Mark Pazniokas
With the new year, the drama over the expansion and control of legal gambling in Connecticut enters its fifth season, a convoluted story in search of an ending. There are new cast members and old feuds, whiffs of scandal in Washington and intrigue in Hartford, and millions spent on lobbying and litigation in both places.
At stake are casinos proposed for East Windsor and Bridgeport and the rights to sports betting. Shifting political and market factors have undermined prospects for the new casinos, but sports betting is the hottest segment of the gambling market since the U.S Supreme Court lifted federal restrictions last year.
On one side are the Mashantucket Pequot and Mohegan tribes, old rivals and casino competitors in eastern Connecticut now allied in a fight for market share against a common enemy: MGM Resorts International, the Las Vegas giant that recently opened a casino in Springfield, Mass., and purchased one in Yonkers, N.Y.
New to the show for 2019 is Ned Lamont, a governor intent of finding a way to resolve the question of casino expansion and the newer issue of sports betting. Another gambling company, Caesars Entertainment, just hired Hartford lobbyists to position the company for a piece of sports betting business, should Lamont succeed.
“I know what I want to get accomplished, which is to get something done,” Lamont said in an interview. “I just think sports betting and internet gambling is going to be part of America’s economy. And why should Connecticut get left behind?”
The question is simple. The answer is not.
Over five years, MGM and the tribes have fought to a stalemate that complicates passing any gambling bill in the legislature, even one that focuses on only sports betting — something the tribes are eager to offer to build traffic at their Foxwoods and Mohegan Sun casinos. Rhode Island recently allowed sports gambling at its casinos, and Massachusetts is expected to follow suit.
“I’ve got a lot of moving parts, and it’s my job to make sure we don’t get mired in the legal mud for the next five years. What does that accomplish? So, I don’t have any preconceived notions,” Lamont said. “I know the tribes have been great partners for us for a long time. I want them them to be part of the solution — but I want a solution.”If that sounds like a plea for the tribes and MGM to talk settlement, no one has publicly suggested grounds for a compromise or who might broker a deal. Lamont already has met separately with MGM and the tribes, but Ryan Drajewicz, the governor’s chief of staff, notes that the new administration is a week-and-a-half old with a daunting to-do list.
“This is a complex issue with multiple constituencies,” Drajewicz said. “His responsibility is to understand them all and find a path.”
A quick summary: After lobbying in 2015 and 2016, the tribes won passage in 2017 of a state law authorizing them to jointly build a casino on a hillside overlooking I-91 in East Windsor, an effort to blunt the loss of customers to nearby Springfield, which opened last summer.
But MGM outflanked them in D.C., convincing Interior Secretary Ryan Zinke to withhold approval by the Bureau of Indian Affairs, even though staff had indicated it was forthcoming. Connecticut had made its authorization of the East Windsor plan conditional on BIA approval as a precaution against jeopardizing its longstanding slots revenue-sharing deal with the tribes.
The tribes essentially are in a business partnership with the state, paying more than $7.5 billion for exclusive rights to casino gambling at Foxwoods Resorts Casino and Mohegan Sun over the past quarter century. Based on a 25 percent share of gross slots revenue, the payments peaked at $430 million in 2007. They totaled $263 million last year and are projected to fall as out-of-state competition increases.
At about the same time Zinke made clear that the tribes had a problem in Washington, MGM urged Connecticut to terminate the tribes’ exclusive casino rights and allow it to build a waterfront gambling resort in Bridgeport, one it promised to staff with employees from Bridgeport and New Haven. The plan gave MGM an instant urban coalition of backers in the General Assembly.
