Notwithstanding its Puritan past and despite substantial opposition, Massachusetts has legalized casino gambling. The legislation authorizing the building of casinos was passed and signed into law in November 2011. The Chairman of the newly created Massachusetts Gaming Commission, the body that will award casino licenses in the state, was appointed by the Governor in December 2011. And the other four members of the Commission have all now been appointed, the last two just appointed on March 20, 2012.
The local press seems to carry stories on a daily basis about those bidding to enter the fledgling Massachusetts gaming market, and many familiar gaming and gambling names, including Steve Wynn, Caesars Entertainment, MGM Resorts, Hard Rock International, Genting Group and Mohegan Sun, have all initiated efforts to become Massachusetts’s first casino owner and operator. Developments have been fast and furious, with multiple deadlines approaching. Although the first Massachusetts casino is unlikely to open its doors before 2016, lenders, investors, developers and operators should begin planning as soon as possible. This client communication is intended to help in that process. It recaps the new Massachusetts law, details the important deadlines established by the law, discusses the Commission chairman’s publicly stated expectations, and identifies potential pitfalls and issues that those prepared to ante in should think about, as well as steps to improve their odds of winning.
The New Massachusetts Casino Gambling Law
“An Act Establishing Expanded Gaming in the Commonwealth” (the “Act”) of Massachusetts was signed into law by Governor Deval Patrick on November 22, 2011. The Act authorizes the creation of one slot parlor and up to three “resort” casinos, a maximum of one casino in each of three designated regions:
The Act provides for the establishment of a five-member Gaming Commission which will have exclusive authority to grant operating licenses for Massachusetts’ one slot parlor and three potential casinos. The appointment of the five members of the Commission was finalized on March 21, 2012, just one day before the deadline. The five Commissioners are:
- Stephen Crosby – Mr. Crosby, the Chairman of the Commission, was appointed by Governor Patrick in December 2011. Mr. Crosby is a graduate of Harvard College and Boston University School of Law. He is currently the Dean of the University of Massachusetts’ McCormack Graduate School of Policy and Global Studies. He has previously held state appointments under both Democratic and Republican administrations.
- Gayle Cameron – Ms. Cameron was appointed to the Commission by Massachusetts Attorney General Martha Coakley. Ms. Cameron is a 28-year veteran of the New Jersey State Police, and a former detective in New Jersey’s Casino Gaming Bureau who was responsible for the state’s casino gaming investigations. Ms. Cameron grew up in Massachusetts and is a graduate of Bridgewater State College and Seton Hall University.
- Enrique Zuniga – Mr. Zuniga was appointed to the Commission by Massachusetts Treasurer Steven Grossman, and he currently serves as the Executive Director of the Massachusetts Water Pollution Abatement Trust. Mr. Zuniga is a graduate of the Yale School of Management and has previously held management positions at the accounting firm Ernst & Young, the Boston Housing Authority, and design and engineering companies in Mexico.
- James F. McHugh – Mr. McHugh was jointly appointed to the Commission by Governor Patrick, Treasurer Grossman and Attorney General Coakley. Mr. McHugh served on the Massachusetts Appeals Court from 2001 until his retirement from the bench in February 2012, and he previously served on the Massachusetts Superior Court from 1985 until 2001. Mr. McHugh is also a Navy veteran, and a former adjunct faculty member at Boston College Law School and Northeastern University School of Law. He is a graduate of Brown University and Boston University School of Law.
- Bruce Stebbens – Mr. Stebbens was jointly appointed to the Commission by Governor Patrick, Treasurer Grossman and Attorney General Coakley. Mr. Stebbens presently serves as a business development administrator for the city of Springfield and has served two terms on the Springfield City Council. Mr. Stebbens is a graduate of The George Washington University, and he previously held positions with the National Association of Manufacturers and the Massachusetts Office of Business Development, and in former Governor William Weld’s administration.
The Act establishes strict and substantial eligibility criteria for those seeking casino licenses. For instance, a minimum capital investment of $500 million is required of all prospective licensees. All applicants must also provide plans that include a gaming area, at least one hotel and other amenities.
