In bill, Patrick controls casino panel

Governor Deval Patrick will file a casino gambling bill today that gives him control of a seven-member gaming authority that would auction off licenses and regulate the casinos.

The bill, which puts two elected officials on the new panel, is already drawing fire.

Under the proposal, the state treasurer and the state auditor would sit on the board of what would be called the Massachusetts Gaming Control Authority. The five remaining members would be appointed by the governor.

Treasurer Timothy P. Cahill and Auditor Joseph DeNucci said yesterday they were never asked by Patrick's administration what they thought of their potential involvement in the authority. While DeNucci welcomed the opportunity to serve, saying it is a good idea to have the state auditor overseeing casinos, Cahill disapproved of the makeup of the proposed panel.

"I don't think it's a good business model to have elected officials as part of the oversight process," Cahill said. "This is the most lucrative license anyone will ever bestow on anyone in Massachusetts."

In addition, Cahill, who is chairman of the State Lottery Commission, said it would not be appropriate for a lottery official to regulate casinos because slot machines and table games would compete with the lottery.

"Having a foot in the two doors doesn't make sense," Cahill said. "There could be a conflict, and I want to see the lottery protected."

The bill fleshes out in exhaustive detail a proposal for three resort casinos that Patrick outlined on Sept. 17. A summary of the bill's major provisions provided by an administration source who helped craft the bill did not contain any major surprises, but it provided an outline of the issues that will be hotly debated as the Legislature takes up the measure, which House Speaker Salvatore DiMasi, a gambling opponent, has said will not get a vote in the House until next year.

The legislation would legalize gambling activity that is illegal now and spells out three separate regions of the state - metropolitan Boston and the North Shore, Southeastern Massachusetts, and Western Massachusetts - where casinos could be built.

Patrick estimates that three casinos would produce $2 billion in economic activity, including $400 million a year for state coffers, and 20,000 jobs. Bidding by casino developers for the three 10-year licenses would produce a combined $600 million to $900 million for the state, according to Patrick's projections.

How the industry would be controlled has been a major concern for lawmakers, some of whom see the introduction of casinos as fraught with the potential for corruption. An administration official who helped draft the bill suggested that the governor's proposed Gaming Control Authority would be free of political influence.

"It is an independent authority that will sit outside the executive branch and not be directly answerable to any of the secretaries or the governor," said the official.

The authority would have broad powers to set up the license auction process and evaluate and choose the winning bidders. After the casinos begin operating, the authority would collect and distribute the state's share of gambling proceeds, monitor the conduct of casino operators, and perform annual audits. The authority's operating budget would be funded through a fee on each of a casino's slot machines or gaming tables.

Patrick has said that he wants Massachusetts casinos to operate under the most transparent and stringent regulatory system, to avoid any taint of criminal behavior or corruption. To that end, his proposed bill would provide criminal penalties for gambling related offenses.

The bill contains strict new ethics rules that bar employees or board members of the Massachusetts Gaming Control Authority from working for a gaming company for three years before and three years after their service with the authority. Employees of the executive branch also would be prohibited from working for the authority or a casino for three years after they leave state government.

Prospective bidders would be required to pay $350,000 to have their casino license applications reviewed. In addition, for their application even to be considered, bidders would have to offer the state a minimum licensing fee of $200 million and agree to pay at least 27 percent of their gross annual revenues to the state, or $100 million a year, whichever is larger.

The highest bidder will not necessarily be awarded a license, the bill says. The authority will score proposals by applying about a dozen criteria, including the number of jobs that will be created, the infrastructure improvements, the use of local and small businesses for goods and service, and the level of investment. The bidder who provides "the highest and best value" will win the license, the bill says.

"Because this is predicated on economic development and job creation, the eligibility criteria speak to the level of investment and the number of jobs that will be created," said an administration official who worked on the bill.

As expected, the bill also contains a provision to provide preferential treatment for a Native American casino; the Mashpee Wampanoag tribe has proposed building a resort casino in Middleborough. Administration officials want to be careful not to freeze the tribe out of a state license, which would encourage them to seek federal approval through a separate process available to Indian tribes, and potentially result in a fourth casino in the state.

In addition to the authority board, the governor's bill would establish a 12-member advisory committee that would give key lawmakers a chance to offer their input. Five Cabinet secretaries - health and human services, public safety, administration and finance, housing and economic development, and labor and workforce development - would sit on the board, along with three gubernatorial appointees: a union representative, a gambling addiction specialist, and a police chief.

Senate President Therese Murray, who has expressed her support for expanded gaming, would also have two designees, as would DiMasi.

The money collected from the casino operators would go into seven trust funds. Among them would be the Community Gaming Mitigation Fund, which would get 2.5 percent of gross annual gaming revenue - estimated at between $40 million and $50 million a year - to pay local costs directly related to casinos, including increased police and fire services. An equal amount would go into the Gaming Public Health Fund to pay for social service programs.

Three other funds would be set aside to pay $200 million annually toward property tax credits for about a million homeowners; $200 million in transportation improvements; and any amounts required to offset losses in the state lottery's annual revenues.