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Talk about a turnaround.

It wasn’t too long ago that the future looked quite grim for Suffolk Regional Off-Track Betting Corporation. Rapidly declining horseracing handle and increasing operating expenses sunk the public benefit entity into a $17.5 million hole, forcing it to file for municipal bankruptcy in 2011.

“We were pretty much dead in the water, just really struggling,” said Phil Nolan, who served as Suffolk OTB’s president and CEO from 2012 through 2020. “The handle keeps going down on the horseracing and that’s what we were formed for.”

To right the ship, Suffolk OTB’s leadership embarked on a multi-pronged belt-tightening plan that included shedding property and trimming staff, while renegotiating and cancelling contracts.

“It was essential for our survival,” said Anthony Pancella III, Suffolk OTB’s current president and CEO. Pancella succeeded James LaCarrubba in the beginning of the year, when LaCarrubba was named vice president and chief operating officer by the Suffolk OTB board.

Pancella has been instrumental in orchestrating OTB’s comeback from the time he was installed as the organization’s vice president and chief operating officer in 2010.

But even after selling some $7 million in real estate, closing branches, securing union concessions and greatly expanding its Qwikbetz.com internet wagering franchises, the climb out of the red and into the black needed a much bigger boost.

“Our plan of adjustment was we were going to get VLTs,” Pancella said.

Thanks to state legislation and subsequent referendum passed in 2013, both Nassau OTB and Suffolk OTB were authorized to establish facilities to each hold 1,000 gaming machines. While its Nassau counterpart eventually made a deal to site its machines at the Resorts World casino at Aqueduct Racetrack in Queens, Suffolk OTB partnered with Delaware North to turn the former Marriott Hotel in Islandia into a gaming machine mecca called Jake’s 58 Casino Hotel.

Opened with 275 VLTs in Feb. 2017 and adding 725 more three months later, Jake’s has been off and running ever since. Save for a COVID-induced shutdown for part of 2020, the facility has proven to be quite a money maker, with annual gross gaming revenue of more than $254 million. The haul helped lift Suffolk OTB out of bankruptcy by the end of 2020.

Today, nearly six years after it opened, Jake’s is slated for a major expansion and makeover to accommodate an additional 1,000 VLTs that was recently approved by the state legislature and awaits Gov. Kathy Hochul’s signature. The project, estimated to cost around $200 million, calls for a 100,000-square-foot addition, new structured parking, restaurants, a VIP lounge and renovations to the hotel’s 200 guest rooms.

For Pancella, it’s been a wild ride. The Lindenhurst native, who founded a security and private investigations firm with his cousin Bill Campbell in 1985, began dabbling in local politics a few years later, running a campaign for Lou Howard Jr., who lost his bid to become a Suffolk County legislator.

By 2005, Pancella was named chairman of the Town of Babylon Republican Committee and four years later he became vice chair of the Suffolk County Republican Committee under John LaValle, who tapped Pancella to succeed Marietta Seaman as vice president at Suffolk OTB in 2010. Around the same time, New York City OTB went out of business, and Pancella knew he had his work cut out for him.

“I got really drawn into it because I had people crying at my desk and worried about what was happening,” Pancella told LIBN. “When we were in the depths of bankruptcy and we didn’t know if we were going to make payroll, we had employees take pay lags and we had the unions agree to pay lags outside the scope of their contract. Every single person was onboard, bought in and certainly I can say self-preservation is a great motivator.”

Nolan said one of the keys to the comeback was taking politics out of the equation.

“The hallmark of my time there was the complete business-like and bi-partisan approach to the whole situation between Tony and myself,” said Nolan, a former Town of Islip supervisor who still serves as an OTB consultant. “We’re both very political on opposite sides of the spectrum. However, we worked seamlessly to accomplish what we did and that was really critical, just putting aside the politics and getting the job done.”

Pancella agreed with that assessment.

“We all worked together, we all were rowing in the same direction, and we accomplished great things,” he said. “Phil was there for the whole thing. We went through eight years together and he was supportive in anything we wanted to do, and we did it.”

Though the VLTs kept the money rolling in, there was plenty of turbulence. Suffolk OTB filed a lawsuit against Buffalo, N.Y.-based Delaware North in Oct. 2019, alleging that the company had been misappropriating funds from the casino to benefit its other business interests. The suit was settled eight months later.

Eventually, Suffolk OTB, which sought to end its rocky relationship with Delaware North, purchased the Islandia operation in the spring of 2021 for $120 million, $40 million for the property and the rest to buy out Delaware North’s management deal.

“We were doing very well and now we had the institutional knowledge,” Pancella said. “We bought out a 50-year, $1 billion contract for $80 million.”

While Pancella won’t be leaving Suffolk OTB anytime soon, he will hand over the reins to former State Sen. Phil Boyle, who becomes president and CEO on Jan. 1. Along with his other leadership duties, Boyle will oversee Jake’s looming expansion project.