In public remarks, Chairman Crosby has indicated that he expects proposals to be as high as $1 billion in capital investment per casino complex. In addition, he has made it clear that all proposed casinos must be sensitive to local needs in design and operation. They should not just be a mechanism to reduce public debt, but should be destinations compatible with the history and culture of Massachusetts, integrate well into local communities and appeal to tourism. Applications for licenses can be expected to be judged on overall anticipated economic benefit to the Commonwealth, job creation, and the financial stability and experience of the applicant. Chairman Crosby has vowed to make the process “open and fair” and to grant licenses strictly on the merits. He has also made it clear that the law does not guarantee the licensing of three casinos. Rather it authorizes the licensing of “up to” three casinos, and the Commission will not hesitate to award no license in a region if there is no application that meets the terms and spirit of the new casino law.
Under the casino enabling statute, the path to obtaining a license will be rigorous:
- Step One: The prospective casino owner must first obtain approval from the host community, i.e., the town or local ward where the proposed gaming complex will be located. The approval will require, at a minimum, a majority vote in a local referendum. In certain locations, the local approval will be even more stringent. For instance, in Foxboro, where Steve Wynn has expressed an interest in building a casino, any proposal must win in a town-wide referendum and also obtain approval from the local board of selectmen and achieve a two-thirds vote at the annual Foxboro town meeting.
- Step Two: With local approval in hand, the prospective casino owner must then apply for a license from the Commission, commit to making a capital investment of not less than $500 million into the gaming establishment and pay a non-refundable application fee of $400,000.2 The Commission is authorized to conduct a full blown investigation of the applicant, including its financial backers. The Commission may only approve “up to” one application per region, and no more than three applications state-wide. A quorum of three commissioners voting in favor of a proposal is required for approval.
- Step Three: If an applicant receives Commission approval, the applicant will have to pay a license fee of at least $85 million. Applicants may include the license fee they are prepared to pay as part of their applications. Chairman Crosby has indicated, however, that licenses will not be awarded on the basis of who is willing to pay the highest license fee.
- Step Four: Successful applicants must deposit 10% of the total approved investment up front into an interest-bearing account, to be held in escrow until the final stage of construction. Once the project has reached its final phase of construction (as defined in the construction timeline submitted with the application), the deposit is returned to be used in that final stage. The deposit will be forfeited to the Commonwealth if gaming operations at the proposed casino have not commenced within one year of the date specified in the approved proposal. This means that on an approved investment of $1 billion, failure to timely complete the project and open the doors to the gambling public, will result in a “fine” of $100 million. If operations have not begun within the requisite one-year period, the licensee will also be subject to suspension or revocation of its gaming license and may be assessed a fine of up to $50,000 if found to have acted in bad faith in its application.
- Step Five: Once the approved casino is up and running, the owner will be obligated to pay the Commonwealth 25% of gross gaming revenues. Forty percent of gross revenues will have to be paid to the Commonwealth by the approved slot parlor owner. All fees and taxes paid will be shared by the host municipalities and the Commonwealth.
Deadlines and Anticipated Time Horizons
Under the new casino law, there are certain immediate deadlines. In addition, the law and recent public statements by Chairman Crosby have made it clear what applicants may expect with regard to the timing of Commission decisions. Upcoming deadlines and expected benchmark dates include:
- April 1, 2012 – Deadline for the Commission to have completed an analysis of state law on charitable gambling; decided what updates, amendments and repeals are needed; drafted new legislation; and submitted the bills to the General Assembly.
- End of May 2012 – Deadline for the Commission to take over the regulating duties of the Racing Commission.
- July 31, 2012 – Deadline to finish and approve a compact with the Mashpee Wampanoag Tribe to build a casino in the Southeastern Region (Region C).
- October 31, 2012 – Deadline for the Commission to solicit commercial bids for the Southeastern Region gambling facility if no compact with the Mashpee Tribe is reached. The Commission has yet to set deadlines for the other regions or for the slot parlor.
- 2014 – According to recent statements by Chairman Crosby, it could take up to two years before the Commission awards casino licenses.
- 2016 – The year by which it is currently anticipated that casinos will open their doors in Massachusetts.
