Malloy wants strong casinos, ‘aggressive lottery’

Empire City Casino, a new look for a century-old harness-racing track in Yonkers, N.Y., now has 5,300 slot machines to entice some of the gamblers who used to speed by on their way north to Connecticut’s tribal casinos, Foxwoods and Mohegan Sun.

Rhode Island has new casinos in Lincoln and Newport, offering thousands of slots and electronic table games. And Massachusetts decided this year to join in by authorizing a slots parlor and three casino resorts.

With competition rising on all sides, Gov. Dannel P. Malloy says he is working with the Mashantucket Pequots and Mohegans to stabilize their market share — and Connecticut’s 25 percent cut of the gross profits from their slot machines.

The governor is pledging a new era of cooperation with the tribes, even if that means taking a look at online wagering. With so much money on the line, Connecticut has to stay in the game.

“It is a big issue for us,” Malloy recently told The Mirror. “Obviously, we have to be concerned.”

In 2007, before the twin pressures of recession and competition, the state’s income from slots hit a high of $430 million. It fell for three straight years, stabilizing last year at just under $360 million.

The Connecticut Lottery, meanwhile, has thrived through the bad times and the good, producing a record $289.3 million for the state last year, more than either Foxwoods or Mohegan Sun.

Add it all up — the state also took in $3.7 million from off-track betting, and $876,000 from charitable games — and Connecticut relied on gambling for $653.5 million, or slightly more than 3 percent of its $20 billion annual budget.

It is money the state can ill afford to lose. Malloy said the state needs strong casinos and “a more aggressive lottery,” a phrase he has yet to define.

Does that mean another try at Keno, an electronic game that the lottery proposed and abandoned? Does it mean legislation to position the state and its casinos to accept online wagers, should federal law allow it?

After six months of study and talks with the tribes, Malloy said he is not ready to outline how he proposes to preserve or, perhaps, even try to grow gambling revenues.

He acknowledged at least studying online gambling, a cause recently taken up by the Mohegans in Washington, in case the federal government loosens restrictions that are keeping the online poker business in the hands of off-shore websites.

“What I would say to you, there is nothing off the table, but there’s nothing definitively on the table that I’m speaking about at the moment,” Malloy said.

But one thing is clear: According to both tribes, the state under Malloy has a new relationship with the tribal casinos, where gamblers pumped $16.8 billion into slot machines last year, producing gross profits of $650 million at Foxwoods for the Pequots and $719.2 million at the Sun for the Mohegans.

Whatever lingering discomfort official Connecticut may have had towards its two gambling resorts is gone. The state’s tourism promotions will feature Foxwoods and Mohegan, who say they are helping to craft the pitch.

“I began my administration wanting to change the relationship with my two gaming partners in this state,” Malloy said. “This is about a relationship, as well as a competition.”

Malloy and the chairmen of the two tribes recently met to talk about common interests, and Lt. Gov. Nancy Wyman is leading a policy group that has been meeting tribal representatives without fanfare to brainstorm.

The governor’s three-way meeting with the two tribal chairs was described as a first since the Pequots and Mohegans won federal recognition and started building two of the world’s largest casinos in sleepy eastern Connecticut.

“In all frankness and honesty, we never have had as much interaction as we are currently having with this administration since Mohegan Sun opened in 1996,” said Charles Bunnell, chief of staff for the Mohegans.

“This is really the first administration that has been very open in sitting down with the tribal nations,” said Bill Satti, the director of public affairs for the Pequots, the owners of the first casino, Foxwoods.

‘No free lunch’

Watching nervously from the sidelines is Marvin Steinberg, who has tracked the social costs of gambling for 31 years at the Connecticut Council on Problem Gambling. There are two truisms in his business: One, in bad times, states look to gambling for new revenue. And, two, the expansion of gambling to find that revenue always exacts a price.

“There is no free lunch with gambling,” Steinberg said.

In 2009, Gov. M. Jodi Rell proposed letting the casinos sell alcohol 24 hours a day, reasoning that more alcohol consumption would lead to more gambling, netting another $5 million annually for the state. The plan was abandoned after a car leaving Mohegan Sun at 3 a.m. went the wrong way on I-395, colliding with a van taking college students to the airport. One student was killed. State police said the casino patron was drunk.

