Recession spurs casino support

Recession spurs casino support State Legislature expected to revisit Palmer project next fall
Sunday, May 10, 2009
By NANCY GONTER
ngonter@repub.com

Massachusetts can - for now - only dream of raking in the kind of cash coming from slot machine tax revenues in Pennsylvania.

Since the first slot machine casino opened there in 2006, the Keystone State has taken in $2 billion in taxes and casino license fees through the end of last year. Pennsylvania collects an average of $2.5 million a day in slot machine taxes, and in 2008, $1 billion went for property tax relief, according to its state Gaming Control Board.

Plains Township, a small community adjacent to the larger city of Wilkes-Barre, Pa., finances half of its town budget from slot machine revenue. It is the site of Mohegan Sun Pocono Downs, operated by the same tribe that wants to locate a $1 billion casino in Palmer.

Casino operators in Pennsylvania are subject to a complex system of taxing that results in about 55 percent of slot revenues going back to the state and communities.

If Massachusetts were to legalize casino gambling, just how the state, a host community, and surrounding towns will benefit - or bear the burden - remains unclear.

Legislation to allow casino gambling and slot machines at race tracks is before the state Legislature, and is expected to be taken up next fall. With state tax revenues in a freefall and massive cuts to the state budget in the offing, support for passage of casino legislation is said to be growing.

In Palmer, the Casino Impact Study Committee, a group formed by the town to examine the local impact of a casino, recently issued a report stating that the town’s taxpayers should not have to bear the burden of hosting such an enterprise.

The Mohegan Tribal Gaming Authority has a 99-year lease on more than 150 acres opposite Exit 8 of the state Turnpike between Route 32 and Breckenridge Street, Palmer. If the state allows it, the tribe hopes to build a resort casino there.

The report by the casino committee listed a litany of expected costs related to a hometown casino, including the need for up to 24 more police officers at $1.9 million, expansion of the Fire Department at up to $2.5 million, and the possible construction of two schools at $40 million each.

“There needs to be some mechanism to ensure the host community does not end up becoming a net loser in the process. Whether we negotiate that with the casino, the state, or some combination, it needs to be taken into consideration,” said Town Councilor Paul E. Burns.

The committee’s report includes a cover letter signed by all 12 members which recommended hiring a professional negotiator to deal with the tribal authority.

“The town must have a host agreement in place that will cover all of the expenses set forth in this impact report so that no burden is placed on the citizens to cover any of the expenses associated with a casino,” the letter stated.

The Mohegan Tribal Gaming Authority is prepared to work with Palmer and surrounding towns on a needs assessment of public safety, infrastructure, and other improvements, according to Paul I. Brody, vice president of development for the authority. But, he questions whether the developer of a large mall or industry would be asked to provide all the upgrades needed to locate in a community.

“We want to be treated in the same fashion,” he said. “As we have suggested on a number of occasions, we strongly urge Palmer to have a voice in the legislation in terms of specific distribution of gaming tax revenues for the towns most impacted.”

The gaming bill, filed last January by 11 legislators, including several from Western Massachusetts, calls for allowing 1,500 slot or video-gaming machines at the state’s four existing race tracks - Suffolk Downs in East Boston, the Wonderland Greyhound Park in Revere, the Plainville Race Course, and the Raynham Dog Track - with a $25 million license fee price tag and a tax of 65 percent on slot machine revenues.

Suffolk and Wonderland, are both in the legislative district of House Speaker Robert A. DeLeo, D-Winthrop.

It also calls for one resort casino each in Hampden and Bristol counties to be taxed at a rate of 17 percent of net revenues. The bill requires an endorsement vote from the town where the casino will be located, and an agreement with the host and surrounding towns “to provide mitigation” which would be determined by a newly-created Gaming Commission.

Legislation calling for three resorts filed by Gov. Deval L. Patrick last year and defeated by the Legislature, had many more details. It called for a licensing fee of at least $200 million and an operating license payment of at least 27 percent of all gross gaming revenue, or $100 million a year, whichever is higher.

It also called for an unspecified community impact fee for the host town, and required the casino developer to pay for infrastructure improvements. The bill had a list of other demands, including job creation, designation of open space, on-site day-care programs, and career coaches for employees.

In Connecticut, where two casinos were built on tribal lands in the mid-1990s, the state receives 25 percent of all slot machine revenue. Between the Mohegan Sun and Foxwoods casinos, Connecticut has received an average $400 million annually in recent years, said Charles F. Bunnell, chief of staff for the Mohegan Tribe.

The money is distributed to communities statewide based on population, although in 2005, legislation was approved to increase the amounts given to the host and surrounding towns, he said.

Before Mohegan Sun opened in 1996, it negotiated an agreement with its host town of Montville in which the tribe agreed to pay $500,000 annually, about the amount in tax revenue the town received from the previous owner. The payment is a “gesture of goodwill” because the casino is located on what is now tribal land, said Bunnell.

An additional payment of $250,000 was made to the town in 2004 “just to say the relationship has been working so well,” he said.

A casino in Massachusetts would differ because it would “strictly be a commercial venture,” said Bunnell.

“The tribe coming to Massachusetts would just be like any other developer, dealing with the community and the laws of Massachusetts,” he said.

Legislation here would need to be crafted so “a developer can make the numbers work,” said Bunnell. In Kansas and Maryland, the tax structure was so high that casino developers backed away, he noted.

In Pennsylvania, the Mohegans took over the existing Pocono Downs race track in 2005, added slots when they were legalized in 2006, and doubled the number of machines last July.

The situation is similar to circumstances envisioned for Massachusetts in that the casino is not on tribal land and is a commercial venture. Pennsylvania takes a five-pronged approach to taxation, said Robert Soper, the president and chief executive officer of that facility.

Thirty-four percent of slot revenues go to the state directly for property tax relief, 5 percent to a tourism fund, and another 12 percent to a fund to develop horse racing in the state, although that amount could drop as low as 7 percent, said Bunnell.

Two percent of revenue goes to economic development projects in Luzerne County, where the casino is located, with priority given to Plains Township and then to adjoining towns. Another 2 percent is set aside to fund half of the town budget, which is about $2 million, and the remaining amount also goes for economic development, he said.

In early March, 20 projects in Luzerne County were given a total of $13.8 million in funding from slot machine revenues. They included a new police station and two cruisers for one town, and surveillance cameras for another. More than 80 requests were received, said Steven Weitzman, press secretary for the state Department of Community and Economic Development.

“It’s worked out well,” he said. “It’s a non-taxpayer source of funds to do some things. It gives us a pot of money to do things that would be difficulty or impossible to do.”

Pennsylvania announced in mid-April that almost $770 million in gaming revenue will be available for property tax relief this year, the same level as in 2008. Almost 2.7 million state residents saw their taxes reduced because of gaming revenue, with the statewide average expected to be almost $200 again this year, according to a statement from the state’s budget secretary.

Annual revenue at Pocono Downs alone was $170 million in 2008, and is expected to be higher this year, Soper said. For March, slot revenues there were more than $18 million, almost 36 percent higher than the previous March.

Statewide, revenue from slot machines is growing at almost double-digit rates, and in March it was 9.4 percent higher than in March 2008. That meant more than $85 million in taxes for that month alone.

In Massachusetts, debate on the pending casino legislation is expected to start in the fall, according to Senate President Therese Murray, D-Plymouth, a past casino supporter. She believes that the state should capture some of the $900 million its residents currently spend at the two Connecticut casinos each year.

And, she believes there is strong support for the legislation to be passed this year.

“There was an appetite last time, but there’s a bigger appetite this time,” Murray added.