CLT UPDATE
Thursday, October 11, 2007

Resort Casinos in Massachusetts?


Governor Deval Patrick will file a casino gambling bill today that gives him control of a seven-member gaming authority that would auction off licenses and regulate the casinos.

The bill, which puts two elected officials on the new panel, is already drawing fire....

The money collected from the casino operators would go into seven trust funds. Among them would be . . . $200 million annually toward property tax credits for about a million homeowners . . .

The Boston Globe
Thursday, October 11, 2007
In bill, Patrick controls casino panel


Patrick administration officials who offered details of the proposal yesterday said the bill provides previously undisclosed mechanisms for increasing funding for both transportation and for municipal services in cities and towns through the state lottery....

The legislation also guarantees that cities and towns will receive a 3 percent annual boost in aid from the state lottery, expected to suffer losses of up to 8 percent from the introduction of casinos.

Previously, Patrick had said only that the lottery would be reimbursed any losses due to casinos, but sources said the legislation ensures aid to cities and towns increases every year. Currently, the lottery provides about $900 million a year for municipal services statewide.

The Boston Herald
Thursday, October 11, 2007
Casino proposal ready to roll


Still, the rebate plan doesn't address the need for the state to find a rational way to share revenues with cities and towns at a time when property taxes are rising and services are declining. Patrick promised in his campaign that he would "cut the property tax by reinvesting in cities and towns." That elusive goal hasn't been brought any closer as a result of his casino bill.

A Boston Globe editorial
Thursday, October 11, 2007
Casinos: raising the stakes


Chip Ford's CLT Commentary

This "resort casino" issue is a tough one.  CLT at the moment has no position and is seeking one.  Even among our four-person staff opinions vary.  One thing we do agree on is that whatever state revenue is generated by Massachusetts resort casinos will likely have little impact on everyone's property taxes.

See yesterday's CLT new release

The governor's proposal seems like more pie-in-the-sky.  He keeps coming up with these things without getting them anywhere, so we don't expect this to be any different.  His convoluted formula of alleged "property tax relief" -- his latest -- is nothing more that an income tax credit.  That aside, below is what we at CLT are wrestling with, from different perspectives.

In the next membership mailing we will include a poll asking how you feel about this issue.  Please return it.  You should receive it sometime in November.

Chip Ford

 


I can't see any reason why Massachusetts doesn't have casinos, since the demand is obviously there: e.g., the Mohegan Sun and Foxwood casinos in Connecticut, just over our state's border. Why not attempt to collect some of the revenue from Bay State residents now collected by the Nutmeg State, why not shorten their drive to a casino (a public safety and ecological issue as well) by putting a few in Massachusetts?

Of course Massachusetts politicians will squander the additional revenue. They always do. Of course they'll expand spending and the state budget. They always do that too. But the generated revenue will be voluntary, and it will be additional. The pols won't need to hit us taxpayers up again as soon.

Just don't wait to see anything reformed if more satchels of cash are dropped on the bargaining table to keep the gravy train running. This is but another stop-gap measure, a finger in the dike.

But why not indulge, instead of letting a bordering state absorb it all?

Chip Ford --
Director of Operations, CLT


Casino gambling will cause more problems than it solves. The increased revenue to the state will only fuel overspending problems created by politicians whenever they get extra money. This new revenue will almost certainly not go to "property tax relief" or eliminate the need for new taxes. Just look at New Jersey and Connecticut, states where casinos rake in billions -- yet the two are among the most heavily taxed states in the country. Crime increases dramatically in the area around casinos. That will lead to another unaffordable problem: more police with paid details, high health insurance premiums and costly pensions. Finally, if you think Bay State politicians and powers-to-be can responsibly handle an enterprise that involves billions of dollars, I've got two words for you: Big Dig.

Chip Faulkner --
Associate Director, CLT


Chip is absolutely right. I agree with both of them!

As a libertarian, I think anyone who wants to open a legal business on land he owns should be able to do so. Gambling is obviously legal here; as someone said, the commonwealth is just a bookie with a lottery. But no one is advocating having the state get out of the way of private sector gambling.

