State's gambling future uncertain, despite federal action

HARTFORD, Conn. (AP) — The federal government may have finally given the go-ahead to a satellite tribal casino in East Windsor, but that doesn't mean the debate over gambling in Connecticut is settled.

Nearly three months into his term, Democratic Gov. Ned Lamont still faces the challenging task of trying to negotiate a wide-ranging gambling agreement that doesn't violate the state's revenue-sharing agreement with the Mashantucket Pequot and Mohegan tribes but also includes other forms of gambling, such as sports betting.

"I would love to work out something with the tribes," he said. "We're trying our best."

Lamont's public schedule, obtained by The Associated Press through an open records request, shows he met privately at the governor's residence with the Mashantucket Pequots and Mohegans in January and in February with representatives from MGM Resorts, which says it wants to build a casino in Bridgeport and also offer sports betting. The casino company has challenged the constitutionality of a deal that allows only those two tribes to build and operate an off-reservation casino.

The tribes, which formed a company called MMCT, have said they need the casino in East Windsor to help blunt competition from MGM's new casino in nearby Springfield, Massachusetts, save jobs at Mohegan Sun and Foxwoods Resort Casino, and preserve the funding stream currently provided to the state of Connecticut. On Thursday, the Department of Interior posted a memo saying the proposed amendments to two agreements between the state and tribe had finally been approved after about two years — allowing the planned casino to move forward.

In exchange for exclusive rights to certain forms of gambling, the tribes provide the state 25 percent of slot-machine revenues, which amounts to about $270 million annually.

Lamont, who said he has also met with various sports-betting entities, confirmed to The AP that he hopes to address as many outstanding gambling issues as he can with his closed-door talks, while at the same time taking steps to avoid costly litigation for the state.

The latter could prove challenging. In response to the approval for the East Windsor casino, MGM issued a statement promising to "continue to pursue all legal options, including litigation," challenging the tribes' exclusive gambling rights "and defend our right to compete in Connecticut." The casino company filed a similar lawsuit in 2015, but it was ultimately dismissed.

"Depending on how those negotiations go, we may not see any gaming bills coming out this session," said Rep. Joe Verrengia, D-West Hartford, co-chairman of the General Assembly's Public Safety Committee. He said one exception could be legislation creating a Connecticut Gaming Commission, which has received little opposition.

It's still not clear when the Tribal Winds Casino in East Windsor might open. While the two tribes have purchased and cleared the site along I-91 for the $300 million facility, spending about $14 million so far, they still need to obtain financing.

"I can only imagine the difficulties of getting financing" for the project, given MGM's legal threats, Verrengia said.

Both tribes are also heavily leveraged. A Feb. 4 credit opinion from Moody's Investors Services noted the Mohegan Tribal Gaming Authority's "high leverage" as a cause for concern, as well as tribe's earnings being concentrated in a "highly competitive region." Besides competition from MGM Springfield, which opened in August 2018, Wynn Resorts Limited is in the process of constructing a large resort casino near Boston that's scheduled to open in June. The same report notes how the Mohegans have a "well-established and large product offering" and that "diversification efforts are underway."

Moody's most recent May 2018 credit opinion of the Mashantucket Pequots notes how the tribe has a "weak liquidity profile" and is currently operating under a forbearance agreement that expires June 30 with senior lenders to restructure billions in debt. Such deals occur when a creditor gives up the right to immediate repayment of a loan by a debtor under certain conditions. The report also says the tribe's earnings have been hurt by a "combination of reduced spending trends by gaming consumers, increased competition, and more aggressive promotional activity."

Mashantucket Pequot Tribal Chairman Rodney Butler said the federal approval means construction of the new casino "will move forward" and "preserve much needed jobs and revenue."

Both he and Kevin Brown, the former chairman of the Mohegan Tribe, have said construction would continue through any litigation. The Mohegans did not issue a statement following the Department of the Interior's action.

Meanwhile, there is still a bill before the General Assembly that would create an open casino bidding process, something MGM is supporting but the tribes say would violate their revenue-sharing deal with the state. Bills are also pending concerning sports betting and other forms of gambling. The session adjourns June 5.