Commissioner Crosby has issued statements that he is not confident the upcoming deadlines will be met. He has stated that in the event that they cannot be met, he hopes to work out a compromise, such as by delegating management of the Racing Commission back to the people who are currently doing it, or talking with the Legislature about amending the legislation.
Current State of Play Among Prospective Casino Operators
As of March 20, 2012, the following casino developers had announced plans to enter the Massachusetts market: (i) Ajax Gaming Ventures; (ii) Ameristar Casinos Inc.; (iii) Caesars Entertainment (partnered with Suffolk Downs); (iv) Crossroads Mass LLC; (v) Hard Rock International; (vi) Jencent LLC; (vii) KG Urban Enterprises; (viii) Mashpee Wampanoag Tribe; (ix) MGM Resorts International; (x) Mohegan Tribal Gaming Authority; (xi) Northeast Group (xii) Penn National Gaming Inc.; (xiii) Warner Gaming LLC; and (xiv) Wynn Resorts. Region by region the current frontrunners, or at least the parties most visibly active, appear to be: Suffolk Downs/Caesars Entertainment in close competition with Wynn Resorts in Region A; Mohegan Sun in Region B; and the Mashpee Wampanoag Tribe in Region C.
Region A: Boston to Worchester Region
Strong political backing makes the Suffolk Downs casino a strong contender for the Region A license. Suffolk Downs has teamed with Caesars Entertainment to work up a proposal for a casino next to the Suffolk Downs horseracing track. Boston Mayor Thomas Menino has voiced his support for a Suffolk Downs casino. Caesars Entertainment CEO Gary Loveman has been courting the local business community, speaking to the Boston College Chief Executives’ Club of Boston last month. Mr. Loveman, an MIT alum, still maintains his chief residence in Wellesley, MA. Despite apparent approval from some corners, however, the president of the Boston City Council, Stephen Murphy, has said he will not approve any Boston-area casino proposal until developer Steven Roth (a minority owner of Suffolk Downs) finishes work on the former site of Filene’s Basement. However, because the legislation exempts Boston from necessarily having a city-wide referendum, any referendum may be limited to East Boston residents, which may prevent the Boston City Council from blocking casino plans.
Steve Wynn has teamed with New England Patriots owner Robert Kraft and is exploring a project that would be built on Kraft-owned land in Foxboro, MA, close to Gillette Stadium, the home of the Patriots, about 30 miles outside of Boston. Wynn has proposed to build a “destination resort,” which would create 1,000 construction jobs and 4,000 permanent jobs. He has estimated that the resort he contemplates would generate $250 million of revenue per year for the Commonwealth. A brochure and 20-minute DVD that Wynn recently distributed to thousands of Foxboro residents depicts a complex designed to fit into the New England environment, including a casino that is part of a six-story rustic lodge, with an ice skating rink, high-end shops, a spa, restaurants and a theater. Notwithstanding the full court press in which Wynn has been engaged, and the enthusiastic support of the locally popular Mr. Kraft, Wynn’s proposal has met early resistance in the Town of Foxboro. Local Planning Board meetings concerning Wynn’s proposal have seen high turnouts by angry Town residents, expressing concerns that a Wynn casino will bring with it dramatically increased traffic and crime. In a preliminary vote, the Planning Board rejected zoning changes that would be necessary before any casino could be built on the land earmarked by Wynn. The Planning Board has, however, announced that the vote was preliminary and that it would seriously consider future proposals made by Wynn and Kraft.
AJAX Gaming Ventures chairman David Nunes is also seeking a license in Region A and has entered into exclusive negotiations with the town of Milford to build a potential $700 million, 300,000-square-foot casino featuring a hotel, restaurants and retail shops, at the intersection of Interstate 495 and Route 16. As with Wynn’s proposal, Nunes’ proposal has been met with concerned local citizens who have voiced their opposition at meetings and have created an online petition under the name “Neighbors for a Casino-Free Milford.”
Other entities expressing interest in developing casinos in Region A include Jencent LLC, which is pursuing a slots-only facility or resort casino in Charlton, MA, at 130 Sturbridge Road off of the Massachusetts Turnpike, and Plainridge Racecourse, which is looking at a slots-only facility in Plainville at a current harness-racing track. The estimated cost of the Plainville proposal is approximately $125 million for an expansion of the existing track and the addition of 1,250 slot machines and a 1,000-car parking garage.
