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Casino Coming to Town


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Casino Coming to Town

  2. 2. CASINO COMING??• Gaming Impact on Communities • Who Benefits? • Who gets Hurt? • SNEAPA Annual Conference 2012 Sept 2012 R.J. Birmingham former Director of Planning & Community Development Mashantucket Pequot Tribal Nation Principle, B&S Consulting, & Impact Analysis Realtor, Hunter, Moore & Stearns
  3. 3. THE INDUSTRY TODAY*AMERICAN GAMING ASSOCIATION 2010• World Wide 2.2 Billion People gamble; 1.5 Trillion Dollars• America has 566 Casino’s in 22 states• 42 States have lotteries & 37 racetracks, Indian gaming or other games, Only 2 states have none of it: Utah and Hawaii.• Revenues are 55 billion in “Direct” revenues and up to 125 billion, indirect , (1% of GDP)• 350,000 direct jobs & 820,000 indirect jobs.• Gaming (Gambling) is here to stay
  4. 4. HISTORICAL NOTES• Native Occupancy of S/E CT 10,000 YBP• Trade conflict between English & Dutch• 1637 English & allies attack Mystic fort.• 1790 Congressional Non-intercourse Act• 1983 MTP Lands Settlement act - grants Tribal sovereignty• 1985 High Stakes Bingo,• 1988 National Indian Gaming Act• 1992 Foxwoods• Mohegan Sun Casino 1995
  10. 10. INEQUITIES• Connecticut 2007 “Pequot=Mohegan fund” $437,000,000• Distributed to Municipalities: $158,000,000 • Calculated by pre-existing PILOT formula for State aid to Municipalities.• Balance to State Programs or Surplus• Three Adjoining towns have been provided a $500,000 supplement to PILOT formula
  11. 11. ECONOMIC MITIGATING FACTORS.• Some studies show, up to 2/3 of customers live outside of the County.• 33.7 million people live within 4 hour drive.• 61 % of frequent customers live within a 2 hour drive.• Economic impact is Positive for the County, but draws its dollars from the larger NE region with no benefit.
  12. 12. FOXWOODS & MOHEGAN REVENUE2007 & 2012 COMPAREDFoxwoods 2007 Mohegan Sun 2007 • Pd to State fund: • Pd to State Fund: • $229, 095,455 • $201,580,751 • To est. slot gross X 4 = • Est. Gross X 4 = • 916,318,780 + 25%= 1.2 Bi • 806,121,028 + 25% = 1.1 Bl • Total Gross Over 2.3 Billion in 2007 Foxwoods pd toState:2012 • 2012 Sun pd to State; $165,547,090 X4 + 25% = • $178,783,321 X 4 +25% = 882,917,843 or net -27% • 953,511,045 or net -12%
  13. 13. NEW LONDON DAY AUGUST 2012 • Casino official blames part of decline on popularity of new Resorts World at New York’s Aqueduct • Slot machine revenues, the main barometer of the local casinos’ financial health, told a sorry tale in July. • At Foxwoods Resorts Casino, the slots “win” — the amount of wagers the casino kept after paying out prizes — totaled $51 million, down 15.8 percent when compared to the same month in 2011, the steepest decline since December 2008, when Foxwoods’ win tumbled 19 percent. • Mohegan Sun’s July win of $60 million was down 10.4 percent. • “We thought it was going to be a tough month,” Scott Butera, Foxwoods’ president and chief executive officer, said
  14. 14. MassachusettsGaming Commission Educational ForumJune 14, 2012 • Facilities would open Jan 1, 2014 o First Stabilized Year-2016 • Of the seven scenarios analyzed, Scenarios 4 (A) and 5(b) are nearest to the final bill: o Both scenarios assumed one Destination Resort in each of 3 regions. In addition : 4(A) assumed 750 slots at each of 4 racetrack locations 5 (b) assumed only 1,500 total slots (split between two racetrack locations). o Gaming Revenue ranges $1.74 Billion-$2.07 Billion o Total Direct & Indirect job creation between 16,600-19,800TIG Engagement- Key Assumptions/Conclusions