One CLT member, Frank Conte, pointed out that pro-casino politicians who use Chip Ford's argument about Massachusetts citizens going to Connecticut, don't worry overmuch about Massachusetts citizens shopping in New Hampshire. If they were consistent, they'd want to allow casinos AND repeal the sales tax.

I'm not sure public safety is improved with casinos. People who are drinking, who might stay overnight in Connecticut now, might try to drive home if the casino was closer in Massachusetts.

I think of Nevada, where gambling revenues fund much of state government, there is no state income tax, and the total tax burden is relatively low. But Chip Faulkner is probably right, we'd be more likely to emulate New Jersey. If I recall, when Nevada lost revenues after 9/11, it instituted a "temporary" tax -- which it actually dropped when gambling picked up again! That wouldn't happen here.

I look forward to our poll, to learn what the rest of you think. My only proposal is that this issue should be on the ballot for Massachusetts voters to decide. The Legislature can put it on as an advisory question without having to collect signatures, and that's what it should do.

Barbara Anderson --
Executive Director, CLT


The Boston Globe
Thursday, October 11, 2007

In bill, Patrick controls casino panel
By Andrea Estes


Governor Deval Patrick will file a casino gambling bill today that gives him control of a seven-member gaming authority that would auction off licenses and regulate the casinos.

The bill, which puts two elected officials on the new panel, is already drawing fire.

Under the proposal, the state treasurer and the state auditor would sit on the board of what would be called the Massachusetts Gaming Control Authority. The five remaining members would be appointed by the governor.

Treasurer Timothy P. Cahill and Auditor Joseph DeNucci said yesterday they were never asked by Patrick's administration what they thought of their potential involvement in the authority. While DeNucci welcomed the opportunity to serve, saying it is a good idea to have the state auditor overseeing casinos, Cahill disapproved of the makeup of the proposed panel.

"I don't think it's a good business model to have elected officials as part of the oversight process," Cahill said. "This is the most lucrative license anyone will ever bestow on anyone in Massachusetts."

In addition, Cahill, who is chairman of the State Lottery Commission, said it would not be appropriate for a lottery official to regulate casinos because slot machines and table games would compete with the lottery.

"Having a foot in the two doors doesn't make sense," Cahill said. "There could be a conflict, and I want to see the lottery protected."

The bill fleshes out in exhaustive detail a proposal for three resort casinos that Patrick outlined on Sept. 17. A summary of the bill's major provisions provided by an administration source who helped craft the bill did not contain any major surprises, but it provided an outline of the issues that will be hotly debated as the Legislature takes up the measure, which House Speaker Salvatore DiMasi, a gambling opponent, has said will not get a vote in the House until next year.

The legislation would legalize gambling activity that is illegal now and spells out three separate regions of the state -- metropolitan Boston and the North Shore, Southeastern Massachusetts, and Western Massachusetts -- where casinos could be built.

Patrick estimates that three casinos would produce $2 billion in economic activity, including $400 million a year for state coffers, and 20,000 jobs. Bidding by casino developers for the three 10-year licenses would produce a combined $600 million to $900 million for the state, according to Patrick's projections.

How the industry would be controlled has been a major concern for lawmakers, some of whom see the introduction of casinos as fraught with the potential for corruption. An administration official who helped draft the bill suggested that the governor's proposed Gaming Control Authority would be free of political influence.

"It is an independent authority that will sit outside the executive branch and not be directly answerable to any of the secretaries or the governor," said the official.

The authority would have broad powers to set up the license auction process and evaluate and choose the winning bidders. After the casinos begin operating, the authority would collect and distribute the state's share of gambling proceeds, monitor the conduct of casino operators, and perform annual audits. The authority's operating budget would be funded through a fee on each of a casino's slot machines or gaming tables.

Patrick has said that he wants Massachusetts casinos to operate under the most transparent and stringent regulatory system, to avoid any taint of criminal behavior or corruption. To that end, his proposed bill would provide criminal penalties for gambling related offenses.

