A tribe, a state and a mutual reliance on gambling
Connecticut made $629M off gamblers last year. It wants more.
Mashantucket — The gamblers’ cash came in a gusher, as if the tiny band of Mashantucket Pequots had struck oil in their Great Cedar Swamp. CBS’ “60 Minutes” came to tell the rags-to-riches story of a tribe back from near-extinction, its growing ranks blessed with BMWs and luxury homes, byproducts of a new casino in the woods of eastern Connecticut.
The CBS story aired in 1994, two years after Foxwoods Resort Casino opened on a sleepy stretch of Route 2 fortuitously located between Boston and New York. Within a three-hour drive lay an exclusive gambling market of 22 million people, drawing the envy and enmity of an Atlantic City casino owner named Donald J. Trump.
But it’s been a long time since anyone has gossiped about Pequots, BMWs and luxury homes. The generous stipends once paid to every adult tribal member are long gone. And Rodney Butler, current chairman of the tribal council, drives a 15-year-old Acura. It’s a matter of preference, though not without symbolism.
“We’re a billion-dollar entity, a city and a family trust, all at the same time. I can’t imagine anything more complex than that.”
Chairman, Mashantucket Pequots
A quarter-century after CBS introduced the Pequots to America, back when the idea of a casino resort in New England was novel, much is changed. A failure at casinos, Trump has found success elsewhere. The northeast is crowded with casinos, all but a handful of states make money off some form of legal gambling, and Connecticut lawmakers and the Pequots want to broaden the market.
Connecticut made $628.9 million off gambling last year, a reflection of a slow cultural change that’s snuck up on a state that barred the sales of liquor on Good Friday until an adverse court ruling in 1981 and stubbornly clung to remnants of Sunday blue laws into the new millennium. Gambling is an itch that now can be scratched at every convenience store, as evidenced by the state’s annual lottery sales of $1.3 billion.
The state is a de facto partner in Foxwoods and Mohegan Sun, the casino opened in 1996 by the Pequots’ neighboring tribe, the Mohegans. In a clever bargain struck by Gov. Lowell P. Weicker Jr., the state granted the two federally recognized tribes exclusive rights to casino gambling, a move that both boosted and constrained the casino market.
And the state gets a cut — $8 billion since the casinos opened.
The partnership is being tested as Connecticut’s governor and lawmakers face questions about the state’s tolerance for more gambling, what it owes those tribal partners and whether there is the political will to make hard choices. Gov. Ned Lamont’s dream of a grand bargain, a consensus on the competing commercial and tribal interests, has proven naive.
Sportech PLC, the British company that owns the Connecticut rights to off-track betting on dogs, horses and jai alai, wants to take sports bets. MGM Resorts International wants to bid for rights. So does the Connecticut Lottery, the quasi-public agency that has turned instant scratch tickets into a steady revenue source. More than half its ticket sales come in instant scratch tickets, some costing $30 a play.
The lottery returned $370 million to the state’s general fund last year; the tribes’ direct payments another $255 million; and OTB, $3 million.
The state gets 25% of the “hold” on slots — the money that doesn’t flow back to players — at the two casinos. With the state’s share steadily falling to $255 million from a high of $430 million in 2007, the tribes and state have common cause in drawing new gamblers, or creating them, through sports wagering, online betting and other games.
“Connecticut has sat on the sidelines long enough on this issue.”
Spokesman for Gov. Ned Lamont
What is unclear is how permissive the Land of Steady Habits will be in gambling’s new digital age. Technology makes possible betting on sports, purchasing lottery tickets and playing simulated slots and casino games on a smart phone. The secondary question is how much of the action will be handled by the tribes.
Sen. Cathy Osten, D-Sprague, whose district is home to both tribes, is pushing for pretty much all of it — a long shot.
“I’ve been meeting with the governor’s office on this,” Osten said. “I’m not saying they agree, but this is the bill I’m going to file.”
Osten is framing her bill as a way to beef up the Mashantucket Pequot/Mohegan Fund, the name for the formula that distributes a portion of the state’s slots revenue to every one of the 169 cities and towns. In 2002, the payments peaked at $139 million, then fell as state kept more and more of the shrinking slots revenue to balance its budget. Fund payments will total $51 million this year.
“What I’ve done is figure out what we need for revenue to bring us up to the level of where we were in 2002,” Osten said. It is an approach designed to broaden political support, casting the expansion in dollars-and-cents terms of the additional state aid that could become available to municipalities.
That means allowing aggressive on-line gambling, something that House Majority Leader Matt Ritter, D-Hartford, sees as unlikely to pass in the near future. An incremental step, most likely sports betting at the casinos and other locations, is overdue, he said.
“I think every year that goes by is a shame. We lose market share,” said Ritter, who is urging a minimalist approach. “That’s my recommendation — get it up and running.”
The administration is signaling flexibility.
“Connecticut has sat on the sidelines long enough on this issue,” said Max Reiss, the governor’s communications director. “We want to keep discussion going to make sure Connecticut can take advantage of this opportunity with all stakeholders at the table.”
