An increasingly saturated New England market has prompted Connecticut’s two gaming tribes to slash their proposed investment in the joint East Windsor satellite casino, called Tribal Winds.
The tribes, under the umbrella of MMCT Venture, had originally planned to spend about $300 million to build a slots casinos to blunt the effects of MGM Springfield in Massachusetts on their Connecticut properties, Foxwoods and Mohegan Sun. Mashantucket Pequot Chairman Rodney Butler, whose tribe operates Foxwoods Resort Casino, announced last week that the investment will be more in the neighborhood $200 million to $300 million.
The reason Butler gave to the Connecticut legislature’s Public Safety and Security Committee was “saturation of the market.”
What went unspoken is that the Springfield property hasn’t met MGM’s revenue hopes, bringing $354.1 million since it opened in September 2018, compared to the $412 million MGM told the Massachusetts Gaming Commission it would gross. Reality has run so far behind expectations that the casino’s top executives have stepped down, and new ones were brought in.
Outgoing longtime MGM CEO Jim Murren conceded the point last week during what was likely to be his last conference call with industry analysts. “MGM Springfield has admittedly performed below our expectations, and we’ve recently made some changes there to better position the property,” he said.
The Connecticut legislature is again mulling bills that would authorize online sports betting and a tribally-owned commercial casino in Bridgeport, the state’s largest city, as well as three entertainment zones—and possibly iKeno. The hearing attended by Butler also included discussions of sports betting and other gaming issues.
Butler told lawmakers, “There’s been a lot of concern expressed over the past few years regarding the saturation of the market.”
He pointed out that a zoning dispute in East Windsor over the sale of alcohol at the casino has been resolved, although it will take up to three months to finalize. In that case, a Superior Court judge ruled that the city’s planning and zoning commissioned acted wrongly when it issued the permit without publicly notifying residents the casino would sell alcohol. This required that the permitting be redone.
“Then we should be good to go at that point, barring any other challenges to the zoning concerns,” said Butler. “Anticipating that we get planning and zoning cleared up in the next three to five months, we’re shoveling ground in the next three to five months.” That would be followed by 18 to 24 months of construction before the doors open, he said.
Lawmakers grilled the chairman on why the tribes haven’t started to build the East Windsor casino, and on why it’s now still several years away.
Committee Co-chairman Joseph Verrengia said the tribes must have been aware that MGM would sue to stop the new gaming hall. “It’s safe to say the litigation was expected, and if not, the promise was to still move forward through litigation to build a casino in East Windsor in 24 months,” said Verrengia. “This is a partnership. This is a tribal-state partnership, and the state is upholding their end.
“The state is losing out on this partnership,” he said. “We’re talking about allowing for another casino with partners who haven’t come through on the first one. Litigation is to be expected, but you promised to proceed,” Verrengia said. “People voted in 2017 on that expectation … Despite assurances, you haven’t moved forward. … The state’s losing $25 million a year without East Windsor.”
Butler said the tribes have made a $20 million investment so far, and are not about to abandon the project. “No one’s more intent on resolving this than us,” he said.
These discussions come at the same time the tribes and some lawmakers are at sword’s point over sports betting, and the tribe’s insistence that they should have a monopoly on the wagers, if they’re legalized.
Ray Pineault, regional president of Mohegan Gaming and Entertainment, emphasized this last week, saying, “The tribe has been clear that sports gaming is casino gaming,” and it would come under existing compacts that give the tribes exclusive rights to casino gaming.
Mohegan Chief of Staff Chuck Bunnell, citing an opinion from the National Indian Gaming Commission, added, “We believe sports betting is absolutely a casino game and have been consistent, and things have come out from the only federal agency that regulates gaming that that’s their position also. We believe it’s a casino game and would have been in the compact if not illegal at the time federally.”
But some legislators point to the 2018 opinion by then-Attorney General George Jepsen that sports betting is not explicitly named as a casino game in the tribal state gaming compacts.
The tribes have threatened to cut off the $250 million they annually pay the state—and also to sue. They pay 25 percent of all slots revenue. But some lawmakers aren’t willing to grant that exclusivity—not with other stakeholders in the wings, demanding their share.
Verrengia said that it will be hard to pass a bill under those circumstances. He’s introduced his own bill, which would authorize sportsbooks at tribal casinos, OTB locations and some retail CT Lottery outlets, and allow all of those players to offer online sports wagering.