The bill contains strict new ethics rules that bar employees or board members of the Massachusetts Gaming Control Authority from working for a gaming company for three years before and three years after their service with the authority. Employees of the executive branch also would be prohibited from working for the authority or a casino for three years after they leave state government.

Prospective bidders would be required to pay $350,000 to have their casino license applications reviewed. In addition, for their application even to be considered, bidders would have to offer the state a minimum licensing fee of $200 million and agree to pay at least 27 percent of their gross annual revenues to the state, or $100 million a year, whichever is larger.

The highest bidder will not necessarily be awarded a license, the bill says. The authority will score proposals by applying about a dozen criteria, including the number of jobs that will be created, the infrastructure improvements, the use of local and small businesses for goods and service, and the level of investment. The bidder who provides "the highest and best value" will win the license, the bill says.

"Because this is predicated on economic development and job creation, the eligibility criteria speak to the level of investment and the number of jobs that will be created," said an administration official who worked on the bill.

As expected, the bill also contains a provision to provide preferential treatment for a Native American casino; the Mashpee Wampanoag tribe has proposed building a resort casino in Middleborough. Administration officials want to be careful not to freeze the tribe out of a state license, which would encourage them to seek federal approval through a separate process available to Indian tribes, and potentially result in a fourth casino in the state.

In addition to the authority board, the governor's bill would establish a 12-member advisory committee that would give key lawmakers a chance to offer their input. Five Cabinet secretaries -- health and human services, public safety, administration and finance, housing and economic development, and labor and workforce development -- would sit on the board, along with three gubernatorial appointees: a union representative, a gambling addiction specialist, and a police chief.

Senate President Therese Murray, who has expressed her support for expanded gaming, would also have two designees, as would DiMasi.

The money collected from the casino operators would go into seven trust funds. Among them would be the Community Gaming Mitigation Fund, which would get 2.5 percent of gross annual gaming revenue -- estimated at between $40 million and $50 million a year -- to pay local costs directly related to casinos, including increased police and fire services. An equal amount would go into the Gaming Public Health Fund to pay for social service programs.

Three other funds would be set aside to pay $200 million annually toward property tax credits for about a million homeowners; $200 million in transportation improvements; and any amounts required to offset losses in the state lottery's annual revenues.


The Boston Herald
Thursday, October 11, 2007

Casino proposal ready to roll
Sources: Plan a boon for infrastructure
By Casey Ross


Gov. Deval Patrick’s plan for three casinos would generate $3 billion for bridges and roads, guarantee a 3 percent annual hike in lottery aid to municipalities and impose harsh penalties on casinos that try to shortchange the state on revenue, sources told the Herald.

The governor’s proposal, to be filed formally in the Legislature today, sets forth a detailed framework to auction licenses to three casino developers that would have to pay the state a bare minimum of $200 million for a license, as well as $350,000 in application fees.

State House sources said the legislation will also create a seven-member gaming board to review the applications and determine who receives a license by weighing a variety of factors, with the size of the monetary bid being only one consideration.

The filing of the bill today will start a lengthy process of research and debate in the Legislature, where casinos still face an uphill fight against House Speaker Sal DiMasi and other gaming skeptics.

Patrick says his plan will create a $2 billion explosion of economic growth in Massachusetts and provide 20,000 new jobs.

Patrick administration officials who offered details of the proposal yesterday said the bill provides previously undisclosed mechanisms for increasing funding for both transportation and for municipal services in cities and towns through the state lottery.

The money for transportation -- initially slated to be $200 million a year -- will be vested in a fund that will create immediate room to borrow up to the $3 billion for bridges and roads, officials said.

“This would allow us to significantly reduce the backlog of transportation needs,” one administration source said of the casino money, which will also pay for average annual tax relief of $204 for 1 million residents.

The legislation also guarantees that cities and towns will receive a 3 percent annual boost in aid from the state lottery, expected to suffer losses of up to 8 percent from the introduction of casinos.

