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Now Appearing in Borscht Belt, Developers Betting on a Casino

Charles V. Bagli
The New York Times

Dec. 13, 1999

MONTICELLO, N.Y. -- Gene Barbanti, a real estate broker from New Jersey, moved to the Catskills 30 years ago and bought some land cheap, thinking that the borscht belt had nowhere to go but up.

Instead, the bungalow colonies and grand hotels where Danny Kaye, Milton Berle and Buddy Hackett once entertained vacationing New Yorkers died a lingering death over the next three decades. It left Sullivan County a depressed backwater, only 90 miles northwest of Manhattan.

But with the growing possibility of a $500 million casino opening in Monticello, Barbanti has emerged in the last year as the unofficial grand marshal of the great Sullivan County land rush. He recently sold the 236-acre Shawanga Lodge property in Wurtsboro and the old Laurels resort on Sackett Lake in Thompson and is completing the sale of an 800-acre tract in Wurtsboro Hills. All in all, powerful and well-connected investors and developers have snapped up more than $40 million worth of wooded land, dormant hotels and golf courses in 10 major deals over the last year, with plans to invest hundreds of millions of dollars in resorts, second-home communities and attractions.

"This is not your grandfather's Catskills anymore," Barbanti said at his office in Liberty, where storefront after storefront sits hauntingly empty. "This is a place waiting to be rediscovered and I think we're on the threshold."

Hopes for a Catskill revival have fallen flat in the past. But with Interior Secretary Bruce Babbitt likely to decide by January or February whether to approve a casino proposed by the St. Regis Mohawks next to the Monticello Raceway, more money and muscle are betting on it than ever before. And as developers continue to propose ambitious, big-dollar projects, the future of the Catskills seems increasingly tied to two factors. The first is whether the region will get casino gambling. The second is whether it can come back without it.

For decades, gambling has been held up as a tantalizing cure-all for the region's economic doldrums.

But now many advocates, though not all, expect Babbitt to approve the tribe's casino application and send it to Gov. George E. Pataki for a final decision. Although the governor has not indicated what he will do, Pataki thinks casinos "make economic sense in traditional resort areas like the Catskills," said his spokesman, Michael McKeon. With politically connected developers like Louis R. Cappelli and David Flaum, many of them major Republican contributors, suddenly buying property in Sullivan County, expectations are running high.

Local officials acknowledge that the prospect of gambling is at least partly responsible for the land boom. But they also say that Sullivan County has made great strides in recent years toward developing an economic plan and a tourism industry that are not reliant on gambling or the old resorts. The county plans to build an industrial park with fiber optic connections next spring, and has helped renovate 70 sagging storefronts in Monticello and elsewhere. It has also demolished 100 abandoned hotels and bungalow colonies, what the county manager, Jonathan Drapkin, calls the "flotsam and jetsam of the borscht belt era."

"Gaming is probably a keystone piece of our economic redevelopment," said Gary Sommers, the mayor of Monticello, "but it's only a piece. If we don't do the other elements of our economic plan, the village will die around the casino." Today, a third of the households in the county of 69,000 people make less than $26,000 a year.

A revival would be the third wave of prosperity to wash over the Catskills. From the 1890's until World War I, the cool mountains and lakes of the area were a favorite respite from the city's sweltering heat and tuberculosis for Italian and Irish immigrants.

During the golden age of the Catskills, from 1940 to the mid-1960's, however, the region became a vacation haven for Jewish immigrants who flocked to as many as 500 hotels that offered tennis, swimming, elaborate social programs and legendary nightclub entertainment. But with advent of inexpensive air fares and the popularity of European vacations, the Catskills slowly lost their luster. Today, only a handful of hotels are left.

"What's kept us from moving forward for the last 20 years," Conway said, "was that so many people put all their energy into saving those dinosaurs. People are beginning to realize that we are a viable tourist destination even without the resorts. Indian gaming would add to the appeal of the area."

The proposed 1.8 million-square-foot casino complex would be built next to the harness track in Monticello, which has been losing money for years. Under the proposal, Robert A. Berman and Cliff Ehrlich, two local businessmen who own the track, would give 30 acres to the St. Regis Mohawks and build and operate the casino for the tribe, which would contribute $5 million a year to the county and village to mitigate the negative effects of the casino, including increased traffic. The two men and their partners would enlarge the track and develop the surrounding 200 acres.

Berman and his partners, who include Joseph Bernstein of Americas Partners and Alpha Hospitality, are a politically formidable group. They have contributed more than $160,000 to state and national Republicans since 1995. Charles A. Gargano, chairman of the state's economic development agency, was a director of Alpha Hospitality until late in 1995, when he stepped down, and he remains friendly with the company's chairman, Stanley S. Tollman.

But Sullivan County officials are hoping that the current boomlet will survive even if the bid for a casino fails. With Americans increasingly taking long weekends, rather than three-week vacations, investors and local officials say that Sullivan County should benefit from its position astride a three-state market.

Most developers say their plans do not depend on gambling, although a casino would certainly enhance their investment. In the meantime, county officials are providing tax breaks and other incentives.

Flaum, the Rochester developer who paid $650,000, or roughly $3,000 an acre, for the Shawanga Lodge property, said that Sullivan County's rock-bottom land prices were very attractive. Flaum, who has contributed hundreds of thousands of dollars to state and national Republicans, said he planned to build a 250-room hotel and convention center, whose value would be enhanced by the casino.

Cappelli, a wealthy Westchester developer, made the biggest splash at bankruptcy court sales earlier this year when he paid a total of $16.25 million for the two largest and most famous old resorts: the Concord at Kiamesha Lake, and Grossinger's in Liberty. Cappelli, who built the Sullivan County government building in the early 1970's, said he planned to build a new 1,000-room convention hotel at the Concord, which has a legendary golf course known as the Monster, followed by a 200-room spa at Grossinger's.

The two properties had teetered in and out of bankruptcy for more than decade with a succession of owners. Citing the report of a hotel consultant, Cappelli said he could succeed where others failed because he had more money and experience in renovation projects.

Cappelli, his companies, his family and his partner, an affiliate of Reckson Associates Realty Corporation, have contributed more than $160,000 to state and national Republicans since 1995. Both partners have surfaced in an investigation by the Manhattan district attorney into bidding irregularities in the sale of state land on Long Island and in a wider inquiry into possible political favoritism by the state's economic development agency and its chairman, Gargano.

Although Reckson, which had formed a partnership with Cappelli, was declared the winning bidder for the Long Island property, the state recently decided to hold a new auction, which Cappelli said may be challenged in court.

Cappelli vehemently defended himself, saying he was being penalized for being making legal political contributions. He said he was cooperating with prosecutors, but he declined to say why he has so far rebuffed requests for an interview by the district attorney. Although both Governor Pataki and Gargano have visited him at his summer house in the Hamptons, Cappelli said he had talked to neither man about the Long Island property, gambling or his investments in the Catskills.

"It's a business investment," Cappelli said. "It's an apolitical deal. It'll be successful with or without gaming because there are 55 million people within a four-hour drive."

Cappelli said he would definitely start construction on a new hotel at the Concord next June.

By then, critics note, it should be clear whether or not the casino will go forward.