Massachusetts Casino Developer Drops Out

The casino landscape in Southeastern Massachusetts underwent a massive earthquake last week as KG Urban abruptly pulled out of its proposal to build a casino resort in New Bedford (rendering at left). It cited the difficulty in attracting enough capital. The group had partnered with Connecticut’s Foxwoods.

Last week KG Urban Enterprises and their partners Foxwoods abruptly pulled their proposed 0 million casino project for New Bedford out of the running for the Massachusetts Southeastern casino license. They cited their inability to secure financing as the cause.

In a letter to the Massachusetts Gaming Commission the developers said they had found securing financing “significantly harder,” than they had anticipated.

The letter concluded, “Given the uncertainty of obtaining viable financing for the project and the time constraints of the license application process, we cannot justify investing any additional funds in the project beyond the significant amount already invested.”

The letter said that investors had been reluctant to invest because of the very real possibility that the Mashpee Wampanoag tribe could still open a casino in Taunton.

With this announcement, suddenly the license for the Bay State’s fourth and final casino appears to be hanging in limbo. At the very least no more casinos will open before 2018.

Last week commissioners reacted to the announcement by saying that they would discuss what to do next at their next meeting.

One bidder remains for the license, Brockton, whose developer Mass Gaming, has already cleared the ethical and financial suitability vetting by the state’s investigators, as well as gaining the approval of the city’s voters.

New Bedford Mayor Jon Mitchell reacted with “extreme disappointment and a great shock” to the news. He added, “We have been united as a community and have done everything possible to support the KG casino proposal.”

The commission has said that it is under no obligation to award a license if it doesn’t think the casino proposed is suitable.

This is all good news for the Mashpee Wampanoag tribe, which was originally intended to be the recipient of the Southeastern license, but which failed to meet all of the requirements in time—prompting the commission to open the license to commercial bids. The Mashpees are still awaiting a ruling from the Bureau of Indian Affairs on whether it will put land in Taunton into trust, making it Indian land.

MGM Springfield

Although it has asked for an extra year to open the MGM Springfield, the casino sounded a bellicose note last week as neighboring Connecticut ramps up its efforts to build a competing satellite casino to try to hold onto some of the state’s players.

The MGM Springfield broke ground on the $800 million casino resort a few weeks ago. It expects to open in 2018.

The proposed Connecticut casino is likely to be positioned near Hartford, just a few miles from Springfield. The state’s two gaming tribes, the Mohegan Sun, and the Mashantucket Pequot tribe, hope to open the satellite casino well before the MGM Springfield opens its doors. The towns of East Hartford, East Windsor and Enfield have said they are interested in hosting such a casino.

MGM Resorts International President William Hornbuckle was long on bellicosity and short on details in an interview with the Associated Press where he said, “We’re not going to go peacefully.”

MGM has estimated that 40 percent of the players it hopes to attract live in Connecticut.

This prompted Connecticut Rep. Stephen D. Dargan, to snap, “Bring it on, MGM. We’re in direct competition!” adding, “We’re serious about protecting our market share. If they think they’re going to scare us with their tactics, they’re not.”

Tribe Chairmen Kevin Brown and Rodney Butler added, “Simply, this is about siphoning revenues from Connecticut to benefit a Las Vegas company while at the same time moving thousands of existing jobs from Connecticut to Massachusetts. That’s why the tribes, the legislature, and the governor have committed to developing a solution that protects Connecticut.”

Several weeks ago Jim Murren, chief executive officer of MGM, and a Connecticut native referred to the proposed satellite casino as “a box of slots.” He also said, “I do give a damn about Connecticut because I’m from there. I just want their money to come here!”

Although MGM has not yet said what it might do, some legal experts warn that MGM could go to court and claim Connecticut has violated the U.S. Constitution’s Equal Protection Clause by giving the tribes a monopoly outside of their sovereign tribal lands.

The bill passed did not actually amend the law to allow the tribes to operate outside of their reservation. It created a process for the tribes to find a willing community. The tribes propose a casino that would have up to 2,000 slot machines and up to 75 gaming tables.

