Entering its third year of fiscal crisis resulting from the national recession, the Commonwealth of Massachusetts once again faces severe spending cuts across state and local government, including cuts in human services, health care, local aid and education.1 Currently, state spending for 2011 exceeds projected state revenues by an estimated $3 billion.2 The need for additional state revenues and an unemployment rate estimated at 9.2 percent in April 20103 have caused Massachusetts to reconsider gambling as an important source of jobs and revenue generation. At the same time, the three most critical players in Massachusetts’ government—Gov. Deval Patrick, House Speaker Robert DeLeo and Senate President Therese Murray—are on record favoring expanded gambling, at least in the form of resort casinos. It appears that the only dispute among those leaders is over whether Massachusetts’ two horse racing tracks and two former dog racing tracks should be allowed to operate slot machines in addition to their simulcasting activities.4
Recent studies show that Massachusetts residents support expanding gambling in the state. A poll taken in March 2010 determined that a proposal to license two casinos and award a limited number of slot machines to the state’s racetracks was supported by 58 percent of the state’s residents.5 In addition, by margins of 40 percent or more, Massachusetts residents believed that two resort casinos and a limited number of slot machines at the state’s racetracks would “generate tax revenues, create new jobs and recapture Bay State dollars” spent at casinos and racinos in other New England states.6
Massachusetts residents are showing their preference for gambling by their actions as well. It is estimated that, in 2009, Massachusetts residents spent approximately $730.6 million at Connecticut’s two Native American casinos and $237 million at Rhode Island’s Twin River and Newport Grand gaming facilities.7 Based on these figures, it is estimated that, as a result of their gaming and gaming-related expenditures, in 2009, Massachusetts residents contributed $96.6 million to the Connecticut general treasury and $133 million to the Rhode Island general treasury.8 This has not gone unnoticed by Massachusetts government leaders. Indeed, at public hearings conducted on Oct. 29, 2009, before the Joint Committee on Economic Development and Emerging Technologies, one of the legislators commented that he had been to Twin River and at least half of the license plates were from Massachusetts.9
With that as background, on April 1, 2010, DeLeo introduced legislation to expand gambling in Massachusetts, and that legislation was passed by the full House, without public hearing and with only a few amendments, on April 14, 2010.10
The DeLeo Bill would authorize two resort casinos (each including at least one hotel) and up to 750 slot machines at each of Massachusetts’ four pari-mutuel wagering tracks—one thoroughbred horse racing track, one harness racking track and two former Greyhound racing facilities.11 DeLeo estimated that the legislation would provide 15,000 jobs for Massachusetts residents.12
The casino licenses, designated in the bill as “category 1,” would have 15-year terms and be subject to renewal; the horse and dog track licenses, “category 2” and “category 3,” respectively, would be five years in duration, also subject to renewal. The license fee for a casino would be at least $100 million, and successful applicants would be required to invest at least $500 million in a gaming/hotel facility. The license fee for category 2 and 3 licenses would be at least $15 million, and successful applicants would be obligated to invest at least $75 million in their gaming facilities. The application fee for seeking any category of gaming facility license would be $250,000.
A fee of $600 per year would be due for each slot machine approved for use and at least $5 million per year would be due from the gaming facilities collectively, each paying in proportion to its share of the total number of “gaming positions” (i.e., seats or standing positions where a customer can play a game).
Taxes on gross gaming revenue (GGR) would be as follows:
• casinos (category 1 licensees) – 25 percent of GGR
• slots at horse racing tracks (category 2 licensees) – 40 percent of GGR plus 8 percent of GGR to the Horse Race Development Fund
• slots at former greyhound racing tracks (category 3 licensees) – 40 percent of GGR plus 10 percent of GGR to the Horse Race Development Fund
The above casino tax rates are competitive with the rates applicable to the other gaming facilities in New England. Specifically, they are the same as the gaming (slot) machine rates for the Foxwoods and Mohegan Sun casinos in Connecticut, half of the rate applicable to the Hollywood Star gaming facility in Maine, and less than half of the gaming machine rate applicable to the Twin River and Newport Grand gaming facilities in Rhode Island.13
Massachusetts is home to one of “the most successful lotteries in the nation.”14 Conscious of that success and hoping to protect it, the DeLeo Bill also cites as one of its principal goals the enhancement and support of the Massachusetts Lottery. This goal is manifested in the requirement that applicants for gaming facility licenses agree to be Massachusetts Lottery resellers for purposes of traditional lottery and keno games and for multi-jurisdictional lottery games. Licensees must demonstrate that such games are readily available for purchase by their customers.