Region B: Western Massachusetts
Fearful of losing out to the new Massachusetts casinos, the Mohegan tribe (which operates Connecticut’s Mohegan Sun Casino) is working on a proposal to open a second Mohegan Sun casino in Palmer, a town in western Massachusetts. The Mohegan proposal includes a “trestle-like design” that incorporates Palmer’s railroad hub past. Mohegan Sun’s proposal does not include an entertainment venue like the one at its Connecticut location. The plan would, instead, be for a $600 million casino and hotel development directly off the Massachusetts Turnpike. The town of Palmer, which has shown strong support for a casino, has already started the host community agreement process. At the beginning of March, Mohegan Sun agreed to provide $50,000 to fund the agreement costs.
MGM Resorts has proposed a “Rolling Hills Resort” in Brimfield, MA, the town adjacent to Palmer. As part of its efforts to woo local residents, MGM has opened a Brimfield office and hired a Brimfield local to manage it. In order to address concerns that have been expressed about traffic congestion, MGM has proposed the creation of a new exit ramp off the Massachusetts Turnpike that would enable casino traffic to bypass the town itself. MGM has selected the Gensler architectural firm, known for its environmentally friendly designs, to design the facility.
Others who appear to be eyeing the Western Massachusetts region include Ameristar Casinos (Springfield location), Hard Rock Entertainment (Holyoke) and Penn National Gaming (specific site yet to be proposed, though somewhere in the greater Springfield area is likely).
Region C: Southeastern Massachusetts
In the Southeast Region, the law includes a built-in advantage for a federally recognized Native American tribe.3 Specifically, the law provides that if such a tribe has purchased land for the building of a casino and signed a compact with the Governor of Massachusetts by July 31, 2012, it will have exclusive rights to build a casino in this region. If a federally recognized tribe fails to meet the July 31, 2012 deadline, there will be full competition in the region. Late last year, KG Urban Enterprises mounted a legal challenge in federal court to the provision. That challenge failed when the presiding judge dismissed KG Urban’s suit. KG Urban has appealed the dismissal.
The Mashpee Wampanoag Tribe, based in the Town of Mashpee on Cape Cod, now appears to be closing in on achieving a monopoly hold on the Southeast Region. Earlier this month, the Mashpee Tribe made a $200,000 down payment on a 77-acre parcel in Liberty and Union Industrial Park in Taunton, MA, and obtained an option to buy the land for $5.3 million. The Mashpee Tribe also recently acquired an option to buy an additional 58 acres of land in the same area for an undisclosed amount. The City of Taunton has hired consultants to study the potential impact a casino might have on the area, a requirement for the Mashpee Tribe’s application for a casino license. On March 14, the Mashpee Tribe sent a letter to Governor Patrick formally requesting to begin negotiating a gaming compact with the Commonwealth.4 Taunton residents will vote on June 9, 2012 on whether to allow the Mashpee Tribe to develop its tribal casino in Taunton. Arkana Limited, a Malaysia-based conglomerate and affiliate of the Genting Group (one of world’s largest casino operators), is financing the Mashpee Tribe’s licensing efforts.
If the Mashpee Tribe’s Taunton proposal is approved, that approval might create an insurmountable hurdle to Steve Wynn’s Foxboro plans. Taunton, though located in Region C, is close by the border of Region A, and within 20 miles of Foxboro. If the Taunton plan is approved, it is highly likely that the Commission will reject Wynn’s nearby proposal. The Massachusetts law is designed to avoid the creation of anything resembling Las Vegas or Atlantic City anywhere in Massachusetts. The concentration of more than one casino in a single geographic area is contrary to the law. Though the approval of separate casinos in Taunton and Foxboro is legally permissible under the law, as the two towns are technically in different “Regions,” building casinos in both would run afoul of the spirit of the law. It seems unlikely that the Commission would allow that to occur.
