The highest court in Massachusetts is poised to deliver a judgment on whether a referendum to repeal the Bay State’s 2011 gaming expansion can go onto the November ballot while the State Gaming Commission ruled on May 8 that Boston is not a “host community,” severely reducing its options in dealing with two casino developers.
The commission had given Boston’s Mayor Martin J. Walsh an extra week before issuing this ruling, time that Governor Devil Patrick had hoped would lead to an agreement of some sort between Walsh and the two developers who propose to build on Boston’s borders.
The decision was unanimous, 4-0, with Chairman Stephen Crosby—who recused himself before the vote—absent from any votes concerning Boston metro due to a misstep that got him into hot water.
First of all, the commission, upon being requested to by Governor Deval Patrick, granted the city an extra week to negotiate a deal or two with the developers of the Everett and Revere projects. They sat down with the Mohegan tribe’s representatives, although Steve Wynn declined to negotiate with the mayor.
Chairman’s Faux Pas
Then the gaffe-prone chairman of the commission, Stephen Crosby, did it again. Crosby, who is being sued because a former suitor for the Boston metro license, Caesars Entertainment, accused him of favoritism, decided under pressure to recuse himself from that decision after he drew a reprimand from the governor for attending a Kentucky Derby viewing reception at Suffolk Downs Racetrack. The party was in honor of the 140th running of the derby. In the same room were artist’s drawings of the proposed Mohegan Sun casino. Crosby paid the $400 fee for himself, his wife and guests to attend.
This brought down criticism from the governor who appointed him. Suffolk Down is where the Mohegans hope to build a casino resort. In a press conference Patrick said, “From what I can tell, with his having paid for the ticket, it was probably within the rules, but not a wise decision, in my view. I imagine that, based on some of the reaction to it, he’s going to be thinking twice in the future.”
The commission’s spokesman Elaine Driscoll at first defended Crosby’s action as a way of supporting the state’s racing industry, which the commission oversees. However, that was quickly followed by a mea culpa from the chairman.
“I agree with Governor Patrick’s assessment,” said the statement from Crosby. “Although fulfilling our responsibility as racing regulators and supporting the racing industry and our employees in this uncertain time is important, with the benefit of hindsight, I should have chosen a different forum for expressing my support.”
In announcing his recusal, Crosby said his actions had become, “a distraction and potential threat to our critical appearance of the total impartiality.” He then left the meeting shortly before the remaining four commissioners took up the issue of Boston’s status.
Crosby has been criticized for skirting ethical bounds since the week he was appointed, when he attended a reception in his honor given by a law firm that had just won a state contract to negotiate a casino deal. Mayor Walsh last month called on Crosby to step away from the decision because of remarks he made that the mayor claimed were prejudicial to his city’s position.
After the commission granted another week before voting on Boston’s request, Walsh commented that while he had as yet not sat down with either developer, “we’re going to take one more crack at them this week to see where we can go and see if we can come up with some type of understanding.”
Although Patrick, according to Crosby, told him “the parties were close enough that it was worth agreeing to the request for a delay for a week. I understood that he meant some kind of an agreement,” that was not how one developer saw it.
According to a statement issued by Wynn, “We have not had any substantive conversations with the city of Boston for 20 days.” A Wynn spokesman, Michael Weaver, told the Boston Herald that they were willing to talk to Walsh about a “surrounding community agreement,” but nothing else. “We have been and continue to be interested in meeting with the city of Boston to discuss a surrounding community agreement. We currently are unaware of any meeting planned to discuss a surrounding community agreement.”
Representatives of the Mohegan tribe did meet with Walsh, but no agreement came out of it, although Mohegan Tribal Gaming Authority CEO Mitchell Etess called the private negotiations “productive.”
Before the meeting Walsh had sounded optimistic, saying that the Mohegans had offered a more substantive financial package than that negotiated by Walsh’s predecessor, former Mayor Tom Menino. However, Walsh insisted that he wasn’t going to settle for anything less than “host community status.” “People want a voice. Something I’ve stuck my guns on and consistent all along,” said the mayor.
Walsh insists that Charlestown, which is across the river from Revere, should be allowed to vote on the Everett project and East Boston to vote on the Revere project. Crosby has confirmed that if Boston is granted a “host community” status that such a vote would be likely.
Walsh insists he is trying to get the best financial deal possible for the city, and not to kill either casino proposal. He has played his relatively weak position as if he held four aces. He insisted not only that his city should be a host community, but also that it had a right to designate itself as such, without the commission’s approval.
Now, with the commission’s decision firmly in place, Walsh’s only option if he wants to continue to play hardball is to challenge the ruling in court.
That may have been the real reason for Governor Patrick’s intervention, since a court challenge has the potential to tie up a Boston metro casino for years.