Internet gambling interests also were accommodated by the DeLeo Bill, although to a much lesser extent and with ambiguous results. An explicit prohibition on Internet gambling contained in the original version of the DeLeo Bill was removed via amendment before passage of the final bill. There is probably little significance to this, however, since the Massachusetts attorney general takes the position that “Internet gambling is always illegal.”15
The DeLeo Bill would establish a Massachusetts Gaming Commission, consisting of five commissioners appointed by majority vote of the governor, attorney general and state treasurer, and the chair of the commission would be appointed by a similar majority vote. Each commissioner would need to prove Massachusetts residency, and they would be chosen so that one had a background in each of the following areas:
• gaming, legal and policy issues
• corporate finance and securities
• criminal investigations and law enforcement
• qualification as a certified public accountant
• at least five years experience in public or business administration
The commissioners would serve five-year terms and could not serve longer than 10 years. (Initially, terms would be staggered for periods of between three and seven years.) The commission would assume the responsibilities of the Massachusetts Racing Commission, and its authority would include the following:
• developing criteria for licensing
• evaluating license applications to determine which among them provide the “highest and best value” to the commonwealth
• granting licenses
• conducting investigations into the qualifications of all applicants for employment
• certifying revenues
• conducting operation reviews
• collecting taxes
• administering and enforcing laws related to pari-mutuel wagering and simulcasting
As in all U.S. gaming jurisdictions, an applicant for a gaming facility licenses would have to demonstrate suitability, including the suitability of its owners, lenders, underwriters and key executives. Only if a facility applicant were found suitable would the Massachusetts Gaming Commission review its entire application.
To be successful in securing a license, an applicant would also have to demonstrate:
• that it had suitable capital on hand to fulfill its financial obligations16
• that it would have “ownership” of the gaming facility land within 60 days after the license award
• that it would satisfactorily address compulsive gambling issues
• that it would develop its workforce, including providing opportunities for increased responsibility17
• that it would mitigate adverse affects of the gaming facility on the host community and on surrounding communities
• that it had an agreement with the host community setting forth the conditions for the operation of the gaming facility and the responsibilities of the host community and the applicant, including a community impact fee to be paid to the host community
• that it would mitigate adverse effects on the Massachusetts Lottery
Finally, an applicant for a casino (category 1) license would have to demonstrate that it had the approval of the host community. More specifically, the applicant would be required to prove, within three months of submission of its application, that voters in the host community had voted to approve the applicant’s casino license.
In evaluating the location of the two category 1 facilities to be licensed, the Massachusetts Gaming Commission would take into consideration their proximity to each other and how that may impact the policy goals of the law.
The DeLeo Bill has been transmitted to the Senate, and Senate leaders have stated that they intend to draft their own bill “from scratch.”18 However, most of those watching the process closely believe that the Senate will adopt large parts of the DeLeo Bill. Although Patrick and Murray do not favor authorizing slots at racetracks,19 DeLeo is strongly in favor of this. Notably, two of Massachusetts’ four racetracks are located within his district. He has said: “I’ve always been a supporter of the slots at the race tracks. I think it’s a more immediate form of revenue. Some folks say 90 days—I think that’s being a bit optimistic. Maybe it’s four months, five months, maybe even six months—whatever it may be …”20
Meanwhile, the Mashpee Wampanoag Tribe, based in Mashpee (Cape Cod), Mass., announced on May 17, 2010, that it had reached an agreement with Fall River, Mass., (in the south eastern part of the state) to build a resort-style casino there.21 The tribe’s proposal includes a casino, three hotels, a shopping mall, convention facilities and a spa to be built on approximately 300 acres of land previously set aside for a biotechnology park. The tribe’s proposal has the backing of Fall River Mayor Will Flanagan,22 and on May 26, 2010, the Fall River Redevelopment Authority approved an agreement to sell the proposed 300-acre site to the tribe.23 A number of conditions need to be fulfilled within a year in order for the land purchase to close, including revoking a restriction applicable to the site directing that it revert back to the state if it is used as a casino.24
The announcement by the Mashpee Wampanoag Tribe, one of two federally recognized tribes in Massachusetts, contains the threat that it may execute its plans outside the scope of state legislation and pursuant to the Indian Gaming Regulatory Act (IGRA).25 The tribe’s announcement on May 17 states: “As a federally recognized tribe, the Mashpee Wampanoag Tribe would have the right to operate gaming once the Commonwealth passes legislation allowing casinos. Under the tribe’s proposal, it will work with state officials to develop a contract that would provide revenue to the state from the casino development.” 26
