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Massachusetts’ casino plans facing significant expense cuts

Posted on July 5th, 2010

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The recent casino bill in the state of Massachusetts proposing the construction of 3 casinos is facing significant reductions in budget. Developers who show interest for the project are looking more to spend less and create simple and low end casinos rather than lavish ones, similar to the Mohegan Sun entertainment complex located in Connecticut. In return the state is facing much less revenue projection.

In 2008, before the recession hit the world, Governor Deval Patrick made the same casino proposal, however the numbers he used back then will have to be reduced by very significant numbers. Two years ago, the minimum investment Patrick set for each of the 3 casinos is $1 billion , today and in actuality, the initial investment required for each of the casinos proposed dropped to a measly $600 million. This amount in itself is a rather big investment, according to casino developers. The status of the casino and gambling industry before the recession hit the markets changed massively, and higher competition that recently emerged in the scene attributes to the reduction of expected investment and likewise profits from the said casino projects.

In the 2008 proposal, $600 million was projected from license fees alone. The current bill only sums up $225 million in licensing fees. The new bill also calls for $285 to $355 million from gaming tax, which is 25% from all winnings. The proposal made in 2008 was going for as much as $450 annual state income. As the Senate voted for a non smoking casino last week, the quality of the said casino projects are to be greatly affected. Steven Panagiotakos, Senate Ways and Means Committee Chairman said that a smoke free casino will only devalue the project greater, as great as cutting off $90 million in tax revenues annually or about 20%.

The kind of casinos that will be built under current the situation is an issue that was talked about constantly in the Senate debates, and now much anticipation is facing the project. Senator Susan Tucker, a known critic of the casino bill is saying the shrinking capital that investors are willing to shell out will create a problem with the people’s expectation of what the future casinos will be like. She continues to say that most local players will also like to see a lavish and grand resort and casino facility, “People have a vision of a resort with hotels and golf courses, but $600 million will get you slots in a box, I think Twin River costs around $600 million and I think anybody who visits there would say, I don’t want that in my state. It’s a basic slot parlor.” Tucker was referencing the financially dwindling racino in Rhode Island.

“I think people will be surprised at the lack of quality and by that time the state is down the road and you can’t unplug them, If we expected a really fine resort then the minimum buy-in would have to be tripled. So I suspect the low numbers are simply paving the way for slot parlors, which will be a very big disappointment,” Senator Tucker continued to say. However, Sen. Stephen M. Brewer seem to think otherwise. Although he too voted against the bill, he thinks that a smaller initial investment will be out of the question. He explains that since the bill will be up for bidding, contractors will have to bid the highest to get the license to operate, and with higher bids include a vision of a more up scale casino .“I think you will get something that people could be proud of as far as the infrastructure goes” Brewer said. The original study to put up casinos in the state did not include setting up a minimum bid but the Senate recommended to have a $600 million investment while the House suggested $500 million.