The governor of Connecticut weighed in last week in favor of not strangling the golden gaming goose to help hatch a silver one. His remarks may have helped push the Senate to vote decisively in favor of a third, 0 million tribal casino in the state. Now it’s up to the House. Meanwhile a tribe that has been left out of the deal has threatened to sue.
After months of neutral silence on the issue of whether there should be a third, satellite, casino in Connecticut, Governor Dannel P. Malloy broke his silence to signal support for a third casino—but not for opening bidding to commercial developers. That’s good news for the Mohegan and Pequot tribes, who have been lobbying to be allowed to build the third casino to buttress their market against inroads by the MGM Springfield being built in Massachusetts.
This puts Malloy in the camp of those favoring a bill that would allow the tribes to operate a third casino, and against a rival bill that would open the third casino to all bidders, tribal or commercial. The second bill would require the developer to pay $8 million to its host town, and invest a minimum of $300 million on a casino, and have the resources to pay a $250 million licensing fee. There is a third option: do nothing.
After two and a half hours of debate, shortly after midnight the Senate voted 24-12 to support the Mashantucket Pequot and Mohegan tribes. “We did what we had to do. We stood up for Connecticut workers,” declared Senate Majority Leader Bob Duff after the vote.
Before the vote, Senator Cathy Osten said, “There are 140 towns in this state that send residents to southeastern Connecticut every day to work at one of the two casinos there. This is a Connecticut jobs bill, one that protects jobs for middle-class workers, our neighbors, our friends and our family.”
Senator Tim Larson, defended the vote, including not charging the tribes a licensing fee. “These guys, frankly, have been good business partners,” he said. “To go in and try to lean on them would have been irresponsible.”
Senator Michael McLachlan, supported the bill, but with reservations. “When are we going to stop chasing easy money like this?” he asked. “Our monopoly is gone. The whole dynamics of casino gambling and royalty payments to the state of Connecticut are gone. … If we’re going to approve one in East Windsor, I hope you’re not going to come back in three or four or five years and say, ‘We need one in Danbury.’”
A senator who doesn’t want any kind of casino bill is Tony Hwang, who is also considered likely to run for governor. After the vote he said, “This has been a David vs. Goliath fight from the beginning,” adding, “The forces that want expanded gambling in Connecticut are extremely powerful. We believe that doubling down on the gambling industry ignores the significant and heartbreaking human and societal costs which would arise from addiction. We believe that rolling the dice on casino expansion puts our state at risk for constitutional challenges by MGM or others under the equal protection clause. We continue to believe that this policy is a bad bet, because it is chasing after a limited and declining pool of resources.”
The tribes joyously greeted the vote: “Today, the Senate took us one step closer to saving more than 9,000 jobs and millions in state tax revenue,” said Rodney Butler, tribal chairman of the Mashantucket Pequots. “With the reconfirmation from the BIA in hand, we’re increasingly optimistic that our state’s leaders will rally around our employees like they’ve done for Sikorsky and Pratt & Whitney.”
MGM Turns Up Heat
For days before the vote MGM had upped the ante with a series of TV adds saying the state would lose millions unless the state adopted an open bidding process. It pointed out that the tribes wouldn’t have to pay for a licensing fee, but only continue their 25 percent annual payment to the state, plus payments of $750,000 to each of six communities impacted by the East Windsor casino. East Windsor has its own deal with the tribes to be paid $8.5 million annually.
Uri Clinton, spokesman for MGM, which has furiously opposed such a bill, promised to fight on in the House. “I think in the middle of a budget crisis, the Senate just took a step to give away a privileged license worth over $100 million,” said Clinton. “I think there are people who are very smart in the House who understand the budget crisis. I think as it becomes part of the budget debate, additional options might show up.”
Regarding his company’s ad campaign Clinton said “This is a campaign to convince the legislature and the governor that a closed, no-bid process shouldn’t be the way Connecticut awards its first commercial casino. No other state has done that, and Connecticut shouldn’t either.”
