second year. It could get more if revenue exceeds certain levels, officials have said. The county is to receive $1 million a year from the third to 10th years, but otherwise profits go to creditors until they are paid off.

Delaware North struck a deal last year with the Village of Islandia in which the village will be paid a total of $47 million over 20 years. The company has paid the village more than $3 million so far, including about $1.5 million for upgrades to a village park.

Village officials have said the deal has helped them cut taxes while expanding services.

Casino critics have expressed doubts about whether it will continue to be a good bet. Assemb. Michael Fitzpatrick (R-St. James) cautioned that Islandia officials should not become too dependent on the casino.

“I think it’s still very early. They’re still in the early phase of, they’re the new thing. They’ll enjoy success for awhile, but I think eventually it’s going to level off. I still question whether it’s going to be successful long-term,” Fitzpatrick said. “The trustees and the mayor need to be careful with spending in case that gold mine dries up, because that’s what’s happened to other communities.”

Casino opponents sued the village in September, saying the village improperly approved the facility. A decision in that case is expected soon, said Paul Sabatino, a Huntington Station attorney for the opponents.

Some Islandia residents complained when the casino opened that customers were parking on nearby streets rather than in the hotel parking lot. On a recent visit, there was ample parking though the casino was mostly filled.

In a statement, Islandia Mayor Allan M. Dorman said, “The village has not received any complaints regarding traffic or parking related to the hotel’s operation. Effective June 1, 2017, the village will have 14 parking meters covering 113 stalls fully operational on village roads adjacent to Jake’s 58.”

Opponents also feared the casino would be a magnet for crime, but Kilroy said that has not been a problem.

Most patrons are from Suffolk, but some have come from Nassau, Kilroy said. Participants from a recent women’s college lacrosse tournament also stopped in one night, he said.

“What people like here, from all the comments, is they like the cleanliness here and they feel safe,” Kilroy said.

Among the additions on May 1 were tables where customers can choose among electronic versions of traditional casino games such as craps, blackjack, roulette and baccarat.

The new section opening this week features slot-style games with names such as Red Hot Diamonds and Titanic. Throughout the casino, large-screen televisions are tuned to sporting events, and servers bring drinks and food to bettors.

“It’s really about what we said a million times, which is that Long Island was the largest population area in the country without VLTs,” Nolan said. “So it is a big market and we have a great site and we have put together a really, really nice facility that accommodates people’s wishes, and it’s only going to get better.”

By Carl MacGowan

carl.macgowan@newsday.comCarlMacGowan

Carl MacGowan is a Long Island native who covers Brookhaven Town after having previously covered Smithtown, Suffolk County courts and numerous spot news and feature stories over his 20-plus year career at Newsday.