Don’t award third casino license
Defer decision a year until smoke clears
THE MASSACHUSETTS GAMING COMMISSION (MGC) has already awarded the state’s sole category 2 (slot parlor) license; and, two of the three category 1 (resort-style casino) licenses, with one remaining to be awarded. However, given the current gaming climate in Massachusetts, should the Commission award the remaining license? The answer to that question should to be a resounding “No.”
In February 2014, the MGC awarded the category 2 license to Penn National for its proposed Plainridge Park Casino. Several months later, in June 2014, the MGC awarded the first category 1 license, for Region B, to MGM Springfield for its resort casino in Springfield. Then, in September 2014, the MGC awarded the Region A category 1 license to Wynn Massachusetts LLC for its resort casino in Everett.
Currently, the MGC is in the process of reviewing the application of Massachusetts Entertainment and Gaming LLC, the only surviving applicant for the one remaining casino license. But the climate in Massachusetts has changed considerably since the Expanded Gaming Act was signed into law back in 2011.
The only indicator that is available as a gauge of market conditions is the gross gaming revenue numbers from the Plainridge Park Casino in Plainville, the only currently operating gaming venue in Massachusetts.
- Plainridge Park had projected revenues of $250 million during its first year of operations, which is an average of $456 per machine per day (pmd). Prior to its opening at the end of June, those revenue estimates had been revised downward to $220 million ($401 pmd) and then to $200 million ($365 pmd).
- When Plainridge Park opened on June 24, its revenue numbers exceeded all expectations. Revenues during its first week of operations were about $585. pmd. Since that time, however, revenues have declined precipitously from $585 pmd to $256 pmd in November.
- My financial model predicts annual gaming revenue in the first year of operations (July 1, 2015 through June 30, 2016 – the same as the Commonwealth’s 2016 fiscal year) of $140 million to $150 million ($255-$275 pmd), roughly 25 to 30 percent less than anticipated.
- That model also predicts that revenues will continue their downward trend and eventually plateau at between $179 and $200 pmd, with annual revenues in the $100 million to $110 million range, once the novelty of the new gaming venue wears off and the category 1 gaming facilities open. Those revenue numbers are based on the average gross gaming revenue of all four slot parlors currently operating in New England (Twin River, Newport Grand, Hollywood Slots, and Oxford Casino) and (2) the average gross gaming revenue of the two slot parlors in the closest proximity to Plainridge Park (Twin River and Newport Grand, respectively).
- The Mashpee Wampanoag tribe has been trying to open an Indian casino in Taunton for several years. That goal has moved one giant step closer to reality with the Bureau of Indian Affairs approval of their application to “take lands into trust” for the benefit of the tribe; in essence, creating a reservation on which the tribe could launch gaming under an approved compact with the Commonwealth without being awarded a gaming license by the MGC and at a tax rate less than the other commercial casino operators.
- To further complicate matters, the Aquinnah Wampanoag tribe is immersed in litigation, initiated by the Commonwealth, to enjoin them from gaming on their reservation lands on Martha’s Vineyard. The Aquinnah have suffered a few setbacks in US District Court, but have appealed those rulings to the First Circuit Court of Appeals.
In the end, awarding a third casino license, which appeared to be a “no brainer” for the MGC initially, has become mired in ancillary issues that have profound effects on the gaming climate in both southeastern Massachusetts and the Commonwealth as a whole. There is also the question as to whether or not the Plainridge Park revenue numbers are a harbinger of drastically reduced revenue numbers for the MGM and Wynn casinos? This possibility raises the importance of the decision to award or not to award in southeastern Massachusetts to profound levels.So what should the MGC do in this case? A little over a year ago the MGC was faced with the very difficult decision as to whom to award the Greater Boston gaming license? There were two very credible applicants, both with great reputations in the gaming industry: Wynn Entertainment and Mohegan Sun. At one of the hearings, Commissioner Bruce Stebbins noted the statute empowers the commission to award up to one category 1 license in each in each of the three geographic regions of the Commonwealth, but that there was nothing in the statute that would require the Commission to award a license if, in their discretion, it is not in the best interest of the Commonwealth. I think we may have reached that point. If the goal of the Expanded Gaming Statute is to have four marginally profitable gaming venues in Massachusetts, then by all means the commission should award the southeastern Massachusetts license. However, if the commission were to ask my opinion, I would advise them to defer any license award for at least one year, until they develop a clearer picture of the gaming landscape.
Paul L. DeBole is an assistant professor of political science at LaSell College in Newton.