On May 24, 2010, one week after the announcement by the Mashpee Wampanoag Tribe, Massachusetts’ other federally recognized tribe met with a committee of the Fall River City Council to propose a separate and competing casino plan.27 The Wampanoag Tribe of Gay Head (Aquinnah) proposed a casino plan considerably smaller in scale, including only one hotel and foregoing a shopping mall and other venues that would compete with existing city restaurants and shops.28 According to news reports, the Aquinnah are “also willing to discuss with the state building a casino pursuant to a new state gambling law, even though it too believes it would have sovereign rights under the IGRA to build and operate a casino if the state follows through on its plans to approve expanded gambling in the state.”29
Both Massachusetts tribes, however, would face a major obstacle were they to proceed outside the scope of a new Massachusetts gambling law. That obstacle takes the form of a 2009 Supreme Court decision, Carcieri v. Salazar,30 holding that the law authorizing Indian tribes to put land into trust for economic development, the Indian Reorganization Act,31 applies only to tribes recognized by the United States government prior to its passage in 1934. (The Mashpee Wampanoag Tribe was recognized in 2007, and the Aquinnah in 1987.) That ruling halted a course of conduct established over the course of more than 70 years and effectively blocks any tribe that first received federal recognition after 1934 from putting land outside its original reservation land into trust in order to operate a casino.
Congress has been working on legislation that would nullify the Carcieri decision, allowing federally recognized tribes—regardless when first recognized—to put land into trust as before.32 If such legislation were passed, federally recognized tribes again would be able to build and operate casinos on so-called sovereign land that would be outside the control of state regulators. In that case, if Massachusetts were to legalize casino gambling and create licenses for just two facilities, under the federal laws applicable to Indian gaming, Massachusetts’ federally recognized Indian tribes would be able to bypass the state process and open additional casinos, provided that they were built on land put into trust and that such land was made part of the tribe’s sovereign nation.
At present, progress has stalled on legislation that would effectively nullify the Carcieri decision. That makes it nearly impossible to assess the tribes’ prospects for building a casino outside the scope of a new state law.
As reported in the Boston Globe:
State lawmakers said they are acutely aware of the complexities of Indian gaming and are preparing
proposed legislation that assumes the Mashpee Wampanoag tribe will eventually gain the right to
operate a casino outside of the state’s control. “We’re vetting a range of options to deal with this,’’
said state Senator Stanley Rosenberg, an Amherst Democrat in charge of writing his chamber’s
version of a gaming bill. “We understand that to ignore this question is to compromise the success of
our efforts if we choose to do this.’’ Without being specific, Rosenberg intimated the proposed
legislation would allow for the construction of tribal casinos.33
Supporters of Indian gaming have acknowledged that legislation nullifying the effect of the Carcieri decision is unlikely before the 2010 midterm elections in November. However, they also maintain that Congress must eventually act, since the Carcieri ruling has clouded the legal status of scores of projects already built by tribes first federally recognized after 1934.34
Massachusetts is poised to approve expanded gambling. The commonwealth’s high rate of unemployment, the acute need for additional revenue generation, and the fact that the three key leaders on the issue—the governor, the House speaker and the Senate president—all favor expanded gambling, have converged to make Massachusetts more likely than ever before in recent memory to authorize casino gambling. Before the end of the legislative session, the commonwealth likely will have enacted legislation authorizing at least two destination resort casinos. Further, in proposing two rather than three casinos, as had been proposed in Patrick’s 2007 casino gambling bill, DeLeo may be anticipating that Massachusetts’ two federally recognized tribes eventually will solve the problem of the Carcieri decision and acquire the right to operate casinos pursuant to the Indian Gaming Regulatory Act. Whether Massachusetts’ four pari-mutuel tracks should be authorized to operate slot machines is a question on which the three leaders do not agree, but this problem could be mitigated—at least as it relates to the tracks in DeLeo’s district—if those two tracks chose instead to pursue a casino (category 1) license. Located just northeast of downtown Boston, Wonderland, in Revere, and Suffolk Downs, in east Boston, have reportedly signed a joint venture agreement to build a casino at the Suffolk Downs facility.35 Patrick and Boston Mayor Menino have both come out in favor of a casino in the Boston area.36
However, the window for passage of expanded gambling legislation in Massachusetts this year is closing. The 2010 legislative session ends July 31, 2010, and there will be little time to reconcile the Senate bill with the DeLeo Bill if they are significantly different. The Senate expanded gambling bill is expected to be introduced and debated in the first weeks of June, with the goal of passing a bill and presenting it to the governor for signature by mid-July.37 Both legislative chambers will have to cooperate if this goal is to be met.
