Gov. Dannel P. Malloy moved forcefully Friday for the first time to focus the legislature’s debate on casino expansion, saying the only measure he would consider signing is a bill granting the owners of Connecticut’s two tribal casinos permission to build a commercial casino in East Windsor to compete with MGM Resorts International in Springfield.
In an interview with CT Mirror, the governor said he remains neutral on the question of whether to expand, but if the General Assembly is going to permit the state’s first casino off tribal lands, then lawmakers should respect the state’s long-standing exclusivity agreement with the Mashantucket Pequot and Mohegan tribal nations.
The tribes have paid the state $7 billion since 1993 under the terms of agreements in which Connecticut granted gaming exclusivity to the tribal casinos, Foxwoods Resorts and Mohegan Sun, in return for annual payments equal to 25 percent of gross slots revenues. The deal is expected to produce at least $260 million for the state this year.
“If I can help the legislature focus, it’s do you want to work with the two tribal nations that employ thousands and thousands of people in our state? If that’s what you’re trying to do to help secure those jobs and that base, then there is one road to go down,” Malloy said. “I will not sign a transaction or bill that puts into real danger our existing arrangement with the tribal nations, nor would anyone in this building who thought about it. And I’m not sure we’ve had that clear, crisp discussion.”
The General Assembly is considering three options: Grant the tribes authority to jointly develop a casino just off I-91 in East Windsor, between Hartford and Springfield; create a competitive process to consider new casinos, including one in Fairfield County that could tap the New York market; or do nothing.
“I’m not pushing it, or pushing against it,” Malloy said. “But I always believe you should have a realistic discussion about realistic outcomes, and it’s not realistic to put $260 million or more at risk.”
Without the Malloy administration’s playing a role, the casino debate has been oddly unfocused. Legislative caucuses have included assumptions of new revenue — $100 million or more — based on fees they hope to collect for rights to a casino in East Windsor or competition for rights to develop a gambling resort in Fairfield County.
But numerous sources say the revenue numbers are not based on negotiations with the tribes, MGM or any other casino company MGM has enticed to look at the Connecticut market. An entry-level question that the legislature has not explored is: Could a casino near New York generate more revenue than is paid by the tribes?
The Senate Democrats caucused on Wednesday to discuss the status of casino expansion, sparking speculation the Senate was getting ready to take up a bill. But the Senate adjourned Thursday without action and will not meet in session again until Tuesday, when only two weeks and a day will remain until the adjournment deadline of midnight June 7.
“I don’t think there’s a casino package out there that is ready to go, because if it was, they’d be running it,” Malloy said. “I don’t think the idea that we re going to have an open process where people participate and, therefore, we lose right out of the box $260 million or more makes any sense at all.”
The tribal chairs, Kevin Brown of the Mohegans and Rodney Butler of the Pequots, said in a joint statement: “The governor’s assessment is spot on. We’ve always said that we want to be part of the solution when it comes to solving the state’s challenges. It’s clear he gets that.”
Uri Clinton, a senior vice president and legal counsel of MGM, noted the legal questions raised by the attorney general’s office that still surround the tribes’ proposal and said, “We respectfully disagree with the governor’s assessment.”
Attorney General George Jepsen has raised two legal issues about a deal with the tribes: One, that the Bureau of Indian Affairs could negate the exclusivity agreement, a possibility the bureau recently downplayed; and two, giving the tribes the right to a commercial casino without competition could be unconstitutional.
“A New York-facing casino with a 35-percent tax rate would generate more than $260 million in tax revenue and fees,” Clinton said. “Only a competitive process can successfully address the constitutional issues the attorney general has raised.”
A federal official who oversees the Bureau of Indian Affairs recently told the tribes in an advisory letter that the BIA was unlikely to interfere with the tribes’ exclusivity agreement with the state.
“In practice, the Department has not disturbed long-standing compacts when reviewing amendments to the underlying agreements,” wrote James E. Cason, the acting deputy secretary of the Interior. “Here, the Tribes and the State have long-relied upon the Compacts that have facilitated a significant source of revenue for the Tribes and the State. The Department does not anticipate disturbing these underlying agreements.”
Jepsen’s office saw Cason’s letter as noteworthy, though non-binding.
“That the department, at least as currently constituted, intends to follow and adhere to that policy should amendments to the agreements between the state and the tribes be submitted for approval does help to alleviate concerns about risk to the revenue-sharing agreements,” said Jaclyn Falkowski, a spokeswoman for the office.
MGM released a poll earlier this week trying to keep pressure on legislators to consider an open process. The poll found only 21 percent of residents favor granting the state’s two federally recognized tribes the right to open a commercial casino, as opposed to the 71 percent who agree with MGM and favor an open competitive process.
But how many residents are aware that the tribes have exclusive rights to operate casinos in Connecticut, a privilege for which they pay annually? MGM’s pollster didn’t ask, nor would they be expected to. The questions asked by the pollster, the Mellman Group of Washington, D.C., were meant to yield data helpful in the task of persuading legislators to vote against the tribe’s bid.
Without the rigor of a competitive process, Clinton said, the state and East Windsor are not getting the best possible terms. The state should take a larger look at the gambling market to determine how to maximize revenues, he said.
The tribes say the East Windsor casino would help protect market share that’s steadily eroded in the face of growing competition as New York, Massachusetts and Rhode Island have allowed gambling parlors with slots and other electronic games. In the Bay State, two full casino resorts are under construction, by MGM in Springfield and Wynn Resorts in Everett, Mass., just outside Boston.
The Mohegans had competed for the Boston-area license granted to Wynn.
The tribes’ struggles have been reflected in falling slots payments to Connecticut, which reached a high of $430 million in 2007, the year before the recession. The revenue-sharing continued to fall, even as the economy improved, to $359 million in 2010 and $267 million in 2015. With annual profits of more than $300 million, the lottery has been a bigger money-maker for the state every year since 2013.
Casino expansion has been intensely lobbied since 2015, when the tribes first broached the idea of at least one satellite casino to compete with MGM and minimize the inevitable loss of market share. MGM hired Global Strategy, a consulting firm that played roles in Malloy’s three campaigns for governor: his loss in 2006 and wins in 2010 and 2014.
Brian Durand, the governor’s chief of staff, is a former Global employee. Roy Occhiogrosso, once Malloy’s top political and communications adviser, who returned to Global after working for the Malloy administration during the governor’s first term, is advising MGM.
Andrew Doba, the governor’s former communication director, is the communications consultant for the tribes.