  15. 15. INDIRECT EMPLOYMENT EFFECTS• CERC Inc: Spin Off effect factor : 1.107 non casino Jobs for every Casino Job. State wide spin off Factor: .74• Total 2005 Casino employment: 20220 x 1.1.0 = 42603 total jobs within the County• State wide additional jobs: 20220 x .74 = 14963• Total Job Creation: 57,566 (2005)• 2012: Estimate 25% - 35% reduction from peak, or about 7,500 – 7,000 employees.• High job turn over: Foxwoods Badge numbering now at 80,000; or about 3100 employee departures (turnovers) per year.• Current 2012 estimate: 15,000 X .1.1 + sum = 31,500 employment
  16. 16. WHO BENEFITS:• Corporate Entities & Native Tribes • 2007 New England operations reaped over $3 billion in gross revenues • Potential Market estimated (ERA) at $ 6 billion (2008)• State and Local governments. • Taxes (New Jersey 8%, CT 25% slots) • Transfer Payments (0peration payments) • Employment • Reduced Welfare & health costs• Gaming Operators • 537 Federally recognized Tribes/100 operate gaming
  17. 17. WHO GETS HURT?• Motoring Public: Less so as gaming becomes ubiquitous• Neighbors: noise, intruders, decreased property values.• Towns with unfunded burdens: • Emergency Service Providers. • Roads, water/sewer • Social Service Agencies: Homeless workers & “problem gamblers”• Low Income Families • Gaming in larger percentages that other groups • Increasing scarcity of affordable Housing
  19. 19. SOUTHEASTERN CONNECTICUT COUNCIL OFGOVERNMENTS: 2005• Issues • Change of Employment Centers • Housing Gap: 5000 housing units. • I-95 congestion (CT Trans Strategy Board) • Limited Air & Rail or Bus alternatives • Increase in Tourist travel• Choices • Highway improvements (Long term limited $) • Intermodal Pilot System • No Action: Increasing congestion
  20. 20. CONN. ROUTE 2 TRAFFIC VOLUME TRENDSPRE CASINO VS POST CASINO 30000 25000 20000 15000 1980 1991-1992 10000 1993-1994 1997-1998 5000 0 Rt.2(95 to 184) Rt.2(184 to 201) Rt.2(201 to 214) Rt.2(214 to 164)
  22. 22. PROBLEMS?*”NAT’L COUNCIL ON PROBLEM GAMBLING”• 2% - 3% of gamblers are “problem gamblers or 6 – 9 million Americans• 50 % of Young people gamble in some way.• People 65 and older are twice as likely to gamble as compared to others.• Areas near casinos experience higher levels of economic decline.
  23. 23. EXPERIENCE VS. EXPECTATIONS• Local street crime has not increased, on campus crime has.• Wave of embezzlement: town halls to doc’s offices• Employment is declining: Current Foxwoods FTE’s about 7500 from 11000 at peak, about same at the Mohegan Sun• Gaming has a high employee turn over rate and at Foxwoods about 3000 on average or 10% - 20% of the labor force per year• Spin off business serving the “drive” or primary market has been limited, minimal growth of local business.• Low cost Housing is in short supply• Gaming is trending to be a ubiquitous activity: slots in bars to on line gaming. Eroding revenues for large casinos.• As revenues erode, Gaming Managers will seek to evade local mitigation funds if allowed:• Quarterly Revenue will be increasing concern for Gaming Managers & Gov’t Officials.
  25. 25. CONSTRUCTION MANAGEMENT PRACTICES• Natural Resource & Archeological Assessment• Potable Water: Memcor Water Filtration of well water• Waste Water Processing: Sequencing Batch Reactor• Reuse Water for Golf Course Irrigation• Natural Gas usage for all heating & cooling• Co Generation: Off grid Electricity & Steam from CNG• Storm water management : small basin detention• Open Space & wild life corridor retention• Wetland Creation: mitigation and management
  26. 26. Expanded Gaming Act (St. 2011,c.194) signed by Governor PatrickNovember 2011Full text can be viewed at:
  27. 27. Gaming legislation (St. 2011, c. 194) overviewWhat are the rights of a host community?What are the rights of a surroundingcommunity?How does the license application process work?The Money Trail: How are funds distributedunder the Act?