High Stakes Before Court
The stakes of the case before the Supreme Judicial Court couldn’t be higher. If the referendum goes to the November ballot, it stands close to an even chance of succeeding, according to recent polls.
Last week the court heard oral arguments from the two sides in the case.
Assistant Attorney General Peter Sacks told justices that if the referendum passes it would take property away without compensation.
Members of Repeal the Casino Deal claim that the public should have a say in such a decision while the gaming industry, its supporters and the lawmakers who passed the bill assert that possibly banning the multi-billion industry would add to the state’s anti-business reputation, and lose it millions of dollars in tax dollars.
The court must issue a decision by July 9 in order for the Secretary of State to print ballots. Gaming Commission Chairman Stephen Crosby said last week the panel will not take a position on the repeal if it qualifies for the ballot.
The opposing attorney, Thomas Bean said that compensation would not be required since no property or contract rights exist yet. He argued that the state could revisit laws through its police powers.
One of the seven justices, Robert Cordy, was highly skeptical. “You can’t say, ‘We have police powers therefore we can take contract rights away without compensation.“’ He noted that Penn National has already been issued a license. “So a five -year exclusive license that’s already been awarded after a thorough process and at a substantial cost to the applicant can simply be taken away with a big ‘never mind’?” said the justice. “You can do that? Without compensation? Wow.”
MGM has already spent $40 million in pursuit of the Springfield license.
On the other side of the question, Justice Ralph Gants asked if the legislature wouldn’t have the right to repeal casino gaming if it turned out the law created social problems but little revenue. “The legislature is not prohibited from saying enough’s enough?” he asked.
Sacks said that the state can repeal the law, but not without compensation. “They can’t get a license in a way that is immune from repeal by future legislatures or repeal by the people,” he said, but later added, “The problem with this petition is it precludes the commission from making a decision on license applications,” Sacks said. Critics of the petition also note that it does not provide a mechanism for compensating casinos for their loss of property.
A number of Springfield residents filed briefs supporting the state’s position. They are defending an estimated 2,000 building jobs and 3,000 permanent jobs, and nearly a billion dollars in taxes that the city could collect over the next four decades if the casino resort is built.
Repeal the Casino Deal leader John Ribeiro, interviewed by the Boston Globe, said that the many conflicts the law has created between cities vying for a license, and neighboring cities fighting them, has increased the numbers of those who might vote to repeal.
“We recognized the flaws in the law and that it would be messy. Now you have Boston pitted against Revere, pitted against Everett. You have Winthrop left out in the cold. You have other communities around the state that are in the same situation — they have no say,” he said, adding, “You can’t simplify it any more than the people should have a right to vote.”
Ribeiro and his allies initially gathered enough signatures to qualify the ballot measure, but Attorney General Martha Coakley, now a candidate for governor, rejected the referendum as violating the U.S. Constitution equal protection clause because it would take away contracts between casino developers and the state without compensation.
Ribeiro counters that the legislature could anytime it chooses repeal the law, and that the state’s voters have the same right.
The repeal proponents appealed her ruling to the high state court.
The Bay State’s Economic Development Secretary Dan O’Connell says businesses shy away from states where the rules are uncertain. “We’re concerned about changing the rules in the middle of the game. If this issue is rehashed once again on the ballot — a rather blunt-edged way to deal with a public policy issue — we don’t think that’s a good thing for the state’s reputation, and for a business-friendly climate of regulatory predictability.”
So far, the gaming commission has issued one of the four licenses it is statutorily obligated to issue. Repealing the law would leave Penn National Gaming on the hook for millions of dollars in license fees, as well as the millions it already spent to obtain the license, with no legal recourse for getting the money back.
MGM Resorts, which is the only remaining bidder for a license in the Western casino zone, is so concerned about the possibility of repeal that it has asked the commission to delay issuing a license until after the July court ruling. MGM wants to build an $800 million casino resort in the east side of the city, a proposal strongly supported by the city government and the business community.
According to MGM spokesman Carole Brennan, “Jobs certainty and billions of dollars in economic development hang in the balance. The Gaming Act allows for the creation of more than 10,000 jobs and the recapture of billions of dollars in tax revenues that are currently leaving the state. It doesn’t make sense to forgo those opportunities.”
MGM Springfield President Michael Mathis predicted last week that if the referendum is allowed on the ballot his company will have to delay the project six months and devote its efforts to defeating the measure. “We remain confident that if it goes to a ballot that there’s support within the Commonwealth for gaming, especially under this very rigorous, detailed statutory regime,” he told the Republican. “But at a minimum, it would mean a delay of six months to the start of our project, and the payments we’ve committed to for Springfield, and the jobs for the entire region and to all the economic development.”
The license for the Boston metro area is the subject of a battle between Steve Wynn in Everett and the Mohegan Sun in Revere, with the added factor of Boston Mayor Walsh, who is trying hard to pressure the commission into giving Boston a veto over either proposal.