Sports gambling is projected to produce a relatively modest bump in revenue for the state. Osten’s bill assumes $13 million a year, though she calls that number conservative. Legalizing other forms of on-line wagering, a more controversial expansion, could raise another $26 million annually in her estimation.
Her bill would permit the tribes, which already have the authorization to jointly build a casino in East Windsor, to also develop a small casino in Bridgeport. But that project would most likely draw many current tribal customers and is aimed primarily at winning political allies, not greatly expanding the market.
Coping with the post-boom years
There is no going back to the boom years of the early ’90s when the map of major casinos in the U.S. had just three dots: Las Vegas, Atlantic City and, improbably, Mashantucket, Conn. Aside from another dot for the Mohegan Sun, it pretty much stayed that way for 10 years.
“After that, there was just this explosion,” said Butler, the chairman of the Pequots’ tribal council. “It correlated directly to the decline.”
Butler, 42, the married father of two children, is what the tribe envisioned when the money started coming in: A young tribal member making a career on a reservation that had been all but abandoned in the 1960s, when the only inhabitants were two elderly women living in dire conditions.
He studied finance and played football as a walk-on at UConn, where Coach Skip Holtz Jr. converted him from a running back to a defensive back. With a trim muscular build, Butler still looks like an athlete. To shake his hand is to get pulled into a friendly shoulder bump.
Butler grew up in Montville, where the Mohegans built their casino in the village of Uncasville on an industrial site by the Thames River. He was turning 15 when the tribe opened Foxwoods in February 1992. With 2,000 gamblers still in the casino at the planned closing time, it stayed open — and has never closed. After graduating college in 1999, Butler started at the casino as a financial analyst.
Still in his 20s, he was elected to the tribal council in 2004, a go-go time of growth that would swell Foxwoods into a behemoth, one of the largest casinos in the world. Soon enough, it would become clear the Mashantucket Pequots had overextended — and at the worst possible time. They were borrowing to expand in what turned out to be the run-up to the deepest economic downturn since the 1930s, the Great Recession of 2008.
Construction began in 2006 on the MGM Grand at Foxwoods, a hotel tower with 800 rooms, a theater and a gambling floor. The name reflected a since-abandoned partnership with MGM, the commercial giant that now bitterly fights Foxwoods and Mohegan Sun for market share with MGM Springfield and Empire City Casino in Yonkers, N.Y., the latter limited to slots and electronic table games. The Foxwoods tower opened in 2008, an event attended by Gov. M. Jodi Rell.
A year later, the tribe defaulted on $2.3 billion in debt.
And a year after that, Butler was elected as tribal chairman at the age of 32, a job that lies between being a corporate CEO and a small-town first selectman. He answers to just 600 tribal voters, the smallest political base in Connecticut. And yet, with 5,144 workers, the tribe’s casino is one of the region’s major employers.
“We’re a billion-dollar entity, a city and a family trust, all at the same time. I can’t imagine anything more complex than that,” Butler said recently, sitting in the tribal council chambers by a stone fire place decorated with foxes painted in a primitive style. “It’s small-town politics, it’s statewide politics, and it’s national politics. We deal in all three arenas.”
By taking the job, he became the fresh face and voice of a tribe everyone suddenly loved to mock for its hubris, its belief in unfettered growth.
“Every consultant, every analyst and every banker on the planet encouraged us to keep getting bigger,” Butler told the New York Times in 2012. “If it wasn’t for that, I’d say, ‘Jeez, maybe we’re just idiots.’ But these were smart people. Then we opened the doors at the MGM Grand, and five months later, Lehman crashes and the world falls apart.”
It took five years after the 2009 default to restructure the complicated debt, which now stands at $1.9 billion. But as the tribe noted in its recently released annual financial report, a requirement of borrowing in the bond markets, the risks are numerous. Competition is growing, and profits are shrinking.
Net revenues fell 5% to $788 million last year, though gamblers still pumped $5.4 billion into 3,500 slots machines at Foxwoods and waged another $1 billion at its 300 table games. It also has a 3,600-seat bingo hall, a high-tech race book and the largest poker room on the East Coast.
The Pequots were trying to diversify when the 2008 crash came. Their default cost them rights to a casino in Pennsylvania, which now has more casinos than any state except Nevada.
“It got lost in the fray. We had the license in Philly. We were looking at a development in Southern California, another in Wichita, Kansas,” Butler said.
Mohegans also have lost market share in Connecticut and carry significant debt, about $2 billion as of Sept. 30. (The Mohegan Tribal Gaming Authority, the tribe’s gambling subsidiary, reported net profits of $992 million last year, down 7% over the previous year.) But they have diversified geographically by building, buying or managing casinos in Louisiana, New Jersey, Pennsylvania, Washington State, and Canada. They are in expansion mode, constructing a multi-billion dollar resort and casino at Incheon International Airport in South Korea and recently winning casino rights in Greece.
