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Concerns around del Lago’s performance not worrying local officials

When Moody’s Investors Services downgraded del Lago Resort & Casino’s ‘financial outlook’ — those in the region took notice.

While it didn’t dampen the mood of last week’s one year anniversary at the $440 million facility, which employs more than 1,200 people — concerns over financial stability were raised.

del Lago was expected to ramp up to about $250 million in net revenue during the first year of operation, according to Moody’s estimates. However, when the rating company downgraded del Lago’s score — it was largely attributed to the facility falling upwards of $100 million below that forecast.

Still though, it’s $150 million in net revenue that wasn’t in Tyre, New York before the opening of the facility.

When it comes to gaming revenue — a big concern was that local municipalities could take a direct hit as result. However, County Manager John Sheppard says he’s heard those concerns — but isn’t worried for the County’s financial stability.

“I am continuously concerned over the revenue and expenses of our County’s operations; my job. However, the recent discussions of del Lago not yet meeting their forecasted revenue is not a vulnerability to the County budget,” Sheppard said on Saturday. “My budget assumptions and recommendations for 2018 were typically conservative.”

It’s about balance, according to Sheppard, who says that while he needs to forecast responsibly — he also has to be as accurate as possible in creating those expectations for the County.

“As Budget Officer I am expected to derive defensible assumptions in both expenses and revenues then make recommendations to the BOS for their budget adoption process. Accuracy is the goal; yet I have no ‘crystal ball’,” he explained. “The best way to explain the importance of accuracy in an annual operations budget is the effect on the Property Tax Levy. Typically, the budget is populated with known and assumed revenue and expenses; the shortfall to ‘close the budget’ (revenues match expenses) is the Levy.”

Sheppard says the intent is to keep the levy as low as prudent, as ‘flat’ as possible with little to no volatility in successive years.

He said the pre-opening gaming revenue forecast for del Lago was $3.8 million, which was a far cry from the $1.5 million that was budgeted. Sheppard said 2017 closed with the County seeing $2.1 million — more than a half-million above expectation.

The 2018 expectation is $2.5 million in gaming revenue, according to the budget adopted last fall. “Going forward, my del Lago revenue recommendations to the BOS will be based on actual performance and the established trend,” added Sheppard.

Given the forecasting efforts of Sheppard and Seneca County — del Lago’s performance shouldn’t have a major impact in the near-future.

Sheppard said a ‘catastrophic shortfall’ would be necessary in the sales tax revenue line to adversely impact the County’s budget and thus taxpayers. “In the event of a catastrophic shortfall of yearly sales tax revenue, our County has sufficient reserves to ‘weather the storm’ without severely impacting annual operations. However, a severe shortage would negatively impact the following year’s Property Tax Levy and Tax Cap compliance. We are vulnerable to sale tax fluctuations; sales tax revenue is nearly 2.5 times the levy,” he added.

The 2018 budget assumes $24 million in sales tax revenue, and in 2017 the County closed at nearly $24.3 million, according to Sheppard — placing Seneca County in a comfortable place currently.

Seneca County has benefited in a number of ways since the opening of del Lago, despite the glum Moody’s report.

“Before del Lago Resort & Casino opened, the unemployment rate in Seneca County hovered around 7 percent — well above the state and national averages. Since del Lago Resort & Casino opened, hundreds of Seneca County residents have landed jobs at del Lago assisting in bringing down the unemployment rate to 3.9 percent,” said Seneca County Board of Supervisors Chairman Bob Shipley last week.

Tyre Town Supervisor Ron McGreevy added on Thursday “del Lago Resort & Casino has been an asset to our region — the Town of Tyre and Seneca County are thriving as a result of the casino opening. Del Lago has done everything it pledged since the day it opened — they brought much needed jobs to the area, enabled the Town of Tyre to reduce taxes 50 percent in 2017.”

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