Bloomberg News

Foxwoods, Mohegan Sun May Lose Under Massachusetts Casino Plan

November 23, 2011

Nov. 22 (Bloomberg) -- A law permitting casinos to open in Massachusetts may cloud the recovery of Connecticut’s Foxwoods and Mohegan Sun, which generated $342.3 million of slot-machine revenue for that state last year.

Massachusetts Governor Deval Patrick signed the law today, putting the Bay State on a course to erode the hold Foxwoods and Mohegan Sun have had on the region’s casino market. The eastern Connecticut resorts may lose as much as 20 percent of their revenue as rivals open nearer to Boston in the next three to five years, according to Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts.

“In Massachusetts we knew something like $1 billion a year was crossing the border, which is about 6,000 jobs,” Barrow said today by telephone, referring to gamblers traveling to Connecticut. “It was getting increasingly difficult for state leaders to watch that outflow.”

Connecticut has benefited by sharing in slot-machine revenue from the two American Indian-owned casinos. The state’s cut reached $430.5 million in fiscal 2007, according to government data. Since then, receipts have declined. Massachusetts became the latest state to open the door to casino gambling in the Northeast, following Rhode Island and New York.

Foxwoods Resort Casino is about 100 miles (160 kilometers) southwest of Boston, in Mashantucket, near the Rhode Island state line. It was started by the Mashantucket Pequot tribe, which began with bingo halls, adding table games and slots in the early 1990s. The Mohegan Tribal Nation followed, partnering with developers to open Mohegan Sun in 1996 in nearby Uncasville. Both are north of coastal New London.

Bay State Gamblers

Last year, about 31 percent of Foxwoods’ customers, and 20 percent of Mohegan Sun’s, came from Connecticut’s northern neighbor, Barrow said, citing research by his center in Dartmouth, Massachusetts. He said surveys show that 67 percent of gamblers from Massachusetts indicated they would stay in the state if it had casinos.

Both Connecticut casinos will lose some business, once rivals open up in Massachusetts, according to Andrew Zarnett, a Deutsche Bank AG analyst in New York who covers the gaming industry. Under the new law, the state can host three full casinos and one slot-machine parlor.

“In general, when the next state approves, it’s growing the market but it cannibalizes some of the existing operators,” Zarnett said today in a telephone interview.

Operators Get Ready

Casino developers have been gearing up to qualify for licenses to operate in the Boston area, western and southeastern Massachusetts, including Cape Cod. The law delivers 25 percent of revenue from each, and 40 percent from the slots-only operation, to the state, according to legislative leaders. Licenses will cost at least $85 million for the three sites with table games, and $25 million for the more limited operation.

The Mohegan Tribal Gaming Authority, which runs one of the Connecticut casinos, bought land in Palmer, a Massachusetts town about 70 miles west of Boston near Springfield. Developers must agree to invest at least $500 million in each casino and $125 million in the slots-only facility, Patrick said in a statement.

The law will “allow the commonwealth to recapture hundreds of millions of dollars that are currently being spent in other states,” state Representative Brian Dempsey, a Haverhill Democrat who leads the House Ways and Means Committee, said in a statement after the measure passed.

Job Creation

“Done right, expanded gaming can create jobs, generate new revenue and spur economic growth,” Patrick said today in his statement. Legislative leaders project the law will spur the creation of as many as 15,000 jobs.

The law requires voter approval in communities where casinos or the slots parlor would be located, according to the statement from state Senate President Therese Murray, a Plymouth Democrat, and House of Representatives Speaker Robert DeLeo, a Winthrop Democrat. Family members can ask to have relatives banned from casinos, they said. Public employees who worked on the legislation are barred from seeking employment with casinos for a year after leaving their jobs, the leaders said.

The Massachusetts law is a “defensive response” that will help the state keep gamblers closer to home while failing to deliver on economic promises, said Fred Carstensen, an economist at the University of Connecticut in Storrs.

“They see money falling out of the state; everybody is opening them,” Carstensen said yesterday, referring to casinos. “This is understandable as a defensive strategy. But ultimately it’s not an economic development strategy.”

--Editors: Ted Bunker, Jerry Hart.

To contact the reporters on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net

To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net.


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