Disturbing Limits Proposed in Massachusetts

Massachusetts has weathered an initiative to try to outlaw casino gaming, and has successfully licensed two casino resorts and one slots parlor. Now the state is considering casino regulations, some of which are hard to swallow for the winning operators, including Wynn’s Robert DeSalvio (l.), as well as the final license for the state.

The three casino developers who have so far been licensed to operate in the Bay State reacted negatively last week to the notion that they should be required to reward customers for voluntarily limiting how much they gamble.

Representatives of MGM Resorts, Wynn Resorts and Penn National Gaming reacted in the strongest possible way when speaking before the commission last week.

They insisted that such programs have not worked where they have been tried, in countries that include New Zealand, Canada and Singapore, something that the regulators dismissed out of hand, with Crosby calling it similar to limiting how many calories someone consumes or how much alcohol they drink. 

The programs are called play management or pre-commitment programs. In a recent letter to the casino operators, Crosby commented, “Setting limits on activities which might get us in trouble is a reasonable and commonplace activity.”

Alan Feldman, executive vice president for MGM, declared flatly about this type of program: “It has failed.”

Jay Snowden, chief operating officer for Penn, said there isn’t enough time to adopt the system before Penn’s racino opens next June.

Robert DeSalvio of Wynn said such a requirement would make his casino less competitive and therefore threaten some of the state’s projected revenues. “If we make the experience difficult, cumbersome or embarrassing for our slot customers, I do worry that they will make another choice and go somewhere else,” he told the panel.

The American Gaming Association also sent a letter to the board, urging it to reject such a program, claiming it would “do little to help,” its targeted audience.

Crosby and the commission have not determined yet whether they support such programs. But they are obviously leaning that way since the chairman noted that they are aiming at the as many as “twenty percent” of those at risk to become problem gamblers. Such programs reward a play for setting a limit and sticking to it. The player is then rewarded with loyalty points, much as he would be for continuing to play in other venues. The program, says Crosby, is not intended to deal with those who already have an addiction.

The commission is also considering another item guaranteed to give some developers heartburn, a ban on casinos putting home liens on those who rack up large unpaid gambling debts. The rule is part of a packet of rules that would keep ATM machines at a distance from the casino floor and create rules for how casinos extend credit.

Final License

Although the Massachusetts Gaming Commission has licensed two of the three casino resorts authorized by the 2011 gaming expansion law, in Boston Metro and the Western part of the state, getting bidders interested in the Southeastern casino zone, aka Region C, is proving harder.

The region is considered the toughest for a casino to attract customers, and because of the involvement of a tribe, the Mashpee Wampanoag, who were originally all but promised the license makes commercial developers wary about committing to a bid.

Now that the voters have failed to repeal the 2011 casino law, the focus of those interested in gaming in the Bay State has shifted to the southeast

The Mashpees are still pursuing putting the land in Taunton into federal trust, which is the last hurdle preventing them from getting a license from the state. However, the state has opened competition for the license to commercial applicants and can no longer guarantee that the tribe will get it.

The tribe’s application is challenging because of the 2009 Carcieri decision of the U.S. Supreme Court that a tribe cannot put land into trust if it was recognized after 1934. The Mashpees were given recognition in 2007.

The Bureau of Indian Affairs has come up with a workaround the ruling that allows some tribes recognized after 1934 to move forward.

According to Mashpee attorney Arlinda Lockyear, quoted by the Globe “What’s at stake is whether or not the court will uphold the standard that the department applies, not only to Mashpee, but to everybody in Indian country.”

Mashpee Chairman Cedric Cromwell last week released a statement: “We are pleased with the progress being made on our land in trust application. Not only is the tribe making strides toward bringing the First Light Destination and Resort Casino project to fruition but, more importantly, we are moving closer to establishing sovereign tribal lands in both Taunton and Mashpee that will serve the needs of our people for generations to come.”

Most experts calculate that a casino in the region would produce about 80 percent of the revenue expected from the Springfield casino and half of what Wynn’s casino in the Boston area is expected to generate.

This means that the commission’s hopes of a competitive process are not working out as planned. Market experts say the commission may need to do something to reduce the financial gamble associated with applying. Such as reduce the requirement that a developer spend $500 million on a casino and pay $85 million for a casino license.

Rush Street Gaming, which asked the commission to lower some of these costs wrote several months ago: “To require applicants to spend more than what (the southeast) can support in light of the region’s unique risks and competitive dynamics creates a hardship.”