Rell also proposed Keno, an electronic lottery game that, in Steinberg’s view, brings a taste of casino gambling too close to home with machines spread around the state, possibly in bars and restaurants. Steinberg said he suspects the Connecticut Lottery will push Keno again, especially since the Rell administration estimated it could goose lottery revenues by $60 million.

Wyman said Steinberg and the council will be consulted before the administration proposes any expansion of gambling.

The lottery is tight-lipped about its plans.

Chelsea Turner, a former Rell legislative liaison who oversees governmental affairs for the lottery, referred questions to Diane Patterson, the vice president of marketing. By email, Patterson refused an interview, telling The Mirror: “Your questions would be best addressed to administration officials.”

Internet offers new opportunity

There may be a third truism in gambling, that new games can cannibalize old ones. Lottery revenues dipped briefly after the state legalized pari-mutuel betting at a dog track in Plainfield and jai alai frontons in Hartford, Bridgeport and Milford.

In 1994, the first full year of slot machines at Foxwoods, the state’s share of pari-mutuel betting plunged from $11.3 million to $2.3 million. After Mohegan Sun opened in 1997, pari-mutuel revenues never again would reach $1 million.

Ten years later, the dog track and frontons were gone.

The lottery is the exception. As a form of gambling available at nearly every supermarket, gas station and convenience store, it has proven impervious to casino competition.

The state lottery was born in 1971, when Thomas J. Meskill was a first-year governor struggling with a deficit and a down economy. One solution: a weekly lottery drawing that began on Feb. 15, 1972. It produced $8.15 million for the state that first year.

In the intervening decades, the lottery has worked to stay fresh, joining other states for mega-drawings that produce jackpots that make headlines, like last month’s $254 million Powerball prize. But it periodically has run afoul of legislators with over-aggressive marketing, including vending-machine sales. Legislators and governors demand a successful lottery, but they seem to recoil from games that are so popular they expand the base of gamblers.

“Defining that balance always has been the key,” said Kevin Sullivan, the commissioner of revenue services, who was a critic of the lottery during his years as a state Senate leader.

Steinberg, the executive director of the Council on Problem Gambling, said the ubiquity of lottery tickets makes them a special concern for problem gamblers. The only form of gaming even easier to access is online gambling, the bets that can be placed on every laptop and desktop computer.

“The lotteries nationally are pretty open about the attempt right now to get an exception to the online gambing ban for lotteries,” Steinberg said. “Lotteries usually get what they want, since the money mainly goes into the general funds.”

Sniffing a new market, casinos are starting to push, too, he said.

“I knew that the wind had changed a few years ago when the commercial casinos in Las Vegas and Atlantic City were strongly opposed to online gambling. They saw it as competition,” Steinberg said. “They switched. Now they all support online gamling, because they see an opportunity to make a lot of money.”

So do the Mohegans.

Bruce “Two Dogs” Bozsum, the chairman of the Mohegan Tribe, testified last month before Congress in favor of loosening federal controls on web-based gambling, starting with online poker. The same day, former Sen. Alfonse D’Amato of New York made a similar pitch on behalf of the Poker Players Alliance.

An offshore, online poker business is flourishing, and Bozsum and D’Amato told Congress it is time to bring it onto U.S. soil, taking care that Indians can compete with non-tribal casinos in Nevada and New Jersey for the business.

“The Mohegan Tribe believes that if done properly, internet gaming can result in another success story for tribes,” Bozsum said.

That would require a change in federal law, and a push from the governor to either change state law or update the gambling compact negotiated in January 1993 by Gov. Lowell P. Weicker Jr., a deal that opened the door to the growth of Foxwoods and Mohegan Sun and raised a barrier to in-state competitors.

Under the compact, the Pequots — the Mohegans would sign on after winning federal recognition — promised to give the state 25 percent of its gross profits from slots, guaranteeing a minimum payment of $100 million. The deal contained a poison pill: The tribes no longer have to share the profits, if the state permits slots outside the tribal casinos.

The provision means the tribes have an effective veto on more casinos in Connecticut. At the same time, the state can keep the tribes from expanding into gaming not otherwise permitted by the state, meaning Malloy woud have to sign off if the Indians are to go online.

Would he? For now, Malloy isn’t committing, and the tribes say they are still talking concepts, not seeking a deal.

“By the time the session begins, I think we’ll be speaking about this issue in a more open sense,” Malloy said.

If he is considering new lottery games, Malloy could hold his answer for his budget speech to the General Assembly in February. It is scheduled exactly a week before the 40th anniversary of the Connecticut Lottery.