Now for the House
Many lawmakers in the House are still very much up in the air. “At this moment, I’m on the fence with both,” said Rep. Jeffrey A. Currey, speaking for many who are not on either side. Currey doesn’t like more gaming because of social ills created by problem gambling, he says.
“It’s a very complicated issue in and of itself and the political piece is all over the place because you have competing interests and you’re talking about a lot of money,” Rep. Joe Verrengia, the House chairman of the legislature’s Public Safety Committee told the Associated Press.
“Right now, I’m leaning towards the tribes,” said Rep. Michael Winkler. He wants to continue the long-standing relationship between the state and the tribe.
Rep. Kurt Vail thinks the issue is too controversial to include in the budget to help balance the budget. He says his constituents don’t support more casinos.
The governor was interviewed by the Connecticut Mirror last week. Malloy stressed that he would not jeopardize the 25 percent of gross revenues that the tribes now pay to the state. They pay that because they are guaranteed exclusive gaming rights in the state. The state would lose the payments if it allowed a commercial casino—other than one owned by the tribes—to open.
He told the Mirror “I will not sign a transaction or bill that puts into real danger our existing arrangement with the tribal nations, nor would anyone in this building who thought about it.”
The governor insisted that he’s neutral on the casino bills. “But I always believe you should have a realistic discussion about realistic outcomes, and it’s not realistic to put $260 million or more at risk,” he said. “If I can help the legislature focus, it’s do you want to work with the two tribal nations that employ thousands and thousands of people in our state? If that’s what you’re trying to do to help secure those jobs and that base, then there is one road to go down.”
Casino Revenues Threatened
Since 1993 the tribes have paid a total of $7 billion from Foxwoods Resort Casino and the Mohegan Sun.
Although the state doesn’t collect what it used to from the tribes—it was once $420 million a year—it still is a substantial $260 million, as of 2016. That amount is expected to plummet to under $200 million after the $950 million MGM Springfield opens next year. That’s the impetus for building the third casino. To keep that hemorrhaging of profits to a minimum. However, the tribes also claim that it would generate 1,200 new jobs.
A study that the tribes funded concluded that Connecticut could lost 9,300 if the MGM Springfield wasn’t challenged. Another analysis, this by the state’s Office of Fiscal Analysis, estimated the state could lost $68 in annual gaming revenues.
Meanwhile the tribes have reached a government-to-government agreement with the town of East Windsor to host a casino in a defunct cinema property that would be a dozen miles from Springfield, along the Interstate-91 corridor.
Rep. Christopher Davis, who represents East Windsor, says it is unclear what the town’s residents feel about the casino, although last month residents in a town hall meeting disapproved of a motion that would have forced a town referendum. He worries that the casino will negatively impact the town. However, he said, “I’m much more inclined to support a casino in East Windsor than I am to support an open process for expanding gaming across the state.”
MMCT Venture, the gaming tribes’ development arm, praised Malloy. “The Governor’s assessment is spot on…we hope to benefit the entire Hartford region.”
The governor’s comments seem to be decisively tip the scales against what MGM has been lobbying for, to open up the bidding for a third casino. MGM hopes to persuade the legislature to allow it to bid for a casino in Fairfield County, to attract the New York City market. It is prevented by its agreement with the city of Springfield from competing within 50 miles of that city.
Senator Cathy Osten and Senator Tim Larson praised Malloy’s remarks.
“The governor’s comments today provide the legislature with a single, clear path forward on the issue of casino expansion in Connecticut, one that I believe is both reasonable and necessary to protect and grow our economy,” said Osten.
After Malloy’s comments Clinton issued a statement: “We respectfully disagree with the Governor’s assessment. The best deal for Connecticut – in terms of generating tax revenue and creating jobs – is to scrap the current process and put in place a new one that is fair, open, and competitive. A New York-facing casino with a 35 percent tax rate would generate more than $260 million in tax revenue and fees. Only a competitive process can successfully address the constitutional issues the attorney general has raised.”