The commission has addressed that concern by increasing the types of non-construction costs that may be applied toward that $500 million. Experts such as Clyde Barrow, a professor who formerly specialized in New England gaming think that other adjustments will need to be made. “My guess is they may have to adjust that down. That adjusts the risks downward,” he told the Boston Globe.

Commission Chairman Stephen Crosby last week told South Coast Today,  “Our position in the past has been to do everything we can within the rules and fairness to facilitate competition on the theory that that gets us the best deals for the commonwealth, which has clearly worked out with the other licenses.”

An additional wrinkle is that even if the state grants a license to someone besides the Mashpees, they could still eventually put the land into trust and build a casino without state involvement. So the region could end up with two casinos. And under the agreement signed with the state, if a commercial casino does open in the region, the Mashpees would not have to share any of their gaming revenue with the state, making them very competitive with any commercial casinos, which would be required to pay 25 percent to the state.

The casinos that have been approved will create an additional problem for a Southeastern casino: they will be well established by the time it opens.

Despite these challengers there are companies interested. They include New York-based KG Urban, which want to build in New Bedford; George Carney, owner of Raynham Park, who is exploring a possible bid in Brockton; David Nunes, who formerly tried to sell a bid in Milford without success; and Foxwoods casino. The town of Somerset has hired a consultant to let potential casino developers that it is interested in hosting a casino. The Claremont Cos. says it would like to attract a casino to land it has in Bridgewater.

Somerset officials say that several casino developers have shown interest in the town.

The town of Fall River has also shown interest, although this is complicated by a recall effort against the mayor, Will Flanagan, which will be decided next month. Foxwoods is talked about most often in connection with Fall River, but also with New Bedford. Foxwoods won’t comment on either report.

Crosby says it seems to him as though interest is building steam. “I get the clear sense that there’s a lot more going on than there has been. Something has caused there to be a lot more interest. At this stage of the game it looks like there’s a real shot that there might be some decent applications in Region C.”

New Bedford Mayor Jon Mitchell told South Coast Today, “The repeal question effectively froze the appeal process in place. Hopefully with the repeal effort behind us, activity will pick up.”

Now that that issue is out of the way, Mitchell said, “We are open to a casino opportunity that would suit New Bedford’s interests and we have our priority sites, which are the golf course and the Hicks-Logan area. To my mind, those would be the best two sites for the city. Whether the market exists for facilities at those locations remains to be seen.

KG’s Principal Andrew M. Stern declared last week, “We have never wavered in our excitement for a truly iconic waterfront casino project that will clean up and re-open one of the most contaminated but also one of the most beautiful sites in New England.” The mayor has never favored KG’s proposal, something that Stern says he will do whatever he can to turn around. “We hope that Mayor Mitchell will now recognize the immense value that the KG Cannon Street project can bring to New Bedford and immediately come to the table and commence Host Community Agreement negotiations with KG Urban Enterprises.”

The first time the state set a deadline for applications, KG was the only one to come up with the $400,000 application fee.

Licensing Payments

Meanwhile MGM Resorts International paid the gaming commission the $85 million license fee that it was given a pass on until the November 4 election was decided. The payment allows it to go forward with its $800 million casino in downtown Springfield and operate it for 15 years.

The city council is meeting this week with representatives of MGM to coordinate moving the project forward through the network of public hearings on zoning changes, and permit approvals.

The project is planned for a three-block area in the South End of the Springfield’s downtown.

With the $85 million licensing payment from MGM Resorts the state has now collected $195 million in license fees. Wynn Resorts paid up several weeks ago for its $1.6 billion casino in Everett, while Penn National Gaming had previously paid $25 million to be allowed to operate its slots parlor in Plainville.

The money will be distributed towards health care, tourism, community colleges, transportation and other public uses, a total of nine funds. Twenty million dollars will go to repay the state’s “rainy day fund,” which helped fund the commission’s initial work.

Some towns have already gotten casino money, paid by developers as part of mitigation agreements with host communities and surrounding communities. For example, the town of Malden, near Boston, will be paid $1 million this week by Wynn Resorts. Wynn is also expected to pay $300,000 to Chelsea and $200,000 to Medford and Cambridge.

MGM will divide $1.5 million among eight communities near Springfield.

Penn National Gaming is currently paying $100,000 to Plainville, where it is building its $225 million slots parlor. Penn is halfway done with building the casino, which is expected to open next June. Once it is open it will pay $2.7 million a year to the town.

The developers have also between them paid $9 million meant to cover the commission’s expenses until it starts getting regular payments.