With about half of the Connecticut legislature leaning towards not giving the Mohegan and Pequot tribes the third, commercial casino that they seek in East Windsor, the tribes are trying to sweeten the deal by guaranteeing slot revenue if the bill they favor is passed.
The tribes sent a letter to senior lawmakers last week that started off: “With the development of a third casino operated jointly by Mohegan and the Pequots we are committed to guaranteeing our existing slot revenue arrangement with the state and are proposing compact amendments that will ensure those revenue streams are preserved. SB 957 does not jeopardize this revenue sharing, because it is expressly conditioned on approval of the tribes’ proposed compact amendments.”
The tribes felt they needed to clarify this point because some lawmakers have been spooked by a legal opinion issued by Attorney General George Jepsen who worried that if a commercial casino opens in the state, even one owned by the tribes, that it would threaten the tribal state gaming compact that guarantees the tribes a monopoly in return for them paying the state 25 percent of slot revenues. Since the Mohegan Sun and Foxwoods opened nearly 20 years ago the casinos have paid more than $7 billion to the state.
And it was that concern that sparked a third bill sponsored by state Senator John W. Fonfara, co-chairman of the finance, revenue and bonding committee.
“We don’t know if that is the most effective way to protect Connecticut and advance our interests,” Fonfara said. His committee will possibly commission a study to examine best practices in other states, including neighboring Massachusetts. A hearing will be held this week to consider the pros and cons of all three bills.
Although tribal casino revenues are in a nine-year decline, they are still hefty. In 2015 they paid $268 million to the state.
Fonfara wants to see if expanded competition could actually help the state. His bill would require casino operators to invest $500 million, more than then $200 million – $300 million the tribes would invest in East Winsdor. The tax rate would be 35 percent vs. 25 percent the tribes would pay and the rate envisioned by the second bill that would open up bidding to other parties. And the licensing fee would only be $50 million as opposed to the $250 million in the tribal bill. Fonfara’s bill would also require payments to local host communities.
Tribal representatives, including the two tribal chairmen also met with key legislators, such as House Speaker Joe Aresimowicz, at the capitol in Hartford last week to back up the letter with face to face assurances.
The bill the tribes back would allow them to build a $300 million casino in East Windsor, for which they would pay a similar percentage to the state, and another 25 percent tax. On table games, they would pay 10 percent to the state and 15 percent to tourist initiatives.
Mohegan Chairman Kevin Brown said he thinks chances are minuscule that the Bureau of Indian Affairs would nix a revised compact that adds the new revenue sharing arrangement. That has worried some lawmakers, and was alluded to in Jepsen’s letter.
“It’s our experience with the Bureau of Indian Affairs that the whole reason that that bureau exists is to oversee the forward movement of Native American tribes across the country and our ability to sustain our economic fortune,” said the chairman. “So, it’s slim to none are the chances that they would rule against what we’re trying to do.”
The purpose of the third casino is to blunt the effects of the $950 million MGM Springfield, which is rising 14 miles from the Connecticut-Massachusetts state line and, when it opens in 2018, is projected to have a devastating effect on the tribal casinos’ revenues.
Brown wasn’t the only one trying to assign odds for things happening. Aresimowicz said he believed the tribe-backed bill has a 50-50 chance of passing this year. The legislature session ends June 7.
He told the State newspaper that Jepsen’s opinion put the bill “in a more difficult spot.”
House Majority Leader Matt Ritter says he is worried about court challenges to the bill, which Jepsen also mentioned in his opinion. Noting that excluded parties, especially MGM Resorts International, continue to threaten more litigation, he said, “This doesn’t change the other concerns the attorney general has raised.”
House Minority Leader Themis Klarides wasn’t as pessimistic. “It certainly is positive if we can have guarantee of that funding one way or another,” she said. “Where all this will end up is still a question. But this piece of information, in my opinion, is very positive for the tribes.”
Governor Dannel P. Malloy, who has so far remained above the fray, said he thought the bill would have a better chance if it could “safely secure the state’s position,” and added that he didn’t intend to put the existing funding in danger.
Malloy and lawmakers are very sensitive about money issues this year since the state is facing a large deficit. At the same time, the bill that is competing with the tribe-backed bill would open up competition to commercial casinos and would, MGM claims, make more for the state than it would lose.
MGM is pushing for a casino in the southwest part of the state, site of Bridgeport, the state’s largest city.
Both bills have been passed from the legislature’s public safety and security committee, which oversees gaming.
Nathan Associates, a financial consulting term whose principal is longtime tribal casino economics watcher Dr. Alan Meister says that the state’s casinos are making 36 percent less than they were at their peaks in 2006. He put the facts out there in Casino City’s 2017 Indian Gaming Industry Report.
In 2015 the state’s Indian casino revenues declined one percent over 2014. It declined 7.5 percent from 2013-2015. The nine-year decline began during the Great Recession, but competition from nearby states is blamed for the more recent dips.
At the same time, however, non-gaming revenue at the two casinos rose from $253 million in 2014 to $259.6 million, reflecting the casinos’ continuous efforts to diversify into amenities unrelated to gaming.
Despite these declines, the state still has the sixth largest tribal casino industry in the nation, says Meister, with a total of $1.6 billion in 2015. Beating it were California, Oklahoma, Florida, Washington and Arizona.
You’ve got this saturation of gaming in that region,” Meister told the Wall Street Journal. “They are fighting for their market share.”