Plot twists in 2018: The disappearance of federal restrictions on sports betting set off a new fight, this time involving the tribes, MGM, the state’s off-track betting vendor, Sportech, and others; MGM bought Empire City Casino in Yonkers; and Zinke abruptly resigned in the face of multiple investigations, including one related to his role in the Connecticut casino fight.U.S. Rep. Joe Courtney, D-2nd District, said the departure of Zinke might clear the way for federal approval, but that would not end the threat of litigation by MGM or close division in the General Assembly, which are evident in the committee that oversees gambling legislation, the Public Safety and Security Committee
The new Senate co-chair is Sen. Dennis Bradley, a Democrat from Bridgeport, a city rooting for MGM. He succeeds former Sen. Timothy Larson, whose district included the site of the East Windsor casino, a project he vehemently backed. The vice chair is Sen. Cathy Osten, D-Sprague, who represents an eastern Connecticut town where the success of the tribal casinos is paramount.
“The dynamic between the two chairs and the Senate vice chair is something that you can’t make up,” said Sen. Tony Hwang of Fairfield, the ranking Senate Republican on the committee.
Osten said she favors legalizing sports betting now. Rep. Joe Verrengia, D-West Hartford, who is returning for another term as the House co-chair, said he wants a comprehensive approach involving all gambling, including the extent to which sports betting would be allowed via the internet.
Legislators said they hope the administration can avoid what MGM promises would be an extended legal fight if East Windsor goes forward — or if the state goes ahead with sports betting without resolving whether it is a casino game, exclusively controlled by the tribes.“We’ve got to get all this gaming stuff out of the courtroom, whether it’s exclusivity or the East Windsor casino or now sports betting,” Verrengia said. “It can’t be played out in the courtroom. We have to get all the stakeholders together and work out a compromise. That’s so important, and hopefully the governor’s going to take the lead.”
Verrengia, a retired cop who is now a part-time legislator, said the legislature needs more information about the viability of the proposals for East Windsor, Bridgeport or anywhere else in Connecticut.The only gambling concerns lobbying for casino expansion in the state are MGM and the tribes, each trying to protect existing investments. Caesars, which recently hired Roy & LeRoy, is interested only in sports betting, said Richard Broome, the company’s senior vice president for government affairs.
“It makes you scratch your head. If this is such a viable market, why aren’t other operators competing here in the state of Connecticut?” Verrengia said. “As legislators, we haven’t had any objective in-depth analysis of what another casino would look like here in the state of Connecticut. All the information we have received is tainted, because it comes from one side or another.”
MGM Springfield has captured less of the Foxwoods and Mohegan market than originally anticipated. In fact, the state’s Office of Policy and Management on Friday upgraded its estimates of revenue expected from the two tribal casinos by $25 million in the fiscal year that ends on June 30.
Even if the political and legal obstacles to the East Windsor casino can be resolved, does the competition from Springfield still justify an investment by the tribes of $300 million in East Windsor when it faces another threat for the larger Boston market from Wynn Everett, the Boston-area casino scheduled to open in June?
And, with MGM’s acquisition of the Empire City Casino in Yonkers for $850 million, how intent is it on spending more than $600 million in Bridgeport, whose attraction to MGM was providing a foothold for the company in the New York regional market?
The casino offers slots and electronic blackjack games on the grounds of the Yonkers Raceway, which still offers harness racing and simulcasting of thoroughbred racing. It is expected to seek a full gaming license, allowing table games, upon the expiration in 2023 of a downstate New York casino moratorium.
Chuck Bunnell, chief of staff to the Mohegan Tribal Nation, said the tribes’ joint venture, MMCT, is ready to proceed.“The reality is Connecticut has a shovel-ready project that was approved by the House, the Senate and signed by the governor,” said Bunnell, chief of staff to the Mohegan Tribal Nation. But he said the tribes need sports betting to remain competitive.
Uri Clinton, a senior counsel who has led the MGM lobbying campaign in Connecticut and was recently named as president and chief operating officer of Empire City, said MGM has not wavered in its interest in Connecticut since the Empire City purchase was announced in May and finalized this month.
“The market in New York is underserved,” Clinton said. “The moratorium in New York, when it is lifted and full resorts are allowed down state, there will be only three licenses.”
But he, too, is working on sports betting, saying MGM has a national data base and brand recognition.