“Many people had written off Suffolk County OTB years ago when we were in bankruptcy. With the incredible success of Jake’s 58, however, we have had the type of turnaround nobody could have predicted,” Boyle said. “While the upgrade of Jake’s hotel and sports bar are imminent, if we are able to obtain additional machines the casino will be expanded dramatically.”

Pancella, who becomes managing director next month, says he will be around to help in any way he can.

“I believe in this corporation, and I have no doubt that Phil Boyle will carry the ball with the team we have going to take the next steps,” he said.

Currently in the midst of the approvals process with the Village of Islandia, much of Jake’s expansion project will be located on 10.3 acres adjacent to the casino hotel property that Delaware North purchased a few years ago.

Pancella credits Long Island development veteran Ron Parr of the Parr Organization, who was originally brought in by Delaware North, for assisting with the acquisition of Jake’s and advancing OTB’s expansion plans.

“I’ve been working with him almost daily for five years and I’ve learned more about the real estate development and construction business and generally having integrity from Ron Parr,” Pancella said. “We couldn’t have gotten this place done and our expansion plans wouldn’t be what they are without his expertise.”

Meanwhile, Suffolk OTB is in contract to sell 32 acres in Medford to a New Jersey-based industrial developer. In 2015, Suffolk OTB paid $10.9 million for the site, formerly occupied by a multi-screen movie complex on the south service road of the Long Island Expressway, where it once planned to build a 98,000-square-foot slots parlor in an ill-fated relocation of its Islandia operation. Real estate sources say Suffolk OTB is selling the Medford property for about three times what it had paid for it.

So far, Jake’s remains Long Island’s only casino, though it may soon have competition in the area. The state will be accepting proposals next month for three full-fledged casinos in the New York metro area, though it’s not yet clear where they will be located. Many observers expect one will likely go to the existing Empire City Casino in Yonkers and another will be sited at Resorts World in Queens.

Some have been pushing for the third casino to be built at the Nassau Coliseum site or the adjacent Long Island Marriott hotel in Uniondale. But both Pancella and Nolan said they think it will end up somewhere in the city. Casino groups have pitched sites like Hudson Yards and Times Square in Manhattan, Coney Island in Brooklyn and Willets Point in Queens, among others.

Still, there could be another casino on Long Island one day. The Shinnecock Nation previously announced it is teaming up with development partners and the Seminole Tribe of Florida, owners of the Hard Rock brand, to build a 76,000-square-foot gambling facility called Shinnecock Casino Hamptons off Montauk Highway in Southampton.

Competition notwithstanding, Pancella expects Jake’s will continue to rake in its share of gaming dollars. After payouts to players, each of the casino’s 1,000 machines currently take in an average of $697 in revenue per day. When Jake’s expands to 2,000 machines, Pancella conservatively projects that the average daily take will be closer to $450 per machine. That means Jake’s annual revenue could rise from $254.4 million to about $328 million or more.

The dough is spread around. Suffolk OTB gets 40 percent of the revenue, the state takes 45 percent to fund education, the state’s Gaming Commission gets 10 percent and 5 percent of the take goes to the New York Racing Association, which in turn pays horsemen’s groups. Suffolk OTB also gives the Village of Islandia $2.4 million a year for allowing Jake’s to be located in its municipality.

Suffolk County gets 100 percent of Suffolk OTB’s profits, which will likely amount to more than $30 million this year. That’s all generated from Jake’s VLTs, since Suffolk OTB continues to lose money on its horseracing business each year.

Though the state’s expansion of casinos and its legalizing of online sports betting has reaped hundreds of millions in revenue, it also comes at a cost. Jeffrey Reynolds, president and CEO of Garden City-based FCA (Family & Children’s Association), says there needs to be a commensurate expansion of prevention messaging and services for those who develop gambling problems.

“Most people can visit Jake’s or any other casino, set aside a budget and have a great time. A small percentage of people will get in over their heads, chase losses and experience family strife, job loss, anxiety, depression and even stress-related medical conditions such as hypertension, cardiovascular disease and peptic ulcers,” Reynolds says. “New York State hasn’t completed a comprehensive needs assessment or social impact study to identify the number or location of individuals in need of problem gambling treatment services in at least a decade, despite raking in billions in new revenues. That needs to change in 2023.”

Pancella acknowledges the issue and says OTB and other gambling venues support initiatives to help with problem gambling.

“We donate money and put pamphlets out about it and we have a self-exclusion policy in the state to see that people who think they do have a problem can exclude themselves, so we’re all in support of that,” he said.

Nolan also agrees that there will always be the problem gambling issue.

“But the reality is people are going to gamble and the whole country is realizing this,” he said. “You may as well get your piece of the action.”

Nevertheless, those involved say the success of Jake’s and its resurrection of Suffolk OTB is quite an accomplishment. Nolan said they created something special.

“It’s a tremendous success story and I’m really proud of it, because when I got there, there were 10 years of failure in front of us,” he said.

Pancella says it’s a story that everyone wants to see happen.

“They want to see government, or quasi-government, working together in a bi-partisan fashion, to generate revenue for the public good,” Pancella said. “We did every single one of those things and the story is one that I’m very proud of and one that everyone on our team should be proud of.”

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