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Local Mass. Move For Casinos Could Lure Mohegans
Analyst says local tribe well positioned to bid for rights to bay state gaming
By Patricia Daddona Published on 9/17/2007
If Massachusetts Gov. Deval Patrick's plan to usher in three commercial casinos moves forward, the Mohegan Sun may find itself sitting in the catbird seat.
According to gaming analyst Clyde Barrow, the governor's plan to allow competitive bidding for three casinos in the western, southeastern and greater metropolitan Boston regions has a drawback that only developers with deep pockets and a strong track record — developers like the Mohegan Sun — will be able to overcome.
Barrow is a professor at the University of Massachusetts at Dartmouth who directs the university's New England Gaming Research Project and its Center for Policy Analysis. The governor's plan, which is expected to be released today, parallels recommendations in a study Barrow released in August.
The danger inherent in competitive bidding, Barrow said Sunday, is that bids could come in so high, average bidders might not have the financing and capacity to make good on them, once the estimated market rate of $150 million or more in licensing fees are paid.
Mohegan Sun, however, which has joined with other developers to build a casino in Palmer, Mass., would be no average bidder. Its proposal, should it come to fruition, is undoubtedly part of the attraction in allowing gaming in Massachusetts, Barrow said.
“Mohegan Sun has proven that they are one of the best managed casino operators in the United States,” Barrow said, with wins per day, per slot machine, trouncing output in Las Vegas casinos.
A competitive bid could require a bidder to complete its project in two years and already own land or have options to buy it — requirements that would “narrow the range of bidders who are actually serious about building a casino,” Barrow said.
Mitch Etess, the president and chief executive officer of the Mohegan Sun, could not be reached for comment Sunday night.
Whether Foxwoods Resort Casino, which Barrow said earns $1.6 billion in total revenue, would also bid on a project in Massachusetts is unclear.
“I have no knowledge of anything we're doing within that jurisdiction,” said Mashantucket Pequot Tribal Spokesman Bruce MacDonald. “We don't like to telegraph our intentions, if we have any.”
Barrow projects that if three developers constructed three $1 billion casinos like the one the Mashpee Wampanoag have proposed in Middleborough, Mass., the trio would earn about $2 billion in total revenue a year — a little bit bigger than what Foxwoods earns— and yield about $400 million a year in tax revenue for the state.
Casino licensing fees in other parts of the country generally go for between $100 and $250 million on the open market, and competitive bidding might yield an even higher price, Barrow said.
“My guess is they're thinking competitive bidding may generate some additional revenue,” he said. “I'm not sure it really will. (But) I think competitive bidding will work.”
Patrick is under pressure to find new revenues. He has proposed big-ticket items from a $1 billion, 10-year life science project, including the world's largest stem cell bank, to a $1.4 billion commuter rail line from Boston to Fall River and New Bedford. The state is also looking for extra money to close an estimated $15 to $19 billion gap in transportation spending over the next 20 years.
A second analyst thinks the plan to require competitive bidding would dampen the “extremely capital intensive” investment needed not only to launch but update and freshen casinos.
“Any kind of excessive tax rate or high licensing fee discourages capital investment, therefore it discourages jobs and economic benefits that can flow if you're going to have (casinos) in the first place,” said Eugene Martin Christiansen, chief executive officer of Christiansen Capital Advisors of New York City and New Gloucester, Me.
His company provides analysis and management services for professional gambling and the entertainment industry.
“I don't think the high tax rate is good policy,” added Christiansen, who had not yet read about Patrick's proposal. “It sounds good because people think (casino operators) can afford to pay anything. It simply isn't true. If you want jobs and economic benefits, you want tax rates low enough to encourage initial and ongoing capital investment.”
Destination resorts are “a healthier animal” than casinos that offer only gaming, because they draw in the entertainment dollar, but as such, they require huge infusions of capital to pull off successfully, Christiansen said. Mohegan Sun is one such example, he said.
Christiansen also said the proposal creates an uneven playing field for commercial operators because tribes that hope to build casinos and miss out on the bidding process can still pursue a federal approval process and, if successful, would not be taxed.
The Mashpee Wampanoag have already started the process of seeking federal approval to take hundreds of acres of land into trust, most of which would be for a $1 billion casino in Middleborough, Mass. Trust land is not taxable. Under Patrick's plan the tribe could bid on a license instead.
Christiansen compared a Massachusetts with casinos to Florida, which he said is “losing tens of millions” of dollars in tax revenue because of a “suicidal” 50 percent tax rate on three commercial racinos in Broward County. The tribally owned Seminole Hard Rock Casino in Tampa is outspending the racinos in marketing “by about 11 to one,” Christiansen said.
The Gulfstream Park Racino, Mardi Gras Casino at Hollywood Greyhound Track in Hallendale Beach and the Pompano Park Harness Track in Pompano Beach are all struggling, he said.
The Seminole tribe has “a tremendous advantage,” he said, as would the Mashpee Wampanoag.
Christiansen and Barrow said they were eager to learn more today as the governor releases details of his proposal. While Christiansen doesn't like it, Barrow does.
“I think overall it's a good strategy,” Barrow said. “It makes sense for Massachusetts. It's designed not just to recapture what's flowing to other states but also to build on capturing additional tourism revenues from other states or that's already coming to Massachusetts right now.”
The Massachusetts legislature, which has defeated gambling proposals in the past, would have to approve Patrick's proposal. |
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