Last month, MGM Resorts International revealed plans for a 5 million waterfront casino at Steelpointe Harbor in Bridgeport, Connecticut. Officials said revenue generated from that facility would more than make up for revenue the state would lose from the Foxwoods Casino and the Mohegan Sun Casino, both in the southeastern part of the state. In exchange for exclusivity, the tribes contribute 25 percent of slot revenues to Connecticut. That peaked at 7 million a decade ago and now is about 0 million in annual tax revenue.
Marcy Block, senior director of U.S. public finance for Fitch Ratings, said if the state did allow MGM to build in Bridgeport, Foxwoods and Mohegan Sun payments could end immediately but it would be years before the new MGM Resorts casino could be built and begin operating. Meanwhile, it’s not clear how the state would plug the gap. Block said. “The state is predicting deficits years into the future and is looking at fairly significant cuts. I don’t know that they can afford to roll the dice on that and think the new casino can provide sufficient compensation for that loss,” she said.
Colin A. Mansfield, a director of corporate finance at Fitch Ratings, added, “The Northeast in general is a pretty saturated market at this point. We’ve seen the number of casinos in the region increase over the last decade.” He noted new casinos in upstate New York have delivered underwhelming results—but coming changes in the New York City market could present competition for Bridgeport.
MGM said taxes from the proposed Bridgeport facility would bring the state revenue of $300 million–a total of $1.6 billion to the state between 2019 and 2023. That’s more than either of the existing casinos would provide. It’s also more than the amount that could be generated by a proposed third casino in East Windsor, approved by lawmakers in June as a way to decrease the number of Connecticut patrons leaving the state to gamble and seek entertainment at the $950 million MGM casino opening just across the state line in Springfield, Massachusetts in fall 2018. It would be run by a joint venture of the Mashantucket Pequot and Mohegan tribes.
MGM Resorts International Legal Counsel Uri Clinton, said MGM Resorts’ product would be better than the East Windsor casino because patrons from New York City could reach Bridgeport by ferry, train and automobile. He said if the state wanted to modernize gaming, “you would not do so in a renovated movie theater.” He said the 59,000 square foot East Windsor location “is the traditional, smoky room casino that nobody wants to go to.” MGM’s integrated resort model “is clearly the way to go,” he said.
MGM said it would pay Connecticut a one-time $50 million licensing fee plus $8 million in annual payments to Bridgeport. Also, MGM said it would build a new job training facility in New Haven. The project would create 7,000 jobs.
Mansfield said, “Can a commercial casino in Bridgeport make up dollar for dollar what the tribes have been paying? To make the math work, you’d probably have to tax at the high end to make up for lost years of revenue-sharing payments. But if you have a high gaming tax, it discourages investment by the commercial operator. It makes it harder to make the returns pencil out.” At this point the tax rate is unknown. Roy Occhiogrosso, representing MGM, said the company did not “want to negotiate the rate in public.”
Connecticut state Senator Cathy Osten, who represents portions of Eastern Connecticut, said MGM can’t be trusted to follow through on its proposals. She said the state’s compact with the tribes has been a successful partnership since the 1990s, providing 9,000 jobs at the two existing casinos, so why toss it out for an uncertain deal with MGM. Osten added MGM must be worried about the East Windsor proposal or it would not be pushing so hard for the Bridgeport facility.
Meanwhile, the contract for the East Windsor facility required that the U.S. Department of the Interior sign off on it. In a letter to the tribes and state officials, Acting Assistant Secretary for Indian Affairs John Tahsuda called the state’s amendment to the compact “premature and likely unnecessary. We find that there is insufficient information upon which to make a decision as to whether a new casino operated by the Mohegan and Mashantucket Pequot tribes would or would not violate the exclusivity clauses of the gaming compact. The tribes have entered an agreement with the state whereby they have agreed that the exclusivity provisions will not be breached by this arrangement. Therefore, our action is unnecessary at this time.”
Clinton said lawmakers will have to revise the legislation approving East Windsor, giving MGM the opportunity to enter the state. “We are both in the same position. If the state is going to expand gaming infrastructure, either one of those developers would have to go back and get legislative authorization. We are in the exact same position now as they are,” he said.
MGM also recently told the Massachusetts Gaming Commission its card room at MGM Springfield will have 23 tables, up from a previous plan for less than 20. Wynn Resorts’ Boston-area casino, which will open in June 2019, will have 90 tables. Massachusetts gaming regulators said MGM’s poker room will “accommodate an emerging gaming trend for a more interactive/communal experience” that will appeal more to millennials than slots.