  28. 28. The Expanded Gaming Actexpands current legalgambling (i.e., StateLottery; Horse and DogRacing; and SimulcastGambling) to include tablegames and slots.
  29. 29. New Gaming Commission Statute (c.23K)New Money Laundering Statute (c.267A)New Enterprise Crime Statute (c.271A)Repeal of Greyhound Council (c.10)Repeal of State Racing Commission (c.13)
  30. 30. New G.L. c.268A, §5(b½) Violation for a municipal employee, who participated as such in the implementation, administration or enforcement of chapter 23K, to later become an employee or officer of, or acquire a financial interest in, a gaming license applicant or licensee within one year after the public employment ceasesG.L. c.23K, §46 Prohibits an applicant and its affiliate from making gifts to municipal, county or state officials or candidates for such office and political parties
  31. 31. Five (5) Commissioners: Stephen Crosby, former UMass Dean and Sec’y of Admin. and Finance Gayle Cameron, former Lt. Col. New Jersey State Police Enrique Zuniga, former Exec. Dir. Mass. Water Pollution Abatement Trust James McHugh, retired Appeals Court Judge Bruce Stebbins, former Business Development Administrator and City Council member, City of Springfield
  32. 32. Contract with persons and governmentIssue LicensesConduct Adjudicatory ProceedingsDetermine surrounding community statusSet election parametersAssist in negotiating an Indian Tribe CompactAdminister pari-mutuel/simulcasting gamblingAdopt RegulationsEnforce Requirements
  33. 33. Category 1 LicenseAn establishment withtable games and slotmachines.Category 2 LicenseAn establishment with notable games and not morethan 1,250 slot machines.
  34. 34. 3 Regions (by counties): A: Suffolk, Middlesex, Essex, Norfolk and Worcester B: Hampshire, Hampden, Franklin and Berkshire C: Bristol, Plymouth, Nantucket, Dukes and Barnstable (Compact with Mashpee Wampanoag Tribe)
  35. 35. Boston Globe Staff, December 7, 2011
  36. 36. Only three Category 1 licenses; Only one perregion; Good for 15 years (G.L. c.23K, §19)Only one Category 2 license (slots only); Goodfor 5 years (G.L. c.23K, §20(a) & (f))No Region C License will be issued, in light ofCompact with Mashpee Wampanoag Tribe(Gaming Act, §91) Note: Federal Court of Appeals cast doubt on the constitutionality of this preference under the Equal Protection Clause. KG Urban Ent. v. Patrick, -- F.3d -- (1st Cir., Aug. 1, 2012)
  37. 37. Category 1 License (G.L. c.23K, §19) Applicant must satisfy all eligibility criteria Must provide convincing evidence value will be provided to region and CommonwealthCategory 2 License (G.L.c .23K, §20) Applicant must satisfy all eligibility criteria Must provide convincing evidence value will be provided to Commonwealth
  38. 38. Federal Law: Indian Gaming Regulatory Act, 25 USC 2701 Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by federal law and is conducted within a State which does not prohibit such gaming activity.
  39. 39. State Gaming Act: $5 million appropriated to negotiate a compact with a federally recognized tribe Governor authorized to negotiate, but the compact is subject to approval by the Legislature (Gaming Act, §91(a)) The land must be owned or under agreement by the tribe (Gaming Act, §91(c))
  40. 40. Compact With Mashpee Wampanoag Tribe: City of Taunton to be Host Community 15-year term with automatic renewal 21.5% of gaming revenues to State (to be distributed pursuant to Act, including mitigation to affected communities) Tribe accedes to State jurisdiction/enforcement State will support Tribe’s Land in Trust application
  41. 41. Host community:One in which a gaming establishment is locatedor in which one is proposed.Surrounding community:One in proximity to a host community andlikely to experience impacts from the gamingoperations. Status conferred either byagreement with the applicant or determinedby the Commission.
