Most of the gaming news coming out of Massachusetts this week is centered on courtroom actions, specifically the MGM challenge to the Connecticut law that would allow a third Indian casino, and the attempt by the Massachusetts Gaming Commission to squash the Boston challenge to its awarding of the Boston metro license to Steve Wynn’s Everett project.
Last week MGM Resorts International filed suit challenging the Connecticut law in a Hartford federal court. The law allows the state’s two gaming tribes, the Mashantucket Pequots and the Mohegans, to form a joint development agency and begin the process of determining the host community for an off reservation commercial casino that would be jointly operated by the tribes. Currently each tribe operates its own casino on its reservation in Ledyard and Uncasville in the southern part of the state.
MGM’s lawsuit challenges the process that eliminates MGM from bidding for the commercial project. It claims this violates the Equal Protection clause of the U.S. Constitution. MGM has broken ground on the $800 million MGM Springfield very close to the Connecticut border.
According to the filing: “There is no constitutionally legitimate basis for the act’s discrimination in favor of the preferred tribes and against all other potential bidders.”
It also states: “The act allows only the preferred tribes to engage in negotiations and sign a casino development agreement with a municipality,” adding, “The act excludes all other entities, including MGM, from competing with the Preferred Tribes to negotiate such a development agreement and presenting such an agreement to the legislature for approval (and so also excludes MGM and all others from the subsequent establishment and operation of the commercial casino gaming facility).”
The Connecticut law is the answer to the concern that the MGM Springfield would draw off a large percentage of revenue from the tribal casinos. The purpose was to protect state revenues and jobs. The tribes hope that a satellite casino near the border would limit the hemorrhaging.
The lawsuit is actually filed against Connecticut Governor Dannel P. Malloy, Secretary of State Denise Merrill and Commissioner Jonathan Harris of the state Department of Consumer Protection.
A spokesman for Malloy commented, “While we will be reviewing the lawsuit, we believe in protecting Connecticut jobs.”
Rep. Stephen D. Dargan, co-chairman of the legislative committee that oversees casinos, called the lawsuit “laughable,” and added, “Well, good luck, MGM. What is happening now, here comes MGM with the pushback.” He noted that the tribes pay the state $200 million annually and quipped, “If MGM wants to come up with $200 million, I’m sure we’d be willing to listen to them.”
The lawsuit puts the spotlight on a relatively common tactic in the gaming industry of opening two casinos near to each other in order to generate more business for both. It is called the “two-stop strategy,” and it is cited in the MGM lawsuit, which also notes that the Mohegans tried a similar tactic when they bid for one of the casino licenses in the Bay State.
In a joint statement the two tribal chairmen, Rodney Butler and Kevin Brown, declared, “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.”
A federal law passed in 1998 paved the way for the Pequots and Mohegans to open the Foxwoods and Mohegan Sun casinos. The MGM lawsuit does not challenge the 1988 Indian Gaming Regulatory Act (IGRA) under which tribes operate casinos, but it does challenge the exclusivity of the Connecticut law that allows the tribes to do a commercial casino, but precludes others from doing the same.
Connecticut Attorney General George Jepsen warned lawmakers when they were contemplating giving the tribes a special arrangement that such a law might violate the U.S. Constitution. He didn’t comment on the lawsuit, but in April 15 wrote, “If enacted, the proposed legislation may face third-party court challenges, the outcomes of which are difficult to forecast,” adding, “For example, a third party could claim that granting the exclusive right to conduct gaming to the Tribes, particularly where that gaming would be conducted off reservation land, violates the Equal Protection Clause of the U.S. Constitution.”
Jepsen’s reservations are quoted in the MGM lawsuit.
Wynn’s Battles
Meanwhile the city of Boston got off on a bad foot with Suffolk Superior Court Judge Janet L. Sanders early last week in its lawsuit against the Massachusetts Gaming Commission.
The city seeks to stop the Wynn Resorts 24-story $1.7 billion casino resort on 33-acres in Everett, along the Mystic River.
The judge ruled that Boston violated court orders by using litigation as a tool against the commission. The two-page order dinged the city for violating court orders by including allegations of “bad faith” and improper actions in the lawsuit challenging the award of the license.
She also rebuked the city for filing these allegations hours before the first hearing with Judge Sanders and for not letting the commission’s lawyers see the allegations before filing them.
