Twin River Worldwide Holdings, which owns Rhode Island’s two casinos, in Lincoln and Tiverton, is blasting a proposed $1 billion 20-year agreement between the state and U.K.-based International Game Technology (IGT,) which would provide lottery services to the Ocean State.
Twin River took out a full page ad in the Sunday Journal last week arguing that the agreement, which is being pushed by Governor Gina Raimondo, will cost the state millions of dollars in revenue it will never collect. The ad declares, “Last week, the day before the legislature ended, Governor Gina Raimondo announced a no-bid, 20-year, billion dollar tentative agreement with lottery vendor IGT. This agreement has been negotiated in secret since January.”
The legislature will vote on the agreement sometime after Labor Day, when legislative leaders plan a special session. Under the terms of the agreement IGT would pay Rhode Island $25 million, make $150 million in capital improvements over two decades and commit to employing at least 1,100 people in the state.
The lottery would be required to get 85 percent of its more than 5,000 lottery terminals from the company. Current law prevents more than 50 percent of machines from being purchased from one source. Twin Rivers argues the contract should be put to competitive bid.
Marc Crisafulli, executive vice president of Twin River Worldwide Holdings, argues that as much as $10 billion in gaming revenue rides “on the belief that the governor’s office did this 20-year secret deal entirely correctly. That’s a pretty big leap of faith when you consider the lack of process, the absence of any competition, the rushed nature of the deal … and the fact that the deal doesn’t seem to make any business sense. There’s no reason to do it now. The terms are very bad. … It undermines competition.”
IGT Chairman Robert Vincent said it was wrong to call the deal merely a no-bid contract. “This is an economic development package that contains agreements that by and large extend our existing relationship, in return for a commitment by IGT to protect 1,100 good-paying jobs in the state, as well as our presence in our downtown headquarters, and the ability to pitch us on any expansion plans we have going forward,” he said. “it’s a good deal for the state.”
A spokesman for the governor also defended the deal: “The continuation of our partnership with IGT will result in hundreds of millions in local investment and jobs for 1,100 Rhode Islanders at an average salary of $100,000. IGT is one of only three companies in the world — and the only company in Rhode Island — capable of operating this system, and this agreement ensures Rhode Island employees will be guaranteed jobs for decades to come,” said Josh Block.
The contracts IGT has with Rhode Island include one to run the lottery systems and the other to provide lottery machines.
Crisafulli argues that of the three companies that manufacture video gaming machines for Twin River’s two casinos, IGT finished last for gaming dollars. Over the last year, he said, IGT machines brought in $258 per day per machines, compared to $303 per day for Everi’s machines and $401 for Scientific Games. Some of IGT’s machines are more than ten years old, he said.
That directly impacts the state’s bottom line since it collects more than half of slots revenue. Moreover, gaming is the third largest source of state government revenue.
Crisafulli added, “Essentially, the state of R.I. is paying five times what Massachusetts is paying for the same or at least, a very similar system,” and risks locking itself into a long-term agreement in a very competitive landscape that is extremely fluid due to rapid developments in technology.
He concluded, “The big concern is what is happening with the regional market right now. … There are three new facilities in Massachusetts over the last couple of years. There’s the prospect of a fourth … along with the prospect of a third facility in Connecticut. We are facing intense competition. … Not only does this deal not help us to compete. It’s a burden that makes us less competitive.”
Critics of Twin River have been quick to point out that Crisafulli was arguing from opposite side when he was the negotiator for GTECH, a company that eventually was absorbed by IGT. He helped nail down the current 20 year agreement that ends in 2023.
Crisafulli doesn’t think it’s the same kind of situation. He told the Providence Journal, “It was a very different time and market … and that was a much better deal for the state. Building a building downtown was critical to kind of reinvigorating the downtown area, and that created all sorts of indirect value.” That discussion also included the 50 percent limitation on machines from the same manufacturer, he sad, which guaranteed a competitive slots market on the casino floor.
That limit still holds, although the state did nothing when GTECH and IGT merged, giving IGT 84 percent of the machines at the two casinos.
The law allows the lottery to reduce the number of IGT machines due to low popularity, which has resulted in a decrease of 15 percent since 2008, said Crisafulli.