On June 2, 2010, after deadline for this article, Massachusetts State Senate leaders provided an outline of their plan for expanded gambling in the commonwealth, and said that they intended to discuss their plan at a public hearing on June 8, 2010.38 According to Sen. Stanley Rosenberg, one of the drafters of the Senate bill yet to be made public, the Senate plan calls for licensing three casinos in three general regions of the state, but no slot machines at the state’s four racetracks.39 This conflicts with the House bill championed by House Speaker Robert DeLeo, which proposes two resort casinos and 750 slot machines at each of the state’s four pari-mutuel racetracks—two horse racing tracks and two former dog racing tracks. According to Rosenberg, the Senate proposal does not call for slots at the tracks because “all the data, all the studies and all experience show that, if you want to maximize jobs and revenue, you go to resort-style casinos. … You add very few jobs when you put slots at tracks.’’40 Another difference from the DeLeo Bill, the Senate plan would designate one casino for an Indian tribe. As mentioned in the article, both the Mashpee Wampanoag Tribe and the Wampanoag Tribe of Gay Head (Aquinnah) have proposed to build a casino in Fall River, Mass. A spokesman for Speaker DeLeo said, not surprisingly, that the Speaker prefers the House bill to the one outlined by the Senate.41 A spokesperson for Gov. Deval Patrick released a statement reiterating the governor’s support for resort-style casinos, but not specifically rejecting slots at tracks.
Rosenberg noted to the press that “many details of the Senate plan have yet to be worked out, including the rate at which the casinos would be taxed, the fees the state would charge for casino licenses, and whether the expected revenue would be dedicated to specific programs.” As mentioned in the main body of the article, differences between the House and Senate versions will ultimately need to be reconciled before the end of the legislative session July 31.
Editor’s Note: To hear more gaming news from Massachusetts, listen to our podcast with Mark Hichar in the Gaming Law News series at www.aceme.org/podcasts.
1 MassBudget.org, May 25, 2010 (last accessed May 25, 2010).
3 Press release dated May 20, 2010, issued by The Commonwealth of Massachusetts Executive Office of Labor and Workforce Development, Department of Workforce Development, available at http://lmi2.detma.org/Lmi/News_release_state.asp (last accessed May 26, 2010).
4 In 2008, Massachusetts voters elected to ban greyhound racing in the state effective Jan. 1, 2010. The two former greyhound racetracks in the commonwealth have the right to continue operating as simulcast facilities until July 31, 2010. Unless legislation is enacted extending that right or authorizing those facilities to continue other gambling activities, they will cease all gambling activities on that date.
5 Public opinion survey conducted March 7–11, 2010, by the Center for Policy Analysis at the University of Massachusetts Dartmouth, available at www.umassd.edu/seppce/policyanalysis/ (last accessed May 26, 2010). The survey had a +/- 4.0 percent margin of error.
7 New England Casino Gaming Update, 2010, conducted by the Center for Policy Analysis at the University of Massachusetts at Dartmouth, March 2010, available at www.umassd.edu/seppce/policyanalysis/ (last accessed May 26, 2010), pages vi and viii.
8 Id., pages vii and viii.
9 Hearing of the Joint Committee on Economic Development and Emerging Technologies on Oct. 29, 2009.
10 House bill No. 4619, available at www.mass.gov/legis/house/index.htm (last accessed May 26, 2010).
11 See footnote 5.
12 “Speaker DeLeo’s Plan for Jobs and Economic Growth; An Act to Establish Expanded Gaming in the Commonwealth,” document distributed by the House Speaker on April 1, 2010, and available at uss- mass.org/documents/deleo_proposal_4_1_10.pdf (last accessed May 26, 2010).