Boston is suing to try to stop Wynn from building a $1.7 billion casino resort in Everett along the Mystic River.
Judge Sanders ruled that these pleadings were improper and that any anti-Wynn material would be removed from the lawsuit’s public file. The materials might be reintroduced later, but they won’t be part of the public record, she ruled.
Following the ruling the commission’s attorneys asked for the case to be dismissed. The 2011 state law that created the casino licensing process puts the decision beyond judicial review, they say and the city waited several months too long to challenge it.
Because the project would be built in a neighboring city, Everett, the city lacks standing, says the filing. “Under the circumstances here, to grant Boston standing to block the construction of a casino in a different city would eviscerate the Commission’s ‘full discretion.’ ”
The mayor’s office reacted to the ruling by saying that Boston still considers itself a “host community” of the casino resort, even though it will be located in neighboring Everett—and demanding that the neighborhood of Charlestown be allowed to vote on the casino. Walsh considers the city’s only recourse.
Two weeks ago U.S. Attorney Carmen Ortiz sharply criticized the mayor for including in its lawsuit the accusation that Wynn had been privy to confidential State Police files on a state and federal investigation of Charles A. Lightbody for his secret ownership of land that Wynn purchased for the casino site.
Lightbody is a convicted felon. He and two others who were partners in the property are under federal indictment for conspiring to keep Lightbody’s participation a secret. Boston’s lawsuit alleges that Wynn had improper knowledge of this investigation, something that federal prosecutors vehemently deny.
Judge Sanders is expected to hear oral arguments on the motion in September.
The war of words between Wynn and the city escalated last week when Mayor Martin Walsh accused Wynn of calling him and offering more than $100 million to get the city to drop the lawsuit.
Both admitted that the phone call took place. However, the two men have entirely different versions of what was said.
Walsh gave his version during a radio interview last week with WGBH’s “Ask the Mayor” segment. He claimed that after Wynn offered the city the money that Walsh retorted that money wasn’t the issue. The issue is allowing Charlestown to vote on the issue.
Walsh said, “And I said to him, well, when can we get together because I’m available. And he said, well how about after Labor Day… He called me. So at some point we’ll sit down and talk, if I get reached out to, and we’ll see…I’ll talk to anyone; we’ve said all along we’re not going to talk and our concerns have been with mainly the way that the Gaming Commission has handled Boston in this particular case but we’ll have a conversation and I’ll express to Mr. Wynn and the Wynn folks the importance of making sure the people of Charlestown have the opportunity to have their voices heard.” He added, “This isn’t personal.”
The Wynn organization quickly disputed Walsh’s version.
According to Michael Weaver, a spokesman for Wynn, “Mr. Wynn made no offer of additional money.” He added, “Mr. Wynn did advise the mayor that hundreds of millions had been spent already in the pursuit of our $1.7 billion project that will create 4,000 construction jobs and 4,000 permanent jobs and reaffirmed the Company’s current mitigation package to the City.” Wynn hopes to open the casino resort in 2018.
Weaver noted that the commission awarded a $25 million mitigation package to the city after Boston refused to sit down and negotiate such an agreement with Wynn. In addition to the $25 million, the city would get $55 million for improvements to Sullivan Square, the section of Charlestown expected to be hardest hit by Wynn traffic.
Wynn has hinted at suing the mayor and other Boston officials personally for defamation for various statements they have made about him in connection with their lawsuit against the commission.
Meanwhile, Wynn is trying to gain some support locally by offering to pay $500,000 every year (for a total of $7 million over 15 years) to the financially challenged Massachusetts Bay Transit Authority, which runs a subway service near the proposed casino sit.
Massachusetts Department of Transportation spokesman Michael Verseckes told the Boston Herald “MassDOT and the MBTA are pleased with the proponent’s proposal to subsidize the operating costs of Orange Line service. The subsidy will allow for enhanced service that will address capacity issues at key periods, as well as accommodating additional ridership generated as a result of the development.”
The subsidy would be over and above the $76 million Wynn has committed to make as required by its license.
Wynn Everett President Robert DeSalvio commented, “The more trains we add, the more people will use public transportation for work and play, all while lowering the number of cars on the street.” The additional money will enable the MBTA to add more trains during busy hours.
Besides the lawsuits, the project is currently undergoing environmental review by the state. The state insisted on reversing a land purchase that Wynn made of state land needed for the casino because it decided the EIR needed to be finished first.