  42. 42. Governing Body In a city, the mayor (or city manager) and city council; In a town, the board of selectmen. Impacted Live Entertainment VenueA “not-for-profit or municipally-owned performancevenue designed in whole or in part for thepresentation of live concerts, comedy or theatricalperformances,” determined to experience or be“likely to experience negative impacts from thedevelopment or operation of a gamingestablishment.”
  43. 43. No gaming license shall issue unless: The governing body of the host community signs an agreement with the applicant that sets out mitigation by the applicant, including impact fees (G.L.c .23K, §15(7), (8) and (14)); The host community votes by affirmative ballot to permit the gaming operation; and The gaming operation complies with all local by-laws, including zoning. (Most proposals would need zoning changes.)(G.L. c.23K, §15)
  44. 44. Infrastructure and Equipment NeedsPublic Safety (note special requirements re: public safetyarrangements)Traffic ImpactsHousing NeedsSchool ImpactsImpacts on Local BusinessesCross-Marketing (local restaurants, hotels, shops,entertainment venues, etc.)Environmental ImpactsProcess Costs (elections, town meetings for zoning changes,consultants, publication and mailings, etc.)Local Preferences (jobs, construction contracts, etc.)Design Considerations/Aesthetics
  45. 45. Public Process Public Notice Public HearingsStudies and Analyses Commission early, as they can be time-consuming G.L. c.23K, §15 requires $50K of each $400,000 license application fee to be set aside to reimburse host and surrounding communities for the costs of studying impacts and negotiating mitigation agreements. However…
  46. 46. Don’t rely on the c.23K, §15 money! Its paid only upon application for the license and negotiations should be well underway already $50,000 likely would not cover even the host community’s expenses - let alone the expenses of the surrounding communities So, request early in the process that the applicant fund a gift account under G.L. c.44, §53A to cover expenses of consultants and attorneys to review impacts and negotiate an agreement Request replenishment of the account well before it is depleted. If an applicant walks away, make sure your expenses are covered by collecting the funds before costs are incurred!
  47. 47. The ballot question for the host community to vote onwould be worded as follows: Shall the city/town of ____ permit the operation of a gaming establishment licensed by the Massachusetts Gaming Commission to be located at ___________? Yes ____ No ______. G.L. c. 23K, §15(13)Not required in surrounding communities.
  48. 48. Only in the host communityOnly after written agreement signed with thehost communityOnly after the applicant requests the electionHappens within 60-90 days after request madeHappens only after signed agreement issummarized and made publicIf a negative vote occurs, then six months mustelapse before a new vote request can be madeand a new written agreement must be signed
  49. 49. No gaming license shall issue unless: The applicant seeks the signature of the governing body of each surrounding community on an written agreement But, if an agreement is not reached within a specific time frame, then the Commission shall enforce protocols that ensure “the conclusion of a negotiation of a fair and reasonable agreement” G.L. c. 23K, §17(a)
  50. 50. Designation is automatic if there is a signedagreement with the applicant (G.L. c.23K, §17)If there is not a signed agreement, theCommission considers the following factors: The detailed construction plan Information provided by the public Population Infrastructure Distance from the establishment
  51. 51. PUBLIC INPUT MATTERS See G.L. c.23K, §19(d):“…in determining which gaming applicant shall receive a gaming license in each region, the commission shall also consider the support or opposition to each gaming applicant from the public in the host and surrounding communities as demonstrated by public comment provided by the gaming applicant or directly to the commission pursuant to section 15 and through oral and written testimony received during the public hearing conducted pursuant to section 17.”