Previously, Patrick had said only that the lottery would be reimbursed any losses due to casinos, but sources said the legislation ensures aid to cities and towns increases every year. Currently, the lottery provides about $900 million a year for municipal services statewide.

The proposed bill includes harsh criminal penalties for casino operators who violate agreements with the state by trying to keep a greater share of their profits. The state is expected to tax casino proceeds between 27 percent and 30 percent, generating about $600 million annually.

If casinos try to skirt the deal, they will be subject to fines of up to $100,000; if the misdeed is tied to an individual, a 2˝-year prison sentence could be imposed, along with a $25,000 fine.

Sources said the bill also imposes strict limits on the legalization of gaming, allowing only resort casinos to operate betting parlors. Any nonlicensed individual or entity that tries to offer gaming could be subject to five years in prison or a $100,000 fine.

The casinos would be overseen by the seven-member gaming board, as well as a 12-member advisory committee to be composed of officials in the governor’s administration and other groups.

The cards are on the table

Key aspects of Gov. Deval Patrick’s Massachusetts casino plan:

Seven-member gaming board would review applications and oversee casinos. Twelve-member advisory board also would oversee casinos. Profits would pay for gaming divisions for attorney general and state police.

State’s revenue from casinos used to relieve taxes and fix bridges and roads.

Lottery losses reimbursed. Cities and towns would get 3 percent annual boost in lottery cash.

Public health trust fund - paid from 2.5 percent casino revenues - would target gambling addiction, child welfare and domestic violence.

Sale of licenses for three resort casinos. Preference given to American Indian bidders.

Developers would pay $200 million upfront and a $350,000 application fee. Casinos would pay state 27 percent of annual profits, about $600 million annually.

Local referendum for each casino community, including Middleboro, which would vote again. Vote would precede casino application.


The Boston Globe
Thursday, October 11, 2007

A Boston Globe editorial
Casinos: raising the stakes


The bill that Governor Patrick files today to license three casinos in Massachusetts addresses concerns that the integrity of the games or the probity of state officials might be compromised as a result of the expansion of legalized gambling. The Patrick administration has promised a best-in-the-nation casino plan. That is what is taking shape, at least from the regulatory, enforcement, and ethics perspectives. But his proposal for how the state's share of casino revenues should be spent needs work.

The bill would establish an independent, seven-member Massachusetts Gaming Control Authority that includes the state treasurer, state auditor, and five members appointed by the governor. The treasurer would be well-placed to ensure that the Lottery is held harmless, as the casino bill intends. Proceeds from the state Lottery, which now provides more than $900 million in direct aid to cities and towns, are expected to drop off, at least initially, as a result of casino competition.

The bill also makes clear that regulatory and enforcement functions would be conducted by separate agencies to avoid possible conflicts of interest or attempts by casino operators to gain undue influence in the licensing process. Wisely, investigations would be placed in the hands of the attorney general.

There is always the risk that public officials will get too cozy with casino interests or that regulators will become dominated by the industry officials they oversee. The best way to guard against this is to enact strict post-employment agreements. The Patrick bill goes even further by proposing that no board member or employee of the authority have any interests in the gaming industry either three years prior or three years after employment. The ethics point is driven home even deeper with a three-year post-employment ban for all employees of the executive branch.

The bill's proposals on how gambling revenues are to be taxed and accounted for during the collection process are sound. But questions remain regarding the distribution of the roughly $400 million in annual revenue expected to flow to the state. Patrick proposes to return about half that amount in the form of an income tax break for homeowners whose local property taxes equal at least 2.5 percent of their annual income. Putting $150 to $375 back in the pockets of nearly 1 million homeowners makes good on a campaign promise and is a clever way to drum up widespread support for the casino plan.

Still, the rebate plan doesn't address the need for the state to find a rational way to share revenues with cities and towns at a time when property taxes are rising and services are declining. Patrick promised in his campaign that he would "cut the property tax by reinvesting in cities and towns." That elusive goal hasn't been brought any closer as a result of his casino bill.


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