The payment to the MBTA is detailed in the 1,000 plus environmental study that was submitted to the state on July 15.
Plainridge Park
The opening last month of Plainridge Park Casino, the Bay State’s first casino and only slots parlor, has raised the stakes for New England’s gaming market and caused both Twin River casino in Rhode Island and Connecticut’s two casinos to look over their shoulders.
Fitch Ratings analysts visited the regional casinos and concluded that the casino, which is being operated by Penn National Gaming, Inc., will deliver a solid return on investment for the next few years, until the Wynn Everett casino opens.
Twin River will continue to siphon off some of the Bay State’s players, but less than before. Said Fitch: “We anticipate only modest impact on the Connecticut casinos, but expect Foxwoods to be hurt more than Mohegan Sun given its closer proximity.”
Fitch noted that most visitors to Plainridge were from Massachusetts, with perhaps 20 percent from Rhode Island. “Penn is aggressively marketing in both states with the intent to build a seasoned database by the time other Massachusetts casinos open,” it wrote.
Twin River casino, on the other hand, has about a 50/50 mix of customers from the two states. It has not yet lost a large volume to Plainridge, according to its management.
Fitch was skeptical of this claim, writing: “Twin River customers from Massachusetts are now spending less as part of their gambling budget is spent at Plainridge. Management expects to lose some Massachusetts customers after the trials but expects to retain the bulk of the Rhode Island players…”
Fitch projects that Plainridge will generate $176 million annually, an 18 percent return on investment. That will be true until Wynn Everett opens, it said.
Martha’s Vineyard Bingo
The Wampanoag Tribe of Gay Head (Aquinnah) is locked in a federal lawsuit with the state of Massachusetts and the town of Aquinnah challenging the tribe’s right to open a Class II bingo in an unfinished community rec center.
The stakes are high for the tribe, which could collect almost $5 million annually if it is allowed to open on this corner of Martha’s Vineyard. That’s small potatoes compared to Plainridge Park Casino, which raked in more than that in its first week of business, but it would nearly double the tribe’s annual $7 million budget.
Most of that revenue comes from federal grants. The tribe ha about 1,300 members, 300 of who live on the island.
Federal Judge Dennis Saylor two weeks ago issued a temporary restraining order to halt construction until the challenge is resolved. He will hear arguments in the case later this month.
According to New England gaming expert Clyde Barrow, the little casino could benefit from the existing tourist trade to the island. “It wouldn’t be a destination,” he told the Cape Cod Times. “People who are there and have already been to the beach and shops might say, ‘Let’s go check out the casino for a while.’”
Tribal Chairman Tobias Vanderhoop calls the casino the tribe’s best chance at economic development. “As tribal chairman, I swore an oath of office and am charged with the fiduciary duty of expanding our limited economic power for the good of all members. The development of a gaming operation is the best option we currently have to create a revenue stream outside of federal funding.”
Tribal members do not unanimously support building a casino on the island. A referendum on the issue will be held August 16.
Racetracks Molder
The Massachusetts Race Horse Development Fund has $10.3 in it and will get $18 million, despite the fact that the thoroughbred racing industry isn’t running any live races.
The money comes from a percentage of casino profits from Plainridge Park.
Suffolk Downs, near Boston, which benefits from the fund, has not run any races in a year, although there are proposals to bring them back.
The fund will continue to grow, however, since the MGM Springfield and Wynn Everett will pay 2.5 percent of their revenues once they open, which will produce an estimated $21 million. That is divided between the harness racing and thoroughbred racing industry, with the thoroughbred sport getting 75 percent
Plainridge continues to offer harness racing. The additional revenues are starting to boost the industry a little by increasing the size of the purses offered, which means more participants.
One member of the harness racing industry told the Associated Press, “To be candid, we feel like we should get a little bit more, especially when there’s no viable thoroughbred racing at this time.”
Plainridge will run more than 100 races this year and next, while Suffolk Downs will have three days this year and next, just to avoid losing its license.
The Stronach Group, which operates several racetracks, has signaled its interest in trying to revive the sport at Suffolk Downs.
Some lawmakers are already getting impatient with the fund and want the money diverted elsewhere.
House Speaker Robert DeLeo, who championed the 2011 gaming expansion law because he wanted to help the racing industry, probably won’t go along with taking the money away. In a statement he called that idea “premature.”