“Connecticut needs to have access to national brands, and there should be multiple licenses,” Clinton said. “The tribes should have sports betting — and so should the national brands.”
Alexander Soule
Connecticut regulators are scheduled to issue a final ruling this week that would revise previously approved rates for the state’s two big utilities and several smaller ones, after the Trump administration cut the federal tax on corporate profits to 21 percent from 34 percent previously.
On the premise that Connecticut ratepayers should be repaid at the earliest the full amount of those lower taxes, the state Public Utilities Regulatory Authority opened separate dockets in early January last year to review rates for Eversource Energy; the United Illuminating subsidiary of Avangrid; natural gas suppliers owned by the two companies; and water companies including Bridgeport-based Aquarion acquired by Eversource at the close of 2017.
PURA reached a preliminary decision on that review in December, with companies and ratepayer advocates having since had the opportunity to register any objections.
A similar process has been under way in other states, including in New York where utilities were required to adjust rates last October to reflect any windfalls under federal tax reform.
In seeking rate approvals in Connecticut, utilities must account for both what they charge customers to cover their income tax expenses, as well as the amounts they accrue for any accumulated liabilities from deferred taxes.Eversource, which provides utility services in Connecticut, Massachusetts and New Hampshire, reported income tax expenses of $220 million through the first nine months of 2018, down from $448 million for the same period the year before, while absorbing a 14 percent increase in other types of taxes during that period.
Eversource’s income tax expense for its historic Connecticut Light & Power territories totaled $102 million in the first three quarters of the year, down from $159 million, with the company having already accounted for the new tax rate in its most recent electric rate approvals.
According to PURA, Eversource balked last summer at any adjustments to the 2018 rates for its Yankee Gas subsidiary on grounds it would constitute “retroactive ratemaking,” and asserting that stance as well for Aquarion after the water company had previously indicated last February it would pass on the full benefit of any tax savings to customers.
Among other arguments, Eversource disclosed it has paid nearly twice as much in municipal property taxes as it has been allowed to collect under its previous rate agreement with PURA. Eversource reached a Yankee Gas settlement last September on the issue of federal tax rebates for customers.
The office of Connecticut’s attorney general had rejected any argument claiming retroactive ratemaking, under former Attorney General George Jepsen, stating tax revenues to government entities are “qualitatively different” that any prohibitions against retroactive ratemaking in current regulations.
Avangrid calculated United Illuminating’s initial income tax savings at $7.5 million, with another $6.3 million annually in the form of deferred taxes amortized over 30 years.
Greenwich lawmaker launches 2019 debate on tolls
Keith M. Phaneuf
The 2019 debate over tolls began this week with a legislator from Connecticut’s southwestern corner — home to some of the state’s most congested highways and rail lines.
Sen. Alex Bergstein, a freshman Democrat from Greenwich who favors tolls on all vehicles, also wants to employ a financing approach that could leverage huge private investment and dramatically accelerate the rebuild of Connecticut’s aging, overcrowded transportation system.
“I’d be happy to resolve the tolling issue this year, not just to extend the conversation,” Bergstein told the CT Mirror. “We don’t have the luxury of waiting any longer. To drive economic growth in this state, we need to make it business friendly, and this is what the business community tells us it needs.”
Deficient and “severely congested roads” cost Connecticut drivers $5.1 billion annually, the state’s Transportation Finance Panel reported in March 2016. This includes $1.6 billion in additional vehicle operating costs, and $3.5 billion in lost productivity tied to congestion-related delays.
An analysis issued late last year by the state Department of Transportation estimated electronic tolling on all major highways could raise as much as $950 million annually by 2023 and cost about $370 million to install. But officials also have said the annual revenue could vary somewhat depending upon the level of discounts legislators want to offer to Connecticut residents and businesses.
DOT officials also have said, depending on how tolls are structured, out-of-state motorists would provide slightly more than 40 percent of the revenue.
But Bergstein, who is vice chairwoman of the legislature’s Transportation Committee, said legislators should consider another cost-sharing option that also could speed up the long-overdue rebuild of the transportation system: Securitization.