13 “Gaming Facilities in New England,” study by the New Hampshire Center for Public Policy Studies dated Oct. 7, 2009, available at www.nh.gov/gsc/calendar/documents/20091006_cpp.pdf (last accessed May 26, 2010). Note: The Rhode Island tax rate on gambling revenues is approximately 61 percent. See: Rhode Island General Laws § 42-61.2-7.
14 Massachusetts Lottery website at www.masslottery.com/winners/, (last accessed May 25, 2010).
15 The Official Website of the Attorney General of Massachusetts, at www.mass.gov/?pageID=cagoterminal&L=4&L0=Home&L1=Community+Safety&L2=Cyber+ Crime+%26+Internet+Safety&L3=Cyber+Crimes&sid=Cago&b=terminalcontent&f= community_online_gambling&csid=Cago (last accessed May 31, 2010).
16 This point is somewhat ambiguous in the legislation. Elsewhere in the DeLeo Bill it refers to the purchase or “lease price” of the land, and another part of the DeLeo Bill discusses the appropriate form of application for a gaming facility license, and states that “an applicant for a category 1 license shall include the following information: . . . (v) whether the applicant will be using publicly owned land for the category 1 establishment.” DeLeo Bill, SECTION 12, Section 17(b) (emphasis added).
17 All gaming employees must be licensed and must be Massachusetts residents, although the residency requirement could be waived in regard to positions that required the employee to work outside of the state.
18 “Senate pledges hearing on any casino bill,” Boston Globe, April 15, 2010, at www.boston.com/news/local/massachusetts/articles/2010/04/15/ mass_senate_pledges_hearing_on_any_casino_bill/ (last accessed May 26, 2010).
19 “House OK’s casinos, slots,” Boston Globe, April 15, 2010 at: www.boston.com/news/local/massachusetts/articles/2010/04/15/house_oks_ca… (last accessed May 31,2010).
20 House Speaker Robert DeLeo, quoted in “Speaker DeLeo favors slots at the tracks & resort casinos for Mass.,” Wicked Local, Oct. 13, 2009, at http://blogs.wickedlocal.com/hull_blog/?p=31095 (last accessed May 31, 2010).
21 “Mashpee Wampanoag Tribe Proposes Resort Casino in Fall River,” tribe announcement dated May 17, 2010, available at www.mashpeewampanoagtribe.com/jobs.html (last accessed May 26, 2010).
22 “Aquinnah pitch Fall River casino,” Cape Cod Times, May 25, 2010, at www.capecodonline.com/apps/pbcs.dll/article?AID=/20100525/NEWS/5250306 (last accessed May 26, 2010).
23 “Redevelopment Authority approves $21M biopark sale,” The Herald News, May 27, 2010, at www.heraldnews.com/news/x505218476/Redevelopment-Authority-approves-21M-… (last accessed May 27, 2010).
25 U.S.C. § 2701 et seq.
26 See footnote 21.
27 See footnote 22.
30 129 S.Ct. 1058 (2009).
31 25 U.S.C. § 465.
32 Senate bill S. 1703, approved by the Senate Indian Affairs Committee in December 2009 (yet to be scheduled for a floor vote), and House bills H.R. 3697 and H.R. 3742, two similar bills, heard by the House Natural Resources Committee in November 2009, but stalled since then.
33 “Congress’s uncertain direction clouds efforts to control Indian casinos, cost of licenses,” Boston Globe, May 26, 2010, at www.boston.com/business/articles/2010/05/26/indian_gaming_debate_has_mas… (last accessed May 26, 2010).
35 “Race to the finish,” Boston Globe, February 14, 2010, at www.boston.com/news/local/articles/2010/02/14/long_past_its_glory_days_w… (last accessed May 31, 2010).
36 Id., and “Menino could get wish: Legislature looks closer to approving casinos,” UniversalHub, Sept.19, 2009, at www.universalhub.com/node/27723 (last accessed May 31, 2010).
37 “Massachusetts Senators line up ‘bullet-proof” casino bill,” Gambling Compliance, May 10, 2010, at www.gamblingcompliance.com/node/42606&fastlogin=notifications/EX4D5q&sta… (last accessed May 31, 2010).
38 “Senate to propose licensing 3 casinos,” Boston Globe, June 3, 2010.