Goodwin Gaming
August 20, 2013

Mayoral Race Could be a Game Changer for Host Community Agreements

By Robert Crawford and Eleanor C. Simon

Host community agreements are an essential part of the gaming application and licensing process. These agreements are negotiated and executed by and between the community where the proposed casino (or slots-facility) will be located and the sponsor of such casino (or slots-facility). The city of Boston is currently negotiating a host community agreement with Suffolk Downs and Caesars Entertainment, in connection with their proposed resort gaming casino at the site of the existing Suffolk Downs racetrack.  At the same time, the city of Boston is also preparing for a mayoral election with the certainty of a new mayor. With the necessity of having a community agreement executed prior to the mayoral election, the new mayor will be tasked with implementing an agreement entered into prior to his or her time in office. While there is a mechanism in the regulations to reopen an executed community agreement, with a fairly high standard, such a route for a new mayor disagreeing with the proposed casino would be an uphill battle.

Host Community Agreement

Under the Expanding Gaming Act, applicants for a gaming license are required to provide the Massachusetts Gaming Commission with an executed agreement “between the host community and the applicant setting forth the conditions to have a gaming establishment located within the host community.” (205 CMR 123.00). The agreement must also include a community impact fee, all terms related to the responsibilities between the host community and the applicant and stipulations of known impacts from the development and operation of the proposed gaming establishment.

An executed host community agreement is a prerequisite to a host community referendum on the gaming establishment, and therefore a prerequisite to proceeding with a gaming establishment in the community. There is a December 31, 2013 deadline for resort casino projects to complete and submit their applications to the Massachusetts Gaming Commission, and those applications must include the certified voting results from the community referendum. There is a requirement of at least a 60-day campaign period before any casino referendum and therefore the host community agreement must be signed at least 60-days prior to any referendum (i.e. the latest that a host community agreement could be signed is the end of October).

Once a host community agreement is executed, unless otherwise indicated in the host community agreement itself, there are only certain instances that trigger the ability to reopen and renegotiate the agreement. Pursuant to 205 CMR 127.00, those events are as follows:

  1. In the event that an applicant or licensee is granted a gaming license subject to the issuance  of the secretary of EOEEA’s certificate on the applicant’s final, supplemental, or single environmental impact report pursuant to 301 CMR 11.08(8) and 205 CMR 120.02: Conditions of Licensure, and the project as so certified and mitigated in accordance with the secretary of EOEEA’s certificate would, if the applicant receives a final license from the commission, likely cause a significant and material adverse impact.
  2. In the event that an applicant or licensee is granted a gaming license subject to the issuance of a federal, state or local permit or approval, and the permit or approval is either denied or issued in a manner such that the project would, if the applicant receives a final license from the commission, likely cause a significant and material adverse impact.
  3. An occurrence that is likely to cause a significant and material adverse impact.

The above regulations define “significant and material adverse impact” to mean “a substantial negative affect on a host community, surrounding community, or impacted live entertainment venue from an unforeseen event, act, or circumstance occurring after a mitigation agreement is executed and which directly undermines a basic premise on which the mitigation agreement was made, a principal purpose of the mitigation agreement, or a vital portion of the mitigation agreement without fault of the affected party.”

The city of Boston, led by Mayor Thomas Menino is currently negotiating a host community agreement with Suffolk Downs. According to a spokesperson for Mayor Menino, the city of Boston has given a formal proposal to Suffolk Downs for consideration and the two sides are working together to come to an agreement. Of the 11 casino applicants, Suffolk Downs is only one of three that have not yet reached an agreement with their proposed host community, however the parties indicate that progress is being made and there remains enough time for the parties to reach an agreement without missing any deadlines.

Mayoral Race

At the same time, the race to succeed retiring Mayor Menino is in full swing, with 12 candidates for mayor campaigning across the city in what is generally considered at this point to be a wide-open race. The primary election is scheduled for September 24th and the general election is scheduled for November 5th.

As indicated above, an executed host community agreement between the city of Boston and Suffolk Downs will likely be in place prior to the primary election and must be in place (in order to meet the current deadline) prior to the general election. Although such an agreement will have been written and executed without any input from Boston’s new mayor, it will be the new mayor that will be in charge of implementing the agreement.

With a large group of candidates, a relatively short time to campaign and a somewhat voting-fatigued electorate, candidates are looking for ways to distinguish themselves from the pack. One way some candidates have attempted to do so is by taking a position on the proposed Boston casino. While certain candidates have disagreed, for instance, on whether the community referendum should be a citywide versus an East Boston-only vote, one candidate in particular, Bill Walczak, has expressed aggressive opposition to the development of a casino in Boston. In an open letter to the Massachusetts Gaming Commissioner Stephen Crosby, Candidate Walczak stated that “if elected mayor, I will automatically consider whether or not to reopen any established mitigation [host community] agreement.” Candidate Walczak states that he believes that casinos promoting local economies is “an economic oxymoron” and that he will use “all available legal avenues to significantly amend or revoke the agreement as afforded under 205 CMR 127.00” if he is elected mayor.

However, it is unclear which legal avenues Candidate Walczak will be able to use under 205 CMR 127.00. As discussed above, to reopen a community agreement, one must show a significant and material adverse impact, which is a high standard and requires an affect to stem from something unforeseen occurring after the agreement is executed. Unless a federal, state, local, environmental or other permit is denied to Suffolk Downs that has a “significant and material adverse impact” on the project, it is difficult to imagine what legal avenues any new mayor of Boston would have to challenge the project. While Candidate Walczak can cite economic and social impact studies and propose alternative uses for the land, those studies and those alternative uses do not satisfy the framework to reopen the agreement. The host community agreement therefore, will likely be another powerful and long lasting legacy of Boston’s long serving retiring mayor.