Saturday, September 22, 2007

Massachusetts Guv Wants Three Casinos

By Ken Davison

Earlier this week, Massachusetts Governor Deval Patrick recommended three commercial casino licenses be awarded in that state and said that an Indian tribe would recieve preferential treatment for one of these casinos.

The decision, which needs legislative approval, has given both federally-recognized Indian tribes of that state more casino options. The tribes could either apply for one of the three proposed commercial licenses or they could take the path of forcing the governor to negotiate an Indian gaming compact.

Both of Connecticut’s Indian casinos are likely to feel the competition. The Mashantucket Pequots say 35% of their casino’s visitors are from Massachusetts while the Mohegans report about half that percentage of Massachusetts residents visit the Mohegan Sun.

The two federally-recognized Indian tribes in Massachusetts are the Aquinna Wampanoags, who were recognized in 1987, and the Mashpee Wampanoags, recognized just this past February. Neither Tribe has negotiated gaming compacts with the state. Massachusetts does not permit the charity casino nights that were once allowed in Connecticut and which helped pave the way for the first Indian casino in Connecticut, the Mashantucket Pequot Nation’s Foxwoods casino. Legalizing casino gambling in Massachusetts, however, will give the Mashpees and Aquinnas a stronger bargaining position.

In 2001, a third Massachusetts Tribe, the Nipmuck Tribe, was on the verge of receiving federal recognition but the U.S. Interior Department’s Bureau of Indian Affairs’ positive finding was reversed under the Bush administration and their petition was later denied in 2004. The Nipmucks are appealing the decision.

The Aquinna Wampanoag, Mashpee Wampanoag and the Nipmucks were officially recognized by the state of Massachusetts in 1976. The Mashpees tell of their tribe welcoming the Pilgrims at Plymouth in 1620 but it was the denial of a planned speech by an Aquinna Wampanoag man, Wamsuta, during celebrations of the 350th anniversary of the landing of the Pilgrims that sparked the Thanksgiving Day protests now held in Plymouth every year since 1970 and to which Indians from many tribes, including the Mohegans, have participated.

The Aquinna Wampanoags have trust lands in the town of Aquinna (Gay Head), in the southwest portion of Martha’s Vineyard Island. The Mashpees recently sent an application to the U.S. Department of the Interior to take into trust as their reservation 160 acres of land in the town of Mashpee and 550 acres in Middleborough. The Mashpees are proposing a $1 billion casino in Middleborough, near the east coast town of Plymouth.

The Pokanoket Wampanoag, neither recognized by the state or the federal government, sent a letter to the governor in August claiming the Mashpee’s proposed casino is infringing on their boundaries, as outlined in an 18th century map.

The Mohegans, with their partners, are likely to bid for one of the casinos. The Tribe announced a desire for a $1 billion casino complex in Palmer, located in western Massachusetts and in a path almost due north from their casino in Connecticut.

The two high-profile partners that developed and managed the Mohegan Sun, Len Wolman and Sol Kerzner, joined the partnership that is backing the Mashpee Wampanoag’s casino bid. Their company, Trading Cove Associates, managed the Mohegan Sun from its inception and until its seven-year contract was bought out on December 31, 1999 in a deal that agreed to pay Trading Cove 5% of the casino’s gross revenues for a fifteen-year period. Based on last year’s $1.5 billion in revenues at Mohegan Sun, Trading Cove earned about $75 million on their five percent formula in that one year alone. The Mohegan Sun, through its business arm Mohegan Tribal Gaming Authority, is expected to pay Trading Cove one billion dollars over this period, even if the casino revenues were to remain flat until the end of 2014. Wolman and Kerzner, among numerous ventures, also own a racetrack with slot machines (VLT’s) in Lincoln, Rhode Island.

Its not clear how long it may take until casinos are opened in Massachusetts. The state Legislature must first approve casino gambling, a bidding process for the licenses must be set up and background investigations completed before any casino construction can begin.

The Pennsylvania and New York Landscapes

By Ken Davison

In just three weeks, the closest competition to the Tribe’s Pocono Downs in Pennsylvania will open. The Mount Airy Casino and Resort, located in the Mount Pocono resort area and just twenty miles east of the Tribe’s Pocono Downs, is scheduled to open on October 15th.