The fourth license, for the Southeastern zone, is on a timetable to be decided last of all, due to complications caused by a requirement that a federally recognized tribe be given an advantage in the licensing process.
It’s hard to predict how the state as a whole might vote on a repeal. Votes in various host communities have been checkered. Voters in Revere, Springfield, Everett, Plainville, Leominster, and Raynham supported casinos, while West Springfield, Palmer, East Boston, and Milford gave thumbs down. A recent poll conducted by Boston’s public radio station WBUR-FM found that 46 percent supported casinos compared to 43 percent against, a considerable loss to pro-gaming sentiment since earlier this year.
No License for Wynn Without Sworn Statements
Another mayor, this one the mayor of Revere, Daniel Rizzo, called on the commission to publically address what has become a giant elephant in the room for the Wynn proposal: who owns the former Monsanto chemical plant land adjacent to the Mystic River where Wynn wants to build his $1.5 billion casino resort.
Rizzo called on the commission to publically discuss the issue of FBT Everett Realty LLC, especially whether the refusal of one of the firm’s partners Anthony Gattineri, to sign a document promising that no secret partners will profit from the land purchase or to testify under oath about it. The land is being sold for $35 million.
This means there is no way to ensure that Charles Lightbody, who served time in state prison for assault with a deadly weapon, won’t profit from the deal.
Rizzo wrote, “The commission appears ready to rely on the signatures of individuals who [investigators] found unreliable, in lieu of conducting its own public fact finding to answer important questions that go to the integrity of the introduction of expanded gaming in Massachusetts.”
Last week the commission declared that it would not issue a casino license to Wynn without all three owners of the property signing the sworn statements. It will not knowingly assist a convicted felon from profiting from a casino land deal.
Speaking for the board, Commissioner James F. McHugh declared, “Our remedy is for a statement to be signed, and we expect that statement to be signed. Obviously, it has to be signed before any license is awarded.” Investigators working for the commission last July uncovered the fact that the real estate company had failed to disclose that Lightbody had an interest in the property, backdated documents to hide his involvement and found that Lightbody himself took actions to hide his involvement. Wynn insisted that the sale price be reduced from $75 million to $35 million, which the partners originally paid for the land.
Everett Mayor Carlo DeMaria and his city council have come up with a plan they hope will break the logjam, acquire the land by eminent domain as part of a multi-parcel redevelopment plan. The council voted for the plan two weeks ago, 10-1. The one no vote, Council President Michael Marchese appealed to the commission said the plan would “to circumvent the commission rules and regulations” and allow Lightbody to profit.
That prompted Rizzo to call on the commission to publically address the issue.
The commission said it is not ready to address DeMaria’s plan, labeling it a “hypothetical” at the moment.
Western Casino Zone
The three arbitrators chosen by the commission to choose between agreements proposed by MGM and Longmeadow, sided with the town, which had requested $850,000 initially with 13 payments of $275,000 a year.
MGM’s “best and final offer,” was to offer $100,000 up front and between $200,000 and $800,000 for traffic improvements.
The gaming law requires the arbitration panel to choose between the “best and final offers,” and not, for instance, come up with a compromise.
MGM appealed the decision, as well as that of West Springfield, but the commission overruled it.
Southeastern casino zone
Meanwhile, the Mashpee Wampanoag Tribe, which wants the license to build a $500 million casino resort in Taunton, is predicting that its facility could be open by early 2016.
The tribe’s First Light casino and resort would have a 15-story hotel, dining and a water park.
Tribal Chairman Cedric Cromwell talked about the 115 acres his tribe hopes to develop with members of the town’s chamber of commerce at a breakfast meeting. The casino would pay about $8 million annual to the town in taxes. The tribe has already paid $1.5 million to the town and committed to $33 million in onetime mitigation and nearly $5 million in annually mitigation payments.
The remaining hurdle to building, and it’s a considerable one, is whether the Bureau of Indian Affairs will approve of the tribe’s application to put the land into trust.
Although the U.S. Supreme Court in 2009 in Carcieri v. Salazar ruled that tribes recognized after 2009 cannot put land into trust, the Mashpee’s argue that they have been under the federal government’s jurisdiction since colonial times, and before that by the British crown, which recognized the tribe’s existence according to a letter from the time.
Cromwell dismisses the possibility that delays in his tribe’s application would persuade the commission to award the license to a commercial bidder, calling it “nonsense.” “They couldn’t treat the customers the way we could,” he said, according to the Taunton Gazette. He said the state would lose money from the tribe, which would go ahead and build a casino anyway, but wouldn’t have to pay the state any taxes.
The commission last month extended the deadline for submitting proposals for the southeastern zone license until September 23.
