Massachusetts Tribal Casino in Litigation-land with Feds

The Mashpee Wampanoag Tribe, a leading contender for the third full-scale casino license in southeastern Massachusetts, the First Light casino (l.), has run into roadblocks over finances and federal lands. The newest issue: Does it pay to push ahead given the less-than-stellar results from existing casinos?

Massachusetts Tribal Casino in Litigation-land with Feds

Eight years after it was created, Massachusetts’ third full-scale casino license for the southeastern region remains unclaimed. The leading contender for that license, the Mashpee Wampanoag Tribe, has been hindered by questions surrounding its federal land status, litigation and crippling finances, according to a report on MassLive.com.

The problem now is whether it’s too late to grant the license, given a casino market that may be oversaturated.

“We’ve reached a point where we’re just moving around on a map. We’re not generating new market,” said Clyde Barrow, a political science professor at the University of Texas Rio Grande Valley who studies the northeastern casino market.

Casino operators, lawmakers and developers can’t agree on how to proceed with the Region C license, which was created out of the 2011 casino law. What there is a consensus on is that Massachusetts still loses money daily as residents drive across state lines to Foxwoods and Mohegan Sun in Connecticut, as well as Twin Rivers and Tiverton Casino Hotel in Rhode Island.

The Massachusetts Gaming Commission in September denied a second time Mass Gaming & Entertainment’s proposal for a destination-based casino on the Brockton Fairgrounds, citing in part the looming possibility of a tribal casino. The commission seeks public input on Region C before deciding whether to re-open bidding.

“There were important matters in my opinion, like a new market assessment or a review of conditions changed in general, not just in Massachusetts but in the New England market, that really might affect what really is behind this request to rethink this in a fundamental way,” Commissioner Enrique Zuniga said during a September meeting.

Commission spokeswoman Elaine Driscoll said the staff is drafting a request for information for the commissioners to consider, followed by possible request for proposals, which would warrant public discussion before any plans on Region C move forward. “There is not a timeline determined for that at this point,” she said.

At their October 24 meeting, commissioners requested a status report on the Mashpee Wampanoag Tribe’s efforts to build a casino. They referenced competing interests vying for a chance to fill the void in Region C, claiming proprietary research shows an oversaturated market, but opted to conduct their own research.

Mashpee Wampanoag Tribe Chairman Cedric Cromwell said in a statement that the casino project is more or less a done deal.

“What some either don’t realize or are eager to forget, is that the Tribe has been ready with a turnkey development since early 2016,” he said.

Yet two years after the Mashpee Wampanoag Tribe’s self-imposed deadline to open a full-scale casino, the tribe is fighting the federal government in an effort to secure the land selected for the development, as well as plaintiffs in Taunton, who originally sued the federal government and were responsible for halting work on the casino.

Analysts say the state shouldn’t rush to issue the license elsewhere, either. Alan Woinski, president of Gaming USA, said the revenue numbers reported by the state’s other two casinos—MGM Springfield to the west and Encore Boston Harbor to the east—suggest the market has become saturated. “At a certain point, you have to say enough is enough, and let’s digest what’s going on now and let’s fix what we have now,” Woinski said.

The opening of Everett’s $2.6 billion casino in June has already cut into profits at Connecticut and Rhode Island’s casinos, Woinski said. Mohegan Sun and Foxwoods saw another drop in gross slots revenue in September, the 15th consecutive month of declining numbers. The two tribal casinos do not disclose their gross table game revenue on a monthly basis.

The Rhode Island casinos took a bigger hit. In August alone the gross table games revenue dropped a whopping 40 percent—when measured on a year-over-year basis—from $1.96 million in 2018 to $1.19 million in 2019. Slots revenues dropped 16 percent over the same time period. Twin River was particularly hard hit.

“There has never been a casino that destroyed another casino like that one,” Woinski said.

Yet even Wynn Resorts’ newest property has faced its own revenue troubles: the casino’s slot numbers are low, though its table game revenue is far higher every month, a first for the industry, at least in this market.

Barrow said a Region C casino would bring new jobs and benefits to a host community but hurt the Northeast market overall.

“Let’s say you open a casino in Brockton, and all it does is cannibalize existing facilities,” he said. “The state gains nothing, but for Brockton, it’s new money, new tax revenue, new jobs. So from their perspective, it makes sense to build into a saturated market.”

Cromwell doesn’t agree that the market has peaked. “The concerns of oversaturation less than two years after the opening of casinos in other regions is both premature and overblown,” he said.

Three years ago, the Mashpee Wampanoag Tribe seemed like the clear winners in the fight over a southeastern Massachusetts casino. The tribe had a compact approved in 2013. The U.S. Interior Department granted the tribe 320 acres of sovereign land in 2015. Tribal leaders vowed to build a $1 billion casino that would open by 2017.

In 2016, a federal judge in Boston nullified the Obama administration’s decision that secured the land for the tribe. Under President Donald Trump, the Interior Department issued a decision saying it could not hold land in trust for the tribe because it wasn’t under federal jurisdiction when the Indian Reorganization Act was passed in 1934.

The tribe sued the federal government and remains locked in litigation.

The U.S. House approved legislation in May to give federal recognition to the Mashpee Wampanoag Tribe. Trump criticized the bill, sponsored by U.S. Rep. William Keating, in a tweet. It is unclear when, or even if, the Republican-controlled Senate will take up the bill.

Meanwhile, the tribe has accumulated more than $500 million in debt to its financial backer, Genting Malaysia, and its financial reserves continue to dwindle. Additionally, Genting halted loans to the Mashpee Wampanoag earlier this year, writing off its investment in the tribe as a loss.

“The only reason we are not out there building right now is because we want to get further along in the litigation. But make no mistake that the Tribe is long past the point of no return,” Cromwell said.

The litigation, however, includes a 2016 injunction that bars the tribe from continuing construction on the casino project. The state missed its chance to hold the tribe accountable for their promises, Woinski said. He questioned why the commission didn’t impose conditions on the tribe when it had the chance. Now, the project’s fate rests in the courts and Congress.

“What the commission should have done was made something contingent on that and said, ‘OK, you and Genting must have the casino open within a year or else you will get fined every day or something,’” Woinski said. “You would have seen how fast they changed their tune on that.”

Gaming regulators want to know the exact status of federal litigation around the Mashpee Wampanoag quest to secure land in trust before making a decision about moving ahead with the third casino license.

In Wareham, the Notos Group proposed a $300 million mixed-use development with a slots parlor. Notos claims to have research suggesting the market can’t handle another full-scale casino, but the firm hasn’t made its materials public.

Rep. Susan Williams Gifford filed a bill to change the law so the commission would legally be allowed to consider the project in lieu of a full-scale Category 1 casino for Region C.

In Plainville, Penn National Gaming wants to expand Plainridge Park, the slots parlor, to include table games. That would also require legislative approval. Woinski said regulators shouldn’t hesitate to work with existing casino operators, like Plainridge Park, if they can make changes that will help them perform better.

“Forget about the Region C right now, let the thing play out with the tribe, if it ever happens,” he said. “That’s great, but in the meantime, Twin River’s jugular is exposed. I don’t know why the state isn’t just going for it.”