It is not known what effect this will have on the Tribe’s racetrack and slot parlor in Wilkes-Barre, Pennsylvania. The Mount Airy casino will have 2,500 slot machines and 200 hotel rooms.
About seventy miles northeast up the mountains from the Poconos are the Catskills of New York, where various Indian tribes are hoping to build casinos. The current head of the Bureau of Indian Affairs, Dick Kempthorne has said he is opposed to off-reservation casinos and that if he approves one then he would have to approve them all. The St. Regis Mohawk Tribe's bid for a casino in the Catskills has the support of New York Governor Eliot Spitzer but is stalled on Kempthorne's desk.

On September 12th, the New York State Division of the Budget (DOB) announced it was seeking expressions of interest from experienced gaming operators to operate a 4,500 machine slot machines (video lottery terminal, or VLT) at Aqueduct Racetrack and calls for responses by October 15th. The operation of VLT's at the Belmont Racetrack, which was included in the first round of bids, is not part of the new bid.

Capital Play, a firm that asked the Mohegan Tribe to join them in their bid, was knocked out of the bidding that ended when the governor announced that New York Racing Association was selected as the franchise to operate the state's three racetracks.

The Mohegan Tribe and its development partner, Capital Play Inc., said after the selection that they would submit a letter of interest to run a gaming facility at Aqueduct Racetrack. While they intend to bid on the gaming at Aqueduct, according to The Day, "the Tribe and Capital Play are nonetheless continuing to lobby the Assembly heavily not to accept Spitzer's awarding of a bid for the operation of the three tracks to the racing association and the separate deal for gaming."

Paul Francis, a senior advisor to the Governor said, “We believe that the Governor’s recommendation to award the racing franchise to a newly reconstituted NYRA—as the best operator of racing in New York State—while seeking an experienced gaming operator to operate the VLT facility offers the best opportunity available to enhance the racing industry in New York while generating the maximum revenue possible for education. We look forward to working with the legislature to translate the Governor’s proposal into law and are prepared to answer any questions they may have about the specific terms and conditions of the Governor’s recommendation.”

In a news release, the governor's office points out that "Funds from the VLT facility will provide sustained funding for elementary and secondary education, while also supporting the operation and improvement of the three thoroughbred racing facilities. The state will receive in excess of 70% of Net Machine Income (“NMI”) from the facility in the form of statutory payments for education and operation of the Lottery and approximately 14.5% of NMI will be dedicated to supporting thoroughbred horse racing in New York State. The remaining funds will be used to pay operating expenses including salaries, debt service, taxes, and a management fee if applicable."

The Aqueduct Racetrack opened in 1894. It is the only racetrack located within New York City limits and it also the New York Racing Association's headquarters. Mr. Spitzer has said he would submit a plan within two months for the awarding of the separate franchise to operate thousands of VLT's at the Queens racetrack.

The $330 Million Debt Question

By Ken Davison

In less than two years, the first and largest piece of financing for the Mohegan Sun’s $1.2 billion Sunburst expansion will come due for payment. For the second time since the expansion first opened in 2001, some might say.

Representing about a quarter of the Tribe’s total casino debt, $300 million was first borrowed in 1999 and was later paid off in 2003, when the Tribe’s business arm, Mohegan Tribal Gaming Authority (MTGA) borrowed $330 million at a lower interest rate (6 3/8% annual interest rate vs. 8 ¾% on the 1999 debt). This $330 million borrowing must be repaid on or before July 15, 2009. MTGA pays $21 million each year in interest expense on this debt alone and isn’t required to pay any of the $330 million amount borrowed until 2009, when the full amount that was borrowed must be repaid.

Due in part to refinancing, the rest of the Sunburst expansion debt won’t come due until the years 2012-2013 when $500 million will need to be repaid, and then the balance of the debt in later years.

Upon reaching the due date for the $330 million borrowing in the summer of 2009, MTGA will have paid over $200 million in just interest expense on that one piece of debt since it was first taken out in 1999. To put this amount in perspective, the $200 million in interest expense is about the equivalent to five per-capita distributions to tribal members.

The expansion will have been open for almost eight years by the summer of 2009 but it is unlikely that MTGA can generate the additional profits that would be needed to pay the $330 million debt. MTGA would then need to borrow money to pay for at least part of the debt. Nobody knows what interest rate would apply two summers from now but if MTGA refinances that debt using the same interest rate that applied in 1999 (8 3/4%) then that $21 million interest expense each year would spike to about $29 million annually.