The casino they hope to co-opt, the MGM Springfield, is planned for 3,000 slots and 100 gaming tables.

The Pequot tribe operates Foxwoods Resort and the Mohegans run the Mohegan Sun. They fear that the MGM Springfield will siphon off a large percentage of their profits.

Meanwhile, although it has asked for a one-year delay in opening its South End casino resort, MGM last week announced it has begun interviewing companies for casino design and construction work.

MGM anticipates creating about 2,000 construction jobs and plans to hire at least 15.3 percent minorities, nearly 7 percent women and 8 percent veterans and 35 percent from Springfield.

The company is first holding information sessions. This will be followed by interviews with companies that show interest. They will be given details on the scope of work and how to pre-quality.

Boston Metro

Some Bay State observers are advising Steve Wynn to try to defuse the situation with Boston by reaching out to residents of Charlestown, the Boston borough most likely to be negatively impacted by the Everett casino. Rival communities that lost the license to Wynn are doing everything they can to delay its implementation, including lawsuits and ethics complaints.

Charlestown remains a rock-ribbed opponent of gaming. Last year 70 percent of its voters supported the failed referendum to repeal the 2011 gaming expansion law.

Wynn is spending considerable money to try to win over Charlestown, including a $76.7 million traffic mitigation plan to try to ameliorate the effects of the casino on Sullivan Square. Wynn representatives have held a half a dozen meetings with residents, plus dozens of one-on-one meetings.

The Wynn organization claims that about 1,500 of Charlestown’s 17,000 residents have signed up to support Wynn.

Delays in Casinos

New England gaming expert Clyde W. Barrow told the Boston Globe last week, “You could say the state is losing $1 billion in revenue because of the delay from 2016 to 2018.” He added, “The debate over whether to legalize casinos went on for over a decade in Massachusetts, and now it’s starting to look like the implementation period is going to be just as long.”

Governor Charlie Baker doesn’t appear to be concerned that the casinos be opened under a rushed schedule. His spokesman noted that the governor is not yet using casino revenues in his projected budget. “The governor is more concerned with getting the casinos done the right way, not the quick way,” said the spokesman.

Other factors that are putting the brakes on additional casinos in the state are the highway viaduct construction scheduled for Springfield and lawsuits by the City of Boston and other cities challenging the awarding of the Boston metro license to Wynn. State Attorney General Maura Healey has also called for an independent traffic study of the Wynn casino.

Massachusetts Gaming Commission Chairman Stephen Crosby has warned that every month that $1.7 billion Wynn’s Everett casino is delayed the state could lose about $18 million.

Aquinnah Class II Casino

In a separate but related development, tribal elders, families town officials of the town of Aquinnah and the Wampanoag Tribe met last week to call for a unified effort to block the Class II casino tribal leaders want to build on Martha’s Vineyard.

The meeting drew about three dozen attendees opposed to the casino. Aquinnah Selectman Juli Vanderhoop, a tribal member who organized the meeting, declared, “We can’t do it alone.”

Some who attended said they were saddened by the lack of unity between the tribe and the community. One member said, “It didn’t make any difference who and what you were. If you weren’t accepted anywhere else on the Island, you could come to Gay Head.”

The plans to convert an unfinished tribal recreation center into a casino were announced last month. Most of the tribal residents of the island are opposed. The casino appears to be pushed by non-residents of the tribe.

One member of the tribe, quoted by the Vineyard Gazette, said, “We have a political setup where most of us can’t get the answers. I feel alone at tribal council meetings.”

Former tribal chairman Beverley Wright urged those attending to support a referendum on August 16, which could put an end to the plans. “They see it as an opportunity to get more money into our coffers, which may be true,” she said. “We look at it as, this is our home and it doesn’t fit with how we believe Aquinnah should be.”

The tribe is embroiled in a legal battle with the state of Massachusetts, which is challenging the legality of the tribe to build a casino in Aquinnah.