MGM Resorts official Uri Clinton gave state legislators something to think about on Thursday. Don’t worry about breaking the exclusive gaming compact with two tribal nations that provides hundreds of millions of dollars to the state each year, albeit lesser amounts in recent years. Approve a competitive bidding process for a third casino in southwestern Connecticut and the economics will dwarf the money the state receives from Foxwoods and Mohegan Sun. It’s perked up interest for a casino in Bridgeport.
The state is considering a third casino in upstate East Windsor, a joint venture of the tribal nations to counter MGM Resorts nearly $1 billion casino under construction in Springfield, Massachusetts. Each side is protecting its economic turf. The legislature is contemplating two bills, one for a third casino joint venture and another for an open, competitive process for presumably a down-state casino. Clinton’s message is open up the process for a new commercial casino in southwestern Connecticut, the ultimate economic driver given its proximity to wealthy Fairfield County and a New York market. The cash flow guarantees, he asserts, will offset concerns about breaking the exclusive gaming compact.
Bridgeport State House members Chris Rosario and Ezequiel Santiago are pushing a bill to open up the process. Backers of the compact argue if the tribal nations are not involved the compact is broken. Clinton counters this East Windsor site is not on tribal land so that in itself could break the compact legally. Connecticut Attorney General George Jepsen is expected to issue an opinion on this soon. A legislative decision could hinge on Jepsen’s opinion.
But Clinton also threw out some numbers to back up the economics of a casino in southwestern Connecticut. From his Thursday testimony before the Public Safety & Security Committee:
MGM’s position is simply this: the State and its citizens deserve the maximum benefits that would flow from an open, transparent, and competitive selection process that adheres to the best practices in the industry.
Although we believe the Competitive Bid Bill is a step in the right direction, the key question for this Committee and the General Assembly to consider is how can the State structure the competitive process in a way that maximizes the number of jobs created and the tax revenue for the State?
We would suggest the following answer to that question: the Legislature should amend the Competitive Bid Bill to include market-based economic drivers, including:
· $15 million Deposit Payable After a Local Referendum;
· $500 million Minimum Total Investment for Commercial Gaming Facility;
· $50 million Non-Refundable License Fee; and
· 30% to 35% Market Based Gaming Tax to Offset Anticipated Losses to the Pequot Fund.
Both Bills Would Have the Effect of Placing the Current Tribal Payments At Risk
While the Competitive Bid Bill should include a market tax rate sufficient to offset the loss of the Tribal Payments, there is a substantial financial risk associated with Raised Bill 957, because the approval of the required amendments to the current Compact could result in a downward adjustment of the 25% the Tribes currently pay on their slot revenues.
Raised Bill 957 would grant MMCT Venture LLC–a private commercial entity, owned by the Mashantucket Pequot and Mohegan Tribes–the exclusive right to operate the State’s first commercial, off-reservation casino. As anticipated in Raised Bill 975, the only possible way to accomplish this would be to amend the current Compact with the tribes. However, the Compact amendment process would itself subject the state of Connecticut to a downward adjustment based on the fact that:
(i) the marketplace has fundamentally and dramatically changed since the Tribes’ 25 percent royalty rate was adopted over 20 years ago; and
(ii) the Mashantucket Pequot revenue sharing agreement was never reviewed or approved by the Department of the Interior in the first instance. This was only possible because it was entered into before the 2008 regulations issued by the Department of the Interior. Moreover, the proposed amendments are inconsistent with the structure and purpose of current federal law, because they are designed to facilitate expansion of off-reservation, commercial gaming, not on-reservation, tribal gaming.
If Adopted, Raised Bill 957 Will Not Allow the State to Create Value Through the Issuance of What Would Be its Only Privileged Gaming License.
There is no reason why Connecticut should settle for less than Massachusetts and Maryland required just a few years ago. Raised Bill 957:
· Does Not Create an Equal Playing Field for Negotiations for Connecticut’s Municipalities. It would ratify the East Windsor Agreement with an artificially low face value of just $7 million, as compared to the offer Mohegan made to Palmer of $60
· Requires a Tax Rate That Amounts to a Public Subsidy of the Convenience Casino.
The 25% Gross Gaming Tax Rate is substantially less than the 49% tax rate Massachusetts has levied upon its Convenience Casino–Plainridge Park. Additionally, as a result of the fact that the East Windsor Agreement does not require any payments to support essential infrastructure, public funds will ultimately be required to subsidize the roadways and utilities required to support the casino.
On the contrary, a Competitive Bid Bill would allow for a market-based tax rate required to offset the loss of the Pequot Fund and mandate millions of dollars in annual payments.
In short, MGM believes Connecticut has a unique opportunity to enter a new industry in a way that can benefit the entire state and all its citizens. We believe Raised Bill 7239 has that potential, while Raised Bill 957 does not.