Despite early announcements after the expansion by MTGA that it would pay down the Sunburst expansion debt aggressively, only about 18% of that debt has been paid off since the expansion first opened in 2001. The MTGA’s profits, as adjusted, suffered badly in the first three years after the expansion first opened, averaging $57 million in total profits for each of those three years (fiscal years 2002, 20003 and 2004) compared to the $140 million average profit for each of the last two pre-expansion years (fiscal year 2000 and fiscal year 2001). Since 2004, profits generated by the Mohegan Sun have doubled and are roughly equivalent to the profit levels of the pre-expansion years. Based on the most recent audit report, it is only when one includes the losses attributed to the diversification program that overall profits fall to slightly below the profit levels of those pre-expansion years.

MTGA first put a dent in the expansion debt in fiscal year 2003 - the same year of the $330 million borrowing - when the expansion debt was reduced by $50 million in that year. In the following three years, the expansion debt was further reduced by $81 million (FY 04), $65 million (FY 05) and $14 million in fiscal year 2006. Those payments total $210 million (not including expansion debt that has been refinanced), or 18% of the $1.2 billion expansion debt.

Although some of the expansion debt has been paid down, total MTGA debt has since increased due to the borrowings for the purchase and construction of Pocono Downs and the second expansion of the Mohegan Sun. As of June 30th, MTGA's total debt was approximately $1.3 billion compared to $1.25 billion a year earlier.



Note: This article focuses on one component of the debt and is not designed to give the reader a complete picture of the Tribe’s financial situation. It is our hope that through more articles covering the Tribe’s finances, the reader will gain a clearer understanding of the financial situation. In this article, the Mohegan Tribal Gaming Authority is referred to as “the Tribe” or “the casino.” The Tribe’s debt of $1.2 billion discussed in this article does not include tribal government debt or the approximately $1 billion the Tribe will pay to the former casino management partners, Trading Cove Associates, over a fifteen-year period. All profit figures have been adjusted to reflect actual payments to Trading Cove and do not take into account the $24.5 million reimbursed by Penn National to the Tribe in fiscal year 2006 This report is largely based on last year’s audit report (FY 06). The audit report for the current fiscal year (which ends on September 30, 2007) is expected to be released by the Tribe in December 2007.

Kerzner Gambles on Las Vegas

Kerzner International Holdings Limited and Istithmar Hotels FZE announced on September 11th that the companies have entered into joint venture agreements to develop a multi-billion dollar integrated resort property on the Las Vegas Strip.

MGM MIRAGE will provide the land and Kerzner and Istithmar will provide cash equity. MGM MIRAGE, Kerzner and Istithmar will own 50 percent, 25 percent, and 25 percent, respectively of the newly formed joint venture. The land being contributed by MGM MIRAGE is being valued at $20 million per acre. The new integrated resort complex is anticipated to be a multi-billion dollar project and will be financed through equity contributions and third-party debt financing, according to a press release.

The press release further states that Kerzner will lead the planning and conceptualization of this project. The joint venture is expected to draw upon MGM MIRAGE's substantial presence and experience in Las Vegas and Kerzner's experience in developing and operating some of the world's most recognized and successful destination resorts.

Ex-BIA Chief to Head National Museum of the American Indian

Kevin Gover, the former head of the Bureau of Indian Affairs has been chosed to become the next director of the Smithsonian Institution's National Musuem of the American Indian (NMAI).

The Mohegan Tribe and the Mashantucket Pequot Tribal Nation each pledged $10 million to the Smithsonian´s NMAI. The Mashantuckets pledged $1 million per year for ten years in 1994 while the Mohegans said in 2001 that they would spread their donation over twenty years.

Gover will replace the NMAI's first director, W. Richard West, who served for 17 years.

Gover is a member of the Pawnee tribe and a former director of the Bureau of Indian Affairs (BIA) during the Clinton administration. As BIA chief, Gover issued a favorable preliminary determination in the Eastern Pequot federal-recognition bid, which was later overturned by the Bush administration.

Tuesday, September 11, 2007

Rep Says Rhode Island Needs Full-Fledged Casinos

Trying to beat Massachusetts to the punch, the state of Rhode Island may allow its two slot parlors to become full-fledged, 24-hour casinos in the future.

Massachusetts Governor Deval Patrick is expected to announce that state's casino plans later this week or next week while Rhode Island's existing slot parlors could be expanded, according to one state official.

The chair of the state general assembly's Permanent Joint Committee on State Lottery, Pawtucket Rep. William San Bento said "Absolutely, we have to head that way," according to the Pawtucket Times.

If Massachusettts allows casino gambling, San Bento said Rhode Island could lose half of its video lottery terminal (slot) revenue. "The only way to protect that is with a full-fledged casino."