  52. 52. 30 days notice to host and surroundingcommunitiesHeld in host community, unless the hostcommunity requests a different locationCommission has full discretion to denythe application (G.L. c.23K, §17(g))
  53. 53. First, the Commission requests applications forthe Category 2 License (Slots) (G.L.c.23K, §8)Second, Commission requests applications forCategory 1 Licenses (G.L. c.23K, §8(a))Commission advertises and sets deadlines andrequirements for applications (§8(a)&(b))The Commission’s Enforcement Bureau thenundertakes an investigation into and reports tothe Commission on the suitable of proposedapplicants (G.L. c.23K, §12)
  54. 54. G.L. c.23K, §15, lists 16 application requirements (to besupplemented by Commission’s Rules and Regulations):1. Agree to be a Lottery sales agent 9. Provide signed Surrounding Communities agreements2. Capital investment of at least $500 million 10. Provide signed Impacted Live Entertainment Venues agreements3. Own or acquire 75 year lease on land 11. Pay nonrefundable application fee of $400,0004. Meet licensee deposit requirement 12. Comply with state and local building codes and local ordinances and bylaws5. Ability to pay gaming licensing fees 13. Favorable binding ballot vote in Host Community6. Address mitigation and impact issues 14. Provide community impact fee to Host Community7. Identify infrastructure costs to host/surrounding 15. Minority/women/veteran business outreachcommunities and commit to mitigation plan program8. Provide signed Host Community Agreement 16. Affirmative action program
  55. 55. Protect the State LotteryPromote local businessesUse existing work force, with training forunemployedPartner with local hotels, restaurants andretailers to promote regional tourismCreate a “green” establishment (LEEDS, StretchEnergy Code, Energy Star, Mitigate vehicle trips,10% Renewable Energy, Stormwater Control)Promote minority, women and veteranbusinessesPromote existing workforce
  56. 56. Full investigation (G.L.c.23K, §12) Character/Reputation Financial stability Business ability/history of complianceShall be established by clear and convincingevidence (G.L.c.23K, §13)Shall be established for applicant andassociates and investors with a greater than 5%ownership interest (G.L.c.23K, §14)
  57. 57. Denial of a license cannot be appealed by an applicant.Approval of a license can be appealed by a party with standing (G.L.c.30A, §14)Since G.L. c.23K is new, standing issues will present novel questions.Right to intervene/participate in administrative proceeding won’t always providestanding. BOH of Sturbridge v. BOH of Southbridge, 461 Mass. 548 (2012)BUT, “various aspects of … [gambling enterprises] give rise to a substantialpublic concern about the manner in which, and by whom, it is conducted” and“situations [may arise] where a town might intervene as a party to protect theinterests of its inhabitants and … have standing to seek review” of a gamblinglicense. Shaker Com., Inc. v. State Rac. Com., 346 Mass. 213, 216-217 (1963).
  58. 58. Host Municipality shall either:If it has accepted G.L. c.43D (Expedited Permitting),file a proposal with the inter-agency permittingboard to designate the proposed Category 1facility as a priority development siteorIf it has not accepted G.L. c.43D, have the PlanningBoard designate a permitting ombudsman (memberof the Planning Board or municipal planning staff)“to help coordinate and expedite local permitting ofthe category 1 establishment”
  59. 59. A quick look at the Fees,Taxes, and Funds, as wellas the various Commissionsand Committeesestablished under theExpanded Gaming Act
  60. 60. Category 1 or 2 License Nonrefundable application fee of $400,000 $50,000 to be set aside to compensate host and surrounding communities for costs of studying impacts and negotiating mitigation agreementsCategory 1 License Fee: At least $85MCategory 2 License Fee: At least $25M
  61. 61. Category 1 Licensees Daily tax of 25% of gross gaming revenueCategory 2 Licensees (Slots only) Daily tax of 40% of gross gaming revenue Daily assessment of 9% of gross gaming revenue (Race Horse Development Fund)Category 1 and 2 Licensees Annual license fee of $600 per slot machine Assessments to cover any remaining costs of the Commission Annual fee of not less than $5 million (Public Health Trust Fund)
