Mohegan Sun Massachusetts lost its bid to build a resort casino in the highly-lucrative Greater Boston market primarily because multi-billionaire Steve Wynn brought a bigger checkbook to town.
After a two-year application process that culminated in five days of public presentations and discussion, the Massachusetts Gaming Commission on September 16 awarded the second of three casino licenses authorized by the state’s 2011 gaming law to Wynn Resorts’ proposed copy.6-billion project in the city of Everett.
Mohegan Tribal Chairman Kevin P. Brown, “Red Eagle,” responded to the commission’s decision: “The Mohegan Tribe has worked for more than three years to develop a gaming resort in Massachusetts that would build on the enormous success of Mohegan Sun, while protecting our business and relationships in Connecticut. We were ready to bring our unparalleled experience in creating world-class entertainment and resort experiences, and our understanding of this unique gaming market to Revere. We are very disappointed in the Commission’s decision.”
Mohegan Sun had proposed a copy.1-billion project in the city of Revere.
Wynn beat Mohegan Sun’s numbers on several economic development criteria, critically important since the main reason Massachusetts is allowing gaming is to swell the state’s coffers. The larger project would bring more construction jobs to the area and would provide 4,382 permanent jobs, in contrast with Mohegan Sun’s 3,172. Wynn’s proposed pay scale for those jobs was one-third higher than Mohegan’s. Everett and Revere (as well as Springfield where the Region A license was awarded and the cities being proposed to host the Region C casino) are among those with the very lowest per-capita incomes in the state, so jobs matter.
Wynn maintained that its proposed 5-star 500-room hotel would bring more out-of-town visitors to Boston than would Mohegan’s Sun’s two hotels (a 3-star and a 4-star), with 450-550 rooms, some of which would be priced moderately.
Wynn, with its luxury hotel rooms, Michelin-starred restaurants and focus on table games as opposed to slots, proposed to bring wealthy customers from out of the region, including international visitors from Asia, China, Canada and South America, to the city, while Mohegan Sun’s proposal was more geared toward attracting customers from the local area, according to the commissioners, though Mohegan Sun contested that interpretation during the presentation and committed to more marketing outside of the region than it had in its application. Out-of-town dollars, especially those from wealthy visitors who would stay longer and spend more than less well-to-do gamblers, will bring more value to the city than would recirculating dollars that are already here.
Mohegan Sun had a better building and site design than did Wynn, as well as a superior plan for dealing with problem gambling. It had the better sustainability plan, which included getting LEED Gold Certification for the project. It had negotiated agreements with its host community and the surrounding towns and cities, something Wynn had been unable to do with the city of Boston and some other area cities. And it was the project strongly favored by Massachusetts citizens, according to a poll conducted in June by the Center for Policy Analysis at the University of Massachusetts Dartmouth. The project had the endorsement of the Boston Herald, which wrote, “It’s the Mohegan Sun proposal that hands down has more going for it — and for the communities it will impact.”
But Wynn showed itself to be in the more secure financial position and clearly indicated it planned to build a very high-end facility (at a cost of $635,000 per hotel room v. $220,000 per hotel room, a figure assumed to indicate the quality of the project). Wynn owns several resort casinos in Las Vegas, including its flagship luxury Wynn Las Vegas, as well as the Wynn Macau in the People’s Republic of China.
Mohegan Sun would have had to borrow almost as much money as Wynn from banks to build its proposed resort, even though Wynn project was significantly larger. Commissioners were seriously concerned that Mohegan Sun would have trouble getting banks to lend the money and that if the market changed significantly, Mohegan, because its project was highly leveraged, would have trouble adapting and paying back their loans.
One condition that the commission imposed, should Mohegan Sun have been awarded the license, was that they find an additional copy00 million in equity, even though they had met the equity criterion set by the commission. Mohegan responded by increasing the amount of equity investors would have in the project from $50 million to $200 million and reduced the rate of return for investors. Nonetheless, the 18-percent equity stake Mohegan could offer was still dwarfed by Wynn’s nearly 50-percent equity stake.
Wynn picked as its proposed site the former site of a Monsanto Chemical Company plant that needs to be rehabilitated. The site is also in an area that is part of Everett’s waterfront development plan. Cleaning up the site and building infrastructure to support the waterfront program brought value to the city, the commissioners decided. Finally, Wynn estimates that 60 percent of the automobile traffic to and from the casino would come through Sullivan Square, a miserable complex of urban intersections that has been in need of redesign for decades. Wynn’s response to the commission’s concerns about traffic was to increase its annual contribution to mitigating negative impacts of the project by copy million, bringing its total contribution to improving Sullivan Square to $51 million, and to offer more detail for some of its traffic reduction plans.
The outlook for an American Indian-owned gaming facility in Massachusetts now lies with the Mashpee Wampanoag Tribe, which intends to build a casino in the town of Taunton on Cape Cod, when and if the BIA takes into trust the land they need.
On a positive note, the BIA has just issued the final EIS for the tribe’s proposed $500-million First Light Resort and Casino. The FEIS recommends taking 170 acres of land into trust for the project. Release of the FEIS begins a 30-day comment period.
On the negative side, the state opened up the Region C competition to non-Indian applicants, of which there is currently one, and the Wampanoag Tribe of Gay Head on Martha’s Vineyard is pursuing plans under IGRA to build a casino that would directly compete with the Region C facility.
Further, in January a three-judge panel of the Ninth Circuit Court of Appeals ruled in Big Lagoon Rancheria v. California that the state of California was not required under IGRA to negotiate in good faith with Big Lagoon on a new gaming compact because the tribe, was not under federal jurisdiction in 1934. The decision was based on the Supreme Court’s 2009 ruling in Carcieri v. Salazar. The Mashpee Wampanoag Tribe was recognized in 2007, so should this ruling stand, the tribe’s right to build a casino could be in question. The case goes to the full court later this month.
On the other hand, Massachusetts voters could decide on November 7 to repeal the state’s gaming law, which could mean there would be no competition for the Region C casino license because the only entities that could pursue gaming in the state would be American Indian tribes.