Casinos developers take extra steps to sweeten the pot

A rendering of the proposed Mohegan Sun casino in Revere, Massachusetts.

Boston's new deal with a casino developer will bring the city more than $300 million. That may not seem remarkable, save for the fact that the casino wouldn’t even be in Boston. In a bid to coax casinos into new markets, gambling companies are taking an extra step to sweeten the pot.

In Massachusetts, the Mohegan Tribal Gaming Authority wants to build the next of its “Mohegun Sun” casinos in the city of Revere. It’s paying a dozen surrounding cities and towns, too.

“Fifty million dollars in annual payments to 13 [host and surrounding] communities closest to the city is just amazing,” Mohegan Sun CEO Mitchell Etess says. “We’re good neighbors.”

Boston Mayor Marty Walsh calls the negotiation with Mohegan developers long but productive.

“They were great in our case. We were basically throwing things on the table,” Walsh says. “They pushed back a bit on it, but everything that we pretty much wanted we were able to achieve.”

All this cash to help neighboring towns pay for better roads and more police is new. Normally, gambling laws carve out a share of casino profits only for the host city and the state. Case in point: Rosemont, Illinois gets no payments from a casino that’s just over the border in Des Plaines. Cezar Froelich, an attorney specializing in casino gambling law, says the state money is supposed to help neighboring municipalities. But it doesn’t always work out that way.

“Part of the problem is, depending on the state’s finances, sometimes it doesn’t get back to the local jurisdiction, as much as the … surrounding community would like,” Froelich says.

There’s no precedent for such payments, such as Mohegan Sun’s deal last week with Boston, which would give the city $300 million in direct investments over 15 years — the largest pact of its kind in the country. Froelich says a lot of Massachusetts cities and towns got greedy.

“Well, you know, if you’re a community and somebody walks up to you says, ‘Listen, you’re a surrounding community. Let’s talk about how much I owe you.’ You’re not going to set the number real low,” he says. “You know, human nature, get as much as you can, I suppose.”

In western Massachusetts, the town of Longmeadow recently failed to reach a deal with a proposed MGM casino in nearby Springfield, Massachusetts. So town manager Stephen Crane went to arbitration and won. Longmeadow would get nearly $850,000 upfront, and $275,000 per year after that.

“Even though we were not victorious, we thought it was a fair process,” says MGM Springfield President Michael Mathis. “At the end of the day, I think we’re a better proposal for it.”

Crane agrees the law worked pretty well. “It gave us a seat at the table, where otherwise we would not have one,” he says.

The extra cash outflows may actually save casinos in Massachusetts. There’s a referendum here on the November ballot to repeal gambling. Some voters might now see those dollars headed to their towns and might not be so concerned about a casino nearby.

Regardless of whether Massachusetts backtracks on casino gambling, the state may have shown the rest of the country a better way forward. Mohegan CEO Mitchell Etess says the Massachusetts gambling law could be a model for new casino developments around the country.

“I wouldn’t be shocked if you see it, because it takes a lot of concerns off the table,” he says.

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