But that doesn’t mean sports gambling in Connecticut isn’t important to the Mohegans, as well as the Pequots. Chuck Bunnell, the chief of staff for the Mohegans, said sports betting increased traffic at casinos in New Jersey and Pennsylvania between 4.5% and 5%. At their Resorts Casino Hotel in Atlantic City, they saw a slightly higher bump in business.
“We believe it is a casino game, and you should offer it to the two people that are in the business,” Bunnell said, describing the Mohegans’ sports betting pitch to the state. “Let us offer it. We’ll pay you for the exclusivity.”
Ted Taylor of Sportech said his company is ready to compete for sports betting, both online and at its OTB parlors. Connecticut gamblers bet more than $100 million last year at OTB facilities or on its smartphone app. Two of the OTB operations reside in high-end sports bars, Bobby V’s, in downtown Stamford and near Bradley International Airport in Windsor Locks.
“We’ve got a perfect fit,” said Taylor, a British expat who oversees Sportech’s operations in the state. “We’ve got existing locations and existing betting sites in Connecticut, and it’s important to us.”
Lamont took office a year ago thinking he could renegotiate Connecticut’s gambling agreements with the tribes and finish the conversation opened by his predecessor, Gov. Dannel P. Malloy, when it became evident that the U.S. Supreme Court was likely to lift the federal restrictions that limited sports wagering to Nevada’s casinos.
The court acted in 2018, and 14 states now offer sports betting, most recently New Hampshire, a state that quickly created a regulatory structure, advertised requests for proposals and chose a vendor.
“I mean, it’s amazing that New Hampshire is already up and running. We’ve been talking about this for three years,” Butler said. “Michigan now has a comprehensive iGaming-sports betting bill that addresses the tribal facilities and commercial facilities in Michigan.”
Connecticut’s complex history
Lamont has learned, however, that nothing is simple about gambling in Connecticut, a consequence of the framework erected by Weicker in response to a federal Indian gaming law and a court decision.
The gaming law permitted federally recognized tribes to offer on their reservations any gambling allowed by the laws of the state in which they resided. In Connecticut, that meant a law permitting charitable “Las Vegas nights” would permit the Pequots to open the first casino in the northeast outside Atlantic City.
In 1983, Congress designated the Mashantucket Pequots as the state’s first federally recognized tribe. The designation was part of a settlement of a claim the tribe filed in 1976 alleging that Connecticut had illegally auctioned off hundreds of acres of reservation land in the 1800s.
Weicker’s predecessor, William A. O’Neill, refused to negotiate terms under which the Pequots could build a casino, but the tribe won a federal court decision that left the newly inaugurated Weicker with two choices in 1991: Negotiate or repeal the Las Vegas nights law.
He sought repeal, but the legislature defeated the measure. The Pequots were free to build a casino with table games, though not slots. Weicker then struck the deal allowing slots in return for a casino exclusivity provision that he saw as a way to effectively bar commercial casinos. (The tribes’s position is that sports betting is a casino game. The state disagrees.)
“In fairness to the new governor and the new members of the legislature, our history is deep, and people are busy. I get that. It’s difficult to appreciate the full depth of that.”
Lamont is Connecticut’s fourth governor since Butler joined the tribal council. He is confident Lamont understands the economic impact of the two casinos, less sure about his understanding of the history behind his tribe’s decimation, recovery and current struggles.
“There is a lot there. In fairness to the new governor and the new members of the legislature, our history is deep, and people are busy,” Butler said. “I get that. It’s difficult to appreciate the full depth of that.”
The history is complex, rife with twists and ironies. The Mohegans joined English colonists in attacking the Pequots in 1637, nearly wiping out the tribe. Once they won federal recognition, the Mohegans then became casino competitors.
The Mohegans are now allies in a lobbying push for rights to sports betting, as well as partners in a joint venture to develop a satellite casino on a hillside overlooking I-91 in East Windsor, halfway between Hartford and Springfield, Mass., where MGM opened a casino in August 2018. The Bay State has two other casinos: Encore Boston Harbor, which opened in Everett, Mass., in June 2019, and Plainridge Park Casino, which offers slots and electronic table games in Plainville, Mass., about an hour’s drive north of Foxwoods.
MGM, once a partner of the Pequots, now is the common enemy of the two tribes. It lobbied in Washington to have the Department of Interior stop the East Windsor project, but ultimately federal authorities reconsidered and permitted the tribes to amend their gaming agreements with Connecticut. MGM is suing to reverse the federal approval.
“MGM continues to be interested in opportunities in Connecticut, and we strongly believe that the best path for Connecticut, whether in establishing sports betting or moving ahead with a third casino in the state, is an open, competitive process,” said Bernard Kavaler, a spokesman for MGM in Connecticut.
The East Windsor casino is on hold after a Superior Court judge concluded three weeks ago that the local zoning approval process was flawed, most likely requiring a resubmission. Bunnell said the ruling is a delay, not a defeat. He and Butler said the tribes still believe the satellite makes economic sense, as does sports betting.
“We’re excited about working with Connecticut and doing in Connecticut what we’re doing in New Jersey and Pennsylvania,” Bunnell said. “What we do depends on what Connecticut wants.”
Now it just has to decide what that is.
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