Connecticut could wait the estimated four years it would take to install toll gantries and get the system fully up and running. Or, if tolls are approved this year, it could market that potential $950 million-per-year toll revenue stream now.In the past, securitization often involved a state offering a future revenue stream — say, 10 years of receipts from a particular fee — in exchange for a one-time, upfront payment that’s less than the pledged revenue stream over time.
It’s like when a lottery winner forfeits a bigger prize paid over 10 years to get a smaller, lump-sum award right away.
But what if Connecticut offers that toll revenue stream to private investors who also want a modern transportation system?
Rather than getting 40 or 50 cents up front for every $1 of future toll revenue pledged, Bergstein said, Connecticut could leverage more money up front than it commits down the road.
How much? Possibly $7 to $9 of private-sector money for every $1 the state pledges, she said.
“It is about unlocking this enormous pot of private-sector money that we are not accessing now,” she said.
Toll securitization involving public-private partnerships began to crop up in the U.S. in the mid-2000s.Chicago leased the Chicago Skyway toll bridge for 99 years to a private investment group for $1.83 billion in 2005, according to an analysis of toll securitization by GlobalCapital.com.
One year later, Indiana approved a 75-year lease of the Indiana Toll Road for $3.85 billion.
The trade-off for these deals, though, is that private investors want a return on their investment. If the numbers aren’t crunched properly, toll costs can escalate.
The Indiana deal became a source of controversy after the Toll Road amassed $5.8 billion in debt within eight years.
Bergstein said any public-private partnership hinges on sound data and proper planning, but that should not stop Connecticut from looking toward the private sector.
“It’s really not that complex when we put it into consumer terms,” she said. “It’s the same thing as getting a loan from the bank when you have equity on your house” and want to make home improvements.
But the top Republican in the Senate, Minority Leader Len Fasano of North Haven, said he believes motorists and businesses are not convinced tolls would help the business climate here.“Maybe down in Greenwich they may not mind paying the extra money,” he said. “But for the person living on a fixed income, or someone with children and who play sports in school, getting on the highway, … going to work and coming home, every day, the costs can add up.”
Fasano also noted that many Democrats in the House and Senate are pushing to bolster the state minimum wage to $15 per hour.
What happens if businesses have to pay more for staff and for transportation?
“You can’t have this tsunami of charges hitting everyone all at once,” Fasano said, adding it could be even worse if the nation and Connecticut slip into recession in a year or two. “Maybe there’s some (economic) confidence growing in the state, but if you want to take the air out of it, then let’s do all of these things.”
Fasano also said Republicans still believe Connecticut can bolster transportation investments through their “Prioritize Progress” plan, which largely freezes state borrowing in other areas except for transportation.
Former Gov. Dannel P. Malloy and other Democrats have criticized that plan, arguing it would not allocate enough resources for major, necessary transportation projects, such as completing the rebuild of the “Mixmaster” junction of Interstate 84 and Route 8, replacing the elevated section of I-84 in Hartford, or widening Interstate 95 in the state’s southwestern corner. The average driver in lower Fairfield County, where Bergstein hails from, spends 49 hours per year stuck in traffic, according to the Transportation Finance Panel report.
But Bergstein believes motorists and businesses, both in her district and across Connecticut, recognize the need for tolls to finance a modern transportation system.
Rep. Kerry Wood, a freshman Democrat from Rocky Hill who also is supporting tolls, said she was thrilled to hear Gov. Ned Lamont’s vision of a 30-30-30 rail system in which commuters can travel from Hartford to New Haven, then to Stamford, and then to New York City, completing each segment in 30 minutes or less.
“A modern rail system, with times like that, with wi-fi — that’s something we’re really behind the times on,” Wood said.
A commercial real estate agent who relies on rail to travel to Fairfield County and New York City, Wood added that the slow travel times and limited service are frustrating. “But sometimes you wonder if you are in a Third World County when the train catches on fire, or a bridge is out” and passengers must disembark and catch a bus.