New York Gov. David Paterson is raising the ante for bidders vying to turn a dilapidated horse-racing track in Queens County into New York City's first casino-type destination.

Paterson's office recently notified six bidders, including gambling heavyweights Wynn Resorts Ltd. (WYNN), MGM Mirage (MGM) and Penn National Gaming Inc. (PENN) that the state wants a $200 million minimum upfront payment for the licensing fee. The interested parties have until Friday to respond and also to provide documentation that they have the funds on hand.

It's another twist in the bidding process for the 115-year old Aqueduct Race Track in Jamaica, N.Y. Some bidders privately expressed frustration that it is taking so long for the state to select a winner and said they received indications from Albany, the state capital, that a decision would be made by Labor Day. Nonetheless, about half of the bidders are on board with the new terms, including Penn National which already pledged $250 million upfront, the highest so far, as part of its initial proposal.

Morgan Hook, a spokesman for Patterson, would only confirm that a letter was sent to the bidders Friday and said a timetable for a decision was never established. The governor, speaker of the assembly and senate president must unanimously agree on the winning bidder.

The bidders are aiming to renovate Aqueduct with thousands of video slot machines and other entertainment and dining fare. The racino--a horse track which has a casino--stands to generate up to $1 million a day in revenue for the state.

"We have no problem meeting the terms outlined in the letter regarding a minimum upfront payment," said William Bissett, president of Delaware North Companies' Gaming & Entertainment subsidiary. Delaware North is leading the bid for Aqueduct Gaming LLC. The company, which originally proposed a $100 million upfront payment, actually won the Aqueduct contract last year, but failed to secure the necessary financing amid the credit crunch.

Don Peebles, a Washington D.C-based real estate developer and hotel owner who is spearheading a bid with MGM Mirage and Harbinger Capital, said his group will increase its minimum upfront and has already submitted the requested documentation.

He said the big question is what happens once the winner is announced.

"What assurances will the state provide that the process will move more expeditiously than it has so far?," he asked.

-By A.D. Pruitt, Dow Jones Newswires; 212-416-2197; angela.pruitt@dowjones.com
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