He said, “We’re basing our decisions or definitions on the future of sports betting based on language that was 30 years ago.” He added, “Our compact does not recognize the present gaming landscape not only here in the state of Connecticut but across the country.”
Rep. Kurt Vail argued that racetracks have as much of an interest in sports betting as the tribes because wagers at a racetrack are placed on events that happen outside of the facility’s four walls. He declared, “You guys should certainly have a piece of that pie, but I don’t think you should have exclusivity.”
CT Lottery CEO Greg Smith also made the case for the lottery getting a piece of the sports betting action, and pointed out that it would return all such profits to the state, but “only if the CT Lottery is substantially involved.”
The operator of all the state’s off-track betting, Sportech, was represented by President Ted Taylor, who declared, “Clearly, we do not agree with the argument that the tribal compacts grant exclusivity to anyone.” He continued, “We believe there’s a simple solution: provide the same in-venue and online sports-betting license to existing Connecticut gaming operators, tax appropriately and provide consumer protections that customers deserve and expect.”
After joking that he feels like a character in the film Groundhog Day because the tribes and lawmakers have run over this terrain so many times, Rep. Russ Morin complained, “I don’t understand why, when there could be a great benefit to all players involved, why we can’t come up with something where we’ll all part of it. I’m getting tired of sitting here and listening over and over and over again to the same questions and the same dialogue, but there’s really no solution.”
Butler retorted, “Let’s just move forward, get it done, get it in place, be competitive in the region. We just sit on our hands and spin and spin and spin and refer to Groundhog Day. It’s a sad reality.”
One comprehensive bill, proposed by Senator Cathy Osten, would give the tribes exclusive rights to offer retail and online sports betting; would authorize a tribally-run Bridgeport casino as well as “entertainment zones” in Hartford, New Haven, and a yet-to-be-determined location. Butler dismissed the latter as “glorified sports-betting facilities,” similar to a sports bar that offers sportsbook. The bill would require a minimum investment of $100 million in Bridgeport. It would also expand the hours of alcohol sales to 4 a.m.
The other co-chairman of the committee, Senator Dennis Bradley, supports Osten’s bill, which would build a casino in his hometown of Bridgeport.
He declared, “The options that we have are either honor our compact and get the revenues and projections that no one else is making to the state of Connecticut or violate our compact and pass legislation that says we can now open it up to whoever would like to have it and no longer get those revenues from the tribes and ruin the compact we have.”
The tribes estimate that with a 9.5 percent tax the state could make $38 million from brick and mortar sports betting the first five years and $85 million the first five years of internet gaming. It would make $10.5 million during the same period from expanded alcohol sales, they say.
No one is talking about building a Bridgeport casino as big as Foxwoods or the Mohegan Sun, especially not in light of the disappointing performance of MGM Springfield.
A lawsuit from somebody—maybe everybody—seems to be inevitable if the legislature passes any new gaming laws, according to Butler. “You’re going to get sued, period,” he declared.
However, none of the lawsuits that MGM or anyone else has so far pursued have been successful, said Aaron Bayer, an attorney for MMCT. That includes an appeal filed against the zoning change in East Windsor, and MGM’s challenge to the Interior Department’s approval of the amendments to the tribes’ compacts with the state that were needed before they could move forward with building.
A quarter century ago, the tribal casinos had the market to themselves. Today, two large Las Vegas-style casinos and a slots parlor operate in Massachusetts, there are two casinos in Rhode Island, and several in New York. All these states are doing what they can to keep their gaming money inside their boundaries, but the inter-state tug of war is in a state of constant flux.
It may also be that the tribal casinos are having more effect on the revenues of the MGM Springfield than it is having on their bottom line. Meanwhile, January revenues for both tribal casinos rose in January, bouncing back from sharp declines in December.
According to the Mohegan Gaming & Entertainment, which operates the Mohegan Sun, its slot revenues were $43.8 million, a 7.6 percent increase over a year ago, when revenues were $40.7 million. In December the Sun posted an 11.7 percent slots revenue decline.
Foxwoods Resort Casino, owned by the Mashantucket Pequot Tribal Nation, saw slots revenues in January go up 4.6 percent to $32.5 million, bouncing back from a 9.2 percent drop in December.
