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Gaming Guru

Arnold M. Knightly
 

Gaming groups want details before entering Massachusetts

19 September 2007

MASSACHEUSETTS -- Harrah's Entertainment, MGM Mirage and Las Vegas Sands Corp. expressed interest Tuesday in entering the underserved Massachusetts gaming market but want more information before proceeding.

The proposal, which was announced Monday but must be approved by the state Legislature, projects the first casinos opening as early as 2012.

However, Gov. Deval Patrick's announcement lacked key details, such as gaming tax rates and proposed slot allowances, that could determine the companies' levels of interest

"Until the details of how this process is going to work are known, it's too early to tell if it is a viable opportunity," said Alan Feldman, senior vice president of public affairs for MGM Mirage. "We're going to have to wait to see how this plays out."

Patrick said the casinos would generate $400 million to $450 million in annual tax revenue.

He did not propose a specific gaming tax rate in his announcement, although Patrick's plan would require the casinos to help fund new state gaming regulating and investigation departments.

The Boston Globe on Tuesday reported the state's gaming tax would be 27 percent of all gaming tax revenue, a number that could not be verified late Tuesday. Nevada's tax rate is 6.75 percent.

Feldman said the gaming tax rate will be a key factor in MGM Mirage's final decision about entering the market.

"We have seen states that have set completely unrealistic and unreasonable tax rates," Feldman said.

West Virginia is the highest in the country at 57.6 percent, followed by New Mexico at 55.25 percent and Pennsylvania at 55 percent, according to the American Gaming Association.

The difference between a high tax rate and a low tax rate could mean the difference between building just a casino or building a resort with hotel rooms, retail, restaurants and convention space, Feldman said.

The casino license open bidding process could generate as much as $900 million in one-time revenue, according to Kofi Jones, spokeswoman for the executive office of housing and economic affairs in Massachusetts.

Jones said the price of the three 10-year renewable licenses will be set by the market. She said licenses might not awarded to the highest bidders but could be based on other factors, such as each proposal's plans for smart and sustainable growth and energy conservation.

Bill Lerner, a gaming analyst for Deutsche Bank, said in a note to investors that the state "would be a tremendously attractive destination for most U.S. gaming operators."

Jan Jones, Harrah's vice president of government relations, said the gaming company has long been interested in the Northeast as potential market.

"The Northeast is very underserved," Jones said. "Your two largest casinos in the world are in Connecticut. Where they are pulling their customers is all from that area."

Foxwoods Resort Casino in Mashantucket, Conn., is 100 miles southeast of Boston, while the Mohegan Sun Hotel and Casino in Uncasville, Conn., is nearly 110 miles southeast of Boston. Both casinos are owned by American Indian tribes.

Jones said Harrah's and the governor have conducted studies showing at least $1 billion annually is going into the neighboring state from Massachusetts.

Jones pointed out that Harrah's Chairman and Chief Executive Officer Gary Loveman lives outside of Boston. A graduate of the Massachusetts Institute of Technology, Loveman taught for four years at Harvard University Business School before joining the company in 1998.

Loveman is not the only Las Vegas gaming executive with Massachusetts roots.

Sheldon Adelson, Las Vegas Sands Corp. chairman, CEO and majority shareholder, was born and raised in the Boston suburb of Dorchester.

"With Mr. Adelson being from Massachusetts, he has shown an interest in the market in the past," said Ron Reese, spokesman for Las Vegas Sands Corp.

Reese said the company will also await further details of the proposal before deciding on the market.

Las Vegas Sands has a project under construction in Pennsylvania, where the gaming tax rate is 55 percent plus additional fees.

The company is spending $600 million on the Sands Bethworks in Bethlehem, Pa., a mixed-use development that will include a 300-room hotel and 3,000 slot machines.

MGM Mirage is building a $700 million MGM Grand resort in neighboring Connecticut scheduled to open in 2008.

The resort is being built in partnership with the Mashantucket Pequot Tribal Nation in Ledyard, Conn., next to Foxwoods.

"The region is quite vibrant in terms of its potential," Feldman said. "But we've also seen other places with great potential where because of the political decisions that have to be made, they can be made much less appealing."

Gaming groups want details before entering Massachusetts is republished from Online.CasinoCity.com.