If the Mashpee Tribe’s Taunton plan falls through, and the Mashpee Tribe misses the July 31, 2012 deadline for entering into a compact with the Governor, competition in the Southeast Region will open up. KG Urban Enterprises appears ready to continue its bid for a casino at the former NStar power plant in New Bedford, and the Northeast Group has indicated that they might step into the breach for a potential casino in New Bedford’s Hicks-Logan neighborhood.
Recommendations and Next Steps
As evidenced by the intense interest that many if not all of the best known and most well established gaming and gambling companies have already expressed in entering the Massachusetts market, a casino license in Massachusetts promises to be extraordinarily lucrative for the winning investors, developers, and casino operators. While the first cards likely won’t be dealt in a casino in Massachusetts for another four years, for those contemplating stepping into the fray, the time to act is now. There are simply too many near-term deadlines, and too much competition to wait any longer. As immediate first steps for those thinking of testing the Massachusetts gaming waters, and as next steps for those already engaged, we recommend:
- Retain experienced counsel with expertise in the array of regulatory, permitting, licensing and financing issues that all developers and investors will face immediately. As one of its first steps, the newly formed Gaming Commission retained counsel to help it draft the additional legislation that will be necessary to enable gaming and gambling to flourish in Massachusetts. Developers and investors, and ultimately casino operators, need to do the same. Able Massachusetts counsel will be necessary to help obtain necessary land use permits from local planning boards, and to steer applicants through the licensing application process. In addition, counsel may also be necessary to ensure that construction and opening are not delayed, as delay can result in whopping fines – 10% of capital investment – under the Massachusetts casino law.
- Retain a gaming industry expert. As first steps are being taken in Massachusetts, developers must make sure they have someone on their side who has already taken those steps in other jurisdictions. Again, the Massachusetts Gaming Commission has retained its own industry expert. Developers, particularly neophyte developers, must do the same.
- Retain a Massachusetts lobbyist or, at a minimum, make sure to have eyes and ears on the ground in Massachusetts. Legislation is being promulgated that will affect the rights and obligations of all players in the nascent Massachusetts gaming market. A lobbyist could help influence that legislation. Regardless of whether a lobbyist is needed, all prospective competitors for a Massachusetts casino license must be aware of what the competition is doing. The best way to stay tuned in is to engage an expert in Massachusetts with the necessary relationships, connections, and/or knowledge of the Massachusetts political and business landscape.
- Retain a Massachusetts real estate maven who can advise you on potentially available and developable land in the Commonwealth, and then establish local connections in the town or municipality where you plan to invest or build.
- Retain a public relations consultant or political campaign advisor who can help maximize your chances of achieving the support necessary to surmount the first hurdle in the licensing process, namely winning a referendum in the host community of your prospective casino.
- Consider entering into strategic joint venture relationships to compensate for any real or perceived deficiencies that may otherwise exist in your application. In addition to the fees, deposit and minimum capital investment requirements, primary factors that the Commission will consider when determining whether and to whom to grant a license will be the financial strength and stability of the applicant, and the applicant’s casino operating experience.
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If you have questions regarding the developing legal, political, and business landscape concerning casino gaming and gambling in Massachusetts, please contact either of the authors, David Apfel or Bob Crawford, co-chairs of Goodwin Procter's Gaming, Gambling & Sweepstakes Practice.
 Presentation, “NAIOP Conference, Spinning the Wheel, Casinos Coming to Massachusetts,” Boston, MA (Jan. 19, 2012).
 The Act further authorizes the Commission to require an additional fee (on 30 days’ notice) if the $400,000 should prove insufficient to vet the proposal. The law states that at least $50,000 of the non-refundable fee will be used to reimburse the “host and surrounding municipalities” for costs associated with vetting the proposal and determining likely impact of a casino on the community.
 Massachusetts is home to only two tribes recognized by the Department of the Interior: the Mashpee Wampanoag Tribe and the Wampanoag Tribe of Gay Head (Aquinnah).
 The legislation states that the Governor may enter into a compact with a federally recognized Indian tribe in the Commonwealth after the tribe has purchased or agreed to purchase a parcel of land for the proposed gaming development. The compact, which would outline a statement of financial investment rights, would then be submitted to the Commission for approval.