Clinton added, “If the Senate bill were to ultimately become law, numerous national gaming operators – including MGM – would be precluded from offering a competitive bid for consideration. To shut down that opportunity would seem to be a disservice to Connecticut’s hardworking taxpayers.”
Besides its aggressive lobbying campaign, coordinated by Global Strategy—a consulting firm that worked in Malloy’s three campaigns for governor—MGM has challenged the third casino concept in federal court. As soon as the bill authorizing the tribes to begin a search for a casino host town was passed in 2015, MGM filed suit. It alleged that the act violates the Equal Protection Clause of the U.S. Constitution by not allowing others to compete for the right to build a casino. That suit is currently under appeal by MGM after being struck down by a lower court.
So, it is almost inevitable that MGM will challenge any new law that emerges out of this session.
Schaghticokes Threaten to Sue
Meanwhile, the Kent-based Schaghticoke Tribal Nation, which is not a federally-recognized tribe, and has supported the second option that would open the bidding up to third parties, including the Schaghticoke, has threatened to join that lawsuit, calling the way the bill was approve a “closed process.”
Richard Velky, chief of the Kent-based Schaghticoke Indian Tribe declared, “A closed casino process ties Connecticut to an unreliable funding source that under the best scenario would likely continue to sink like a stone.” The nation is an ally of MGM, which is funding their play.
Earlier this year Malloy asked Attorney General George Jepsen for his legal opinion about a third casino. Jepsen’s subsequent opinion highlighted worries that the Bureau of Indian Affairs might frown on allowing the tribes to operate a commercial casino that would, in effect, challenge their exclusive rights, guaranteed by the state tribal gaming compact. However, the tribes recently produced a “letter of guidance” that expressed the view that such an action would not violate the compact. However, that opinion is only that, and carries no legal weight.
In the “letter of guidance, James E. Cason, acting deputy secretary of the interior, wrote, “In practice, the Department has not disturbed long-standing compacts when reviewing amendments to the underlying agreements. Here, the Tribes and the State have long-relied upon the Compacts that have facilitated a significant source of revenue for the Tribes and the State. The Department does not anticipate disturbing these underlying agreements.”
Jepson’s office does not believe that this opinion constitutes the last word, however. A spokesman for the AG stated: “That the department, at least as currently constituted, intends to follow and adhere to that policy should amendments to the agreements between the state and the tribes be submitted for approval does help to alleviate concerns about risk to the revenue-sharing agreements.”
MGM released its own, letter, this one from Senator John McCain, asking the Interior Department to withdraw its first letter written last year, as well as the most recent one from Cason. McCain, the author of the 1988 Indian Gaming Regulatory Act, said he believes that under that law the tribes’ exclusivity is endangered if they operate a commercial operation.
Meanwhile, MGM turned up the heat by releasing results of a poll it paid for that found that 71 percent of those survey supported an open bidding process, and that only 21 percent support extending the tribes’ monopoly. The poll, which was conducted by the Mellman Group of Washington D.C., did not ask how many residents were aware that the gaming tribes already have exclusive gaming rights.
The tribes argue that the state stands to lose more by allowing a commercial casino that would bust up their exclusivity agreement with the state, since they would no longer pay any percentage to the state.
Rep. Thomas Delnicki agrees. “The only one that you could do in the state of Connecticut is with the tribes.”
In April, they released a report by New England gaming expert Dr. Clyde Barrow that estimated the state would lose $85.6 million a year by ending the monopoly.
He wrote, “There is no math that makes Connecticut’s first commercial gaming enterprise work for the state if it’s not operated by the two federally recognized tribes,” adding, “For the state of Connecticut to merely break even in terms of state revenue, a competitively bid third casino would need to generate $1.063 billion in gross gaming revenue annually. There is not a single commercial casino in the United States that generates that level of gaming revenue.”