A referendum would need to be approved by Rhode Island voters both state-wide and in the host city-town community in which a proposed casino would be located. A state-wide referendum for a Narrangansett casino in West Warwick was defeated last November.

Monday, September 10, 2007


Senate To Review Indian Casino Oversight Law

The U.S. Senate is once again looking into changes on federal oversight of Indian casinos.

In August 2005, a decision by the U.S. District Court for the District of Columbia found that the Colorado River Indian Tribe could not be penalized for denying the National Indian Gaming Commission (NIGC) access to monitor the Tribe’s compliance with NIGC's Minimum Internal Control Standards (MICS) for Class III gaming.

The NIGC adopted MICS in 1999, which specifies the minimum practices tribes must follow when conducting Class II and III gaming. The case arose in 2001, during an audit of the Colorado River Indian Tribe’s Class II and Class III gaming operation at the Blue Water Casino. The Tribe challenged the NIGC's authority over Class III gaming and denied the NIGC access to Class III gaming records. The NIGC Chairman levied a Notice of Violation on the Tribe and a Civil Fine Assessment. Both the Notice of Violation and Civil Fine Assessment were overturned in the District Court decision in 2005.

In deciding that Congress did not intend to give the NIGC the authority to issue Minimum Internal Control Standards (MICS) for Class III gaming, U.S. District Court Judge John D. Bates warned that "this opinion should not be read to hold that the NIGC will never be able to audit a Class III gaming operation, or that the NIGC may not penalize a tribe that resists a valid audit."

The Senate may change the language of the law to strengthen Federal oversight. Senator Byron Dorgan (D-ND), chair of the Senate Indian Affairs Committee, presented a discussion draft bill in June 2007 that would amend IGRA class III regulatory responsibilities.

Last year, proposed changes to amend IGRA did not become law and at the most recent June hearing on the matter Senator Daniel Inouye (D-Hawaii) said he will do his utmost to make "disappear" any bill that comes out of the June 28th discussion draft.

It is believed that the Mohegan Tribe follows the MICS although the Tribe requests exceptions to these internal controls.

An example of the MICS surveillance checklist can be found at: http://www.nigc.gov/LinkClick.aspx?link=NIGC+Uploads%2fMICS%2fMICSchecklist%2fauditing%2fSurveillance-A+542.23.doc&tabid=241&mid=887

Honoring Native American Contributions to U.S. History

The following is a U.S. Senate press release from last week:

The U.S. Congress has approved a bill championed by U.S. Senator Byron Dorgan (D-ND) to honor the contributions of Native Americans to U.S. history. The House of Representatives passed the bill Tuesday, which was previously approved by the Senate in July. Dorgan, chairman of the Senate Indian Affairs Committee, sponsored a similar companion bill in the Senate.

This legislation, known as the Native American $1 Coin Act of 2007, H.R. 2358, would issue a coin each year with a new design honoring a different Native American individual or contribution, while keeping the image of Sakakawea, who is currently on the dollar coin, on the front of the coin.

“Sakakawea, who helped guide Lewis and Clark on their expedition through the American West, is the only Native American currently on a U.S. coin, and this bill will improve the design, marketing and distribution of the current dollar coin,” said Dorgan. “We are now one step closer to issuing these special Native American coins to pay tribute to the first Americans.”
The bill was introduced by Congressman Dale E. Kildee (D-MI), co-chairman of the Congressional Native American Caucus, in the House of Representatives.

“This bill will honor the strength and wisdom of Indian country by authorizing the Secretary of Treasury to mint and issue coins that commemorate the outstanding contributions of Native Americans,” said Congressman Dale E. Kildee. “The designs of this coin will take the American people through a journey of the different experiences of Native peoples by exposing them to their unique histories while preserving the memory of Sacagawea.”

The legislation would amend the Presidential $1 Coin Act to issue a new coin design each year beginning in 2009 for the duration of the Presidential $1 Coin Act. The bill would improve the circulation and marketing of the current Sakakawea dollar coin. Each coin’s new image honoring a Native American individual or contribution would be chosen by the Secretary of the Treasury in consultation with the Senate Indian Affairs Committee, the Congressional Native American Caucus and the National Congress of American Indians.

The bill now goes to President Bush for his approval.

Wednesday, September 5, 2007

Mohegan Tribe Loses Out on New York Racino Franchise

New York Governor Eliot Spitzer recommended Tuesday that New York Racing Association continue operating the state's three racetracks.

