Thursday, October 1, 2009

Prospect Of Casinos In Massachusetts

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This installmnet of The Tribes In The Media is an article from the State House News Service in Massachusetts on the prospect of casinos in Massachusetts.

Mohegan eyes reduced licensing fees, two-year window until opening
By Jim O'Sullivan
State House News Service
October 1, 2009

BOSTON - The state should charge casino licensing fees between $25 million and $50 million and level tax rates in the low 20-percent range on gambling revenues, according to a top executive at the Mohegan Sun casino firm, one of several business interests circling as the Legislature considers gambling legislation.

A full-scale facility could be up and running in Palmer within two years of receiving a license, said Jeffrey Hartmann, Mohegan Sun’s chief operating officer. Hartmann said the company would pay fully for associated infrastructure costs around the Palmer site and expects to create between 2,500 and 3,000 permanent jobs, including 500 white-collar positions.

Hartmann said Mohegan was willing to suffer some lost business at its Connecticut facility, spying in Palmer a “recapture opportunity” and calling it an ideal locale for job creation.

Options for building up the Palmer casino in the future, Hartmann said, would hinge on the market. “Business levels will dictate future expansion,” he told the News Service during an interview in the Boston offices of O’Neill and Associates, Mohegan’s lobbying firm.

Lawmakers are preparing legislation sanctioning casinos and racetrack slot machines, with the expectation that a bill will be considered next year.

Hartmann’s proposed fee and tax rates are significantly lower than the numbers in the plan Gov. Deval Patrick filed in 2007, when he called for minimum licensing fees of $200 million and annual taxes on gross gaming revenues of 27 percent. Prospective bidders are expected to watch those figures closely as they develop their proposals.

Since 2007, the casino industry has seen a broad decline, the recession reversing long-running positive profit trends, lowering expectations both for what the state can demand from the industry and what it can expect in return.

Hartmann declined to say what state-levied charges would be high enough to sour Mohegan’s enthusiasm. Higher fees and taxes, he said, would limit economic development opportunities by inhibiting property investment.

Rep. Brian Dempsey, House chair of the Economic Development Committee charged with vetting gambling legislation, said, “The tax question is the single most important decision that we’ll make in terms of the long-term success of gaming, of revenue, of investment, cap investment, and the kinds of infrastructure we’d like to see.”

“Everything’s on the table. We’re going to look carefully. I don’t want to give any numbers,” Dempsey said. “But we are mindful of the fact that we certainly are in a different climate than we were a couple years ago. We’re also aware that Massachusetts is also a very strong market for gaming.”

Under Patrick’s earlier plan, leading bids were not guaranteed one of the three licenses. A gaming authority would weigh proposals on about a dozen factors. And the fee and tax thresholds in his bill would have been subject to change in the House and Senate.

Senate President Pro Tempore Stanley Rosenberg, designated the Senate’s lead casino policy analyst, said pinpointing payment levels was premature.

Patrick’s bill died in the House on a 108-46 vote in March 2008, amid a dramatically different political and economic climate. Lawmakers who opposed the bill then say the state’s revenue crash could change their minds this time. Further, House Speaker Robert DeLeo is an active proponent of racetrack slot machines and casinos, while then-Speaker Salvatore DiMasi worked to swing votes against the Patrick plan, after helping muscle an adverse report from the Economic Development and Emerging Technology Committee.

“[L]et's please not forget that the true arm-twisting Sal had to do in last year's casino debate was just to get a negative report from the committee,” a source who worked with House leadership on casino strategy said in an email. “He always had the votes on the floor. So the hand dealt DeLeo … is much worse. He has to flip 30 or more votes. That's no small task when every rep in the building is terrified they will be tossed out next year.”

Lawmakers are often leery of changing votes, especially in the wake of this month’s vote to grant Patrick power to appoint an interim U.S. senator, which saw 58 House members change their votes.

If legislation does clear the Legislature, numerous choices await any decision-making body the new law could create. Suffolk Downs and Wonderland have lined up political backing for an East Boston casino, announcing support Wednesday from that neighborhood’s chamber of commerce, while Plainridge Racecourse and Raynham-Taunton Greyhound Park are angling for slot machines – and could still receive financial backing for a full-scale casino bid.

“If they believe that racinos should turn into casinos, we’ll be there ... Obviously, we’re going to be interested in that,” said Plainridge owner Gary Piontkowski. “Whatever the powers-that-be think is the most opportune for this region after their study, we’re supportive.”

Scott Ferson, a spokesman for Raynham-Taunton, said, “Raynham is more than capable of handling a full-blown casino on the site … They’ll take this one step at a time.”

Suffolk Downs workers are confident that, with support from Boston Mayor Thomas Menino and other political interests, their bid could capitalize on estimates that the state capital provides a healthy casino market.

Another factor is the Mashpee Wampanoag tribe, which has sought casino rights but been hobbled by organizational problems. A Supreme Court ruling earlier this year cast doubt on the tribe’s casino rights. Dempsey said the shape of a congressional response to the ruling was unclear and “evolving.”

As the momentum behind expanded gambling appears to mount, uncertainty around how the market will interact with state government as both push toward new gambling facilities, has sparked as much speculation on Beacon Hill as whether a bill will pass.

“If you ask me, there are a multitude of questions,” said Sen. Michael Morrissey, the Quincy Democrat who has long played a role in gambling policy in the Legislature.

Mohegan’s push in Palmer, where the firm envisions a 600-room hotel and resort complex on 152 acres, includes a commitment to pay for infrastructure upgrades and a storefront that opened there with fanfare earlier this year.

“We’ve spent probably two years preparing for the process in terms of the site, accessibility, a resort product that fits on the destination,” Hartmann said, adding that he expected Mohegan’s spadework to give it a head start on other successful bidders.

“Two years from a selection date, we can be open,” said Hartmann.

Rosenberg said the national average timeline from site selection to open casino doors was two years and four months, calling Hartmann’s projection “in the ballpark.”

“That assumes that everything falls into place, and we’d be state number 37, so there’s a lot of wheels we don’t have to invent,” Rosenberg said.

Hartmann rejected suggestions that Mohegan’s designs on the western Massachusetts site constituted a flank-guarding exercise, intended to protect its interests in Connecticut, where Mohegan Sun employs about 7,000 people and does battle with nearby Foxwoods. Mohegan also operates a slots casino at Pocono Downs in Pennsylvania.

“We really think it’s a two-fold opportunity, to import new gaming customers into the Commonwealth, from New York and Albany, Vermont and New Hampshire,” Hartmann said. “Obviously there’s a recapture opportunity for those customers of the Commonwealth that are going to Rhode Island and Connecticut.”

“Our business will be impacted slightly,” Hartmann said. About 22 percent of the Connecticut casino’s business comes from Massachusetts with about 70 percent from New York and Connecticut, he said.

Morrissey said he preferred a casino on a publicly owned site, where the state could peddle a long-term lease or outright sale of the property.

“I don’t know that Palmer’s a done deal. I think out west is a done deal,” Morrissey said, speaking on the presumption of a bill’s passage. “Warren comes to mind, Holyoke comes to mind, Springfield comes to mind.”

“What does Palmer do for us? Enrich a private landowner,” Morrissey said.

DeLeo and Senate President Therese Murray said Monday that action on casino legislation would likely wait until 2010. A hearing on expanded gambling bills will be held sometime in October, according to DeLeo.

Editor's Note: O'Neill & Associates advertises in the News Service's Weekly Roundup.