  62. 62. Massachusetts Gaming Control Fund (§57)Public Health Trust Fund (§58)Gaming Revenue Fund ((§59)Race Horse Development Fund (§60)Community Mitigation Fund (§61)Transportation Infrastructure Development Fund (§62)Gaming Local Aid Fund (§63)Education Fund (§64)Gaming Licensing Fund (§93)Local Aid Stabilization Fund (G.L. c.29, §2CCCC)Local Capital Projects Fund (G.L. c.29, §2EEEE)
  63. 63. Commission is TrusteeEstablished to finance operationalactivities of the CommissionFunded by initial application fees forlicenses and other appropriations andfunds that are subject to theCommission’s direction and control
  64. 64. Secretary of Health and HumanServices is TrusteeConsists of annual fees (not less than$5 million) assessed under §56(e)To fund programs dedicated toaddressing problems associated withcompulsive gambling
  65. 65. Commission is Trustee.Receives all funds collected from the taxes on grossgaming revenues of licensees.Funds to be distributed as follows: All revenue received from a Category 2 Licensee shall be transferred to the Gaming Local Aid Fund. Revenue from Category 1 Licensees is distributed to twelve different sources. Of particular note to municipalities: 6.5% to the Community mitigation fund 4.5% to the Local Capital Projects Fund 20% to the Gaming Local Aid Fund 10% to the Commonwealth Stabilization Fund (However, up to half of this amount shall be used to offset any decrease in local aid from the prior fiscal year) 15% to the Transportation Infrastructure and Development Fund
  66. 66. Administered by the CommissionConsists of funds transferred from the GamingRevenue Fund—i.e. 6.5% of revenue from Class 1LicenseesFunds to be expended “to assist the host communityand surrounding communities in offsetting costsrelated to construction and operation of a gamingestablishment including,” water/sewer, education,transportation, infrastructure, housing, environmentalissues and public safetyFunds must be sought through written appropriationrequest prior to February 1 of each year
  67. 67. Secretary of Transportation is TrusteeConsists of funds transferred from theGaming Revenue Fund—i.e. 15% ofrevenue from Class 1 LicenseesNot less than half of funds expended shallbe “dedicated for the purpose ofsupplementing, and not offsetting, anyexpenditures made for the constructionand reconstruction of municipal ways”under G.L. c.6C, §4(b)
  68. 68. Includes funds transferred from theGaming Revenue Fund—i.e. 20% ofrevenue from Class 1 LicenseesMonies from this Fund are to bedistributed to cities and towns inaccordance with the formula used todetermine the distribution of unrestrictedgeneral government aid and shall be inaddition to the balance of the StateLottery Fund
  69. 69. Includes funds transferred under theGaming Revenue Fund—i.e. 14% ofrevenue from Class 1 LicenseesExpended by appropriation forpurposes of higher education
  70. 70. Receives all licensing fees (not includinginitial application fees)Funds are distributed to nine differentsources. Of particular note tomunicipalities: 10% to the Community mitigation fund 11% to the Local Capital Projects Fund 5% to the Local Aid Stabilization Fund 14.5% to the Transportation Infrastructure and Development Fund
  71. 71. Massachusetts Gaming Commission (G.L. c.23K, §3) 5 Commissioners (1 appointed by Governor; 1 by Attorney General; 1 by Treasurer/Receiver General; and 2 by majority vote of Governor, Attorney General and Receiver General)Gaming Policy Advisory Committee [G.L. c.23K, §68(a)] 13 members: Governor or his designee (chair); 2 members of the Senate; 2 members of the House of Representatives; Commissioner of Public Health or his/her designee and eight persons appointed by the Governor. Advisory only—makes recommendations re: “matters of gaming policy”
  72. 72. Subcommittee on Community Mitigation [under theGaming Policy Advisory Committee (G.L. c.23K, §68(b)] 12 members (including representatives from each host community, the Commission, the MMA, appointees of the Governor, and others) Shall develop recommendations to be considered by the Commission to address issues of community mitigation as a result of the development of gaming establishments, including how to expend monies from the Community Mitigation FundEach region may establish a local community mitigationadvisory committee [G.L. c.23K, §68(e)]—May designateone member to represent the region on theSubcomittee on Community Mitigation