The Mohegan Tribe was asked by Capital Play, an Australian group, to participate in their bid for that franchise but was eliminated from consideration today as well as two other firms who submitted bids.

The state legislature must approve any firm awarded the franchise, which begins January 1st.

The Tribe may be out of the running in New York but will soon learn more about their future in Massachusetts. Governor Deval Patrick stated that he is about two weeks away from making any decision regarding casino gambling in that state.

In other regional gaming news, the owners of Rhode Island's Lincoln Park have asked permission for that facility to be open 24 hours.

Tuesday, September 4, 2007

New York Governor to Announce Racetrack Operator on Tuesday

New York Governor Eliot Spitzer is expected to announce on Tuesday his decision on which firm will run the state’s three racetracks for the next twenty years. Four firms submitted bids, including Capital Play, an Australian management team which asked the Mohegan Tribe to join their group's bid for the franchise.

New York Racing Association (NYRA) is now running the racetracks in a contract that is set to expire at the end of December. The other two firms are Excelsior Racing and Empire Racing.

In 2006 and part of 2007, it was revealed that these four firms have spent over $2 million in campaign contributions and lobbying efforts. Governor Spitzer was the major benefactor, receiving $632,000 in campaign contributions from the companies bidding on the racetracks.

Excelsior Racing alone paid $403,579 in campaign contributions to the governor. Capital Play CEO Karl O’Farrell was reported saying that he’s concerned that other firms spent two to three times more than his firm in contributions and lobbying.

The state legislature must approve the governor’s recommendation, which may not be an easy task considering recent tension between the governor and the state’s senate majority leader Joseph Bruno.

Check the "In The News" section of the Feather News on Tuesday for other news updates covering the governor's announcement.

Monday, September 3, 2007

Tribal Archeology Classes Begin Tuesday

Beginning Tuesday, September 4th, Tribal Archeologist Dr. Jeffrey Bendremer will conduct an eight-week long seminar covering the theory, method and practice of archeology.

Seventeen tribal members have signed up for the workshop and three open slots remain. The four-hour classes will begin at 8:30 AM and will be held on Tuesdays. The first four weeks will be held in the classroom and the last four sessions will be in the field. The first class will be in the tribal meeting room.

The Massachusetts Threat

In 2003, presidential candidate Mitt Romney was the governor of Massachusetts. Romney disliked the thought of having casinos in that state and suggested that if the Indian tribes from Connecticut helped with their state budget, then Massachusetts might avoid having casinos.

After hearing that news, the Tribe did not investigate the idea any further. “The plan clearly appears to be like a form of extortion,” said then-Mohegan tribal chairman Mark Brown.

Four years later, the state of Massachusetts could finally be on the verge of approving casino gambling and the Tribe finds itself scrambling in an effort to cover the potential loss of revenues. The Mashantucket Pequot Nation reports that 35% of its customers come from Massachusetts while the Mohegans say about half that many customers from Massachusetts visit its casino.

Current Massachusetts Governor Deval Patrick of Massachusetts is expected to announce in September what form casino gambling may take in that state and which groups will be eligible to run the casinos. Last week, the Tribe made public its vision of a $1 billion casino in Massachusetts but it is not clear if the Tribe is under serious consideration.

The New Tribal Council

In October, the tribal council will choose a new corresponding secretary. Nobody yet knows if they will vote for the remaining officer slots, such as chairperson, vice-chairperson, recording secretary and treasurer.

The position of corresponding secretary, currently held by Roberta Harris-Payne who was not re-elected in August, will have to be filled. Could September also be the last month of Bruce Bozsum’s term as chair of the tribal council? Two new tribal councilors have been elected since the tribal council election in the summer of 2005, when the chairperson and the other officer positions were last selected by their fellow councilors.

Since then, Thayne Hutchins replaced Roberta Harris-Payne and Cheryl Todd replaced Roland Harris on the tribal council.

It has been suggested that alleged irregularities in bid practices that resulted in Bozsum’s brother Mike receiving a large casino contract, among other reasons, could result in the selection of a new chairperson.

The Tribe’s Constitution doesn’t forbid the election of a slate of new officers although last year the Council of Elders chose not to select new officers among those councilors already holding those slots for the first two years of their four-year terms.

Corrections

A recent article stated that the color of a car won by the Tribe's chairman Bruce Bozsum in a raffle held at the casino was silver. It was black. Also, Roland Harris is a senior vice president at the casino, not a vice president as stated in another article.