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Cahill wants 3 parlors for slots

Sees state gaining $244m in taxes

By Matt Viser
Globe Staff / March 3, 2009
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State Treasurer Timothy Cahill plans to propose today that the state sell the rights to as many as three slot parlors across Massachusetts, a push far less ambitious than Governor Deval Patrick's bill for three casino resorts last year but one that Cahill will argue is the quickest way to boost state coffers.

Cahill, who is prepared to discuss the proposal at a legislative hearing today and fully unveil it at a speech tomorrow, estimates the state could reap up to $244 million annually by collecting a 27 percent tax on revenue from the slot machines, according to two state treasury officials.

In addition, licensing fees for 15- to 20-year operating rights could bring in between $2 billion and $3.3 billion in up-front payments, according to the two treasury officials who spoke on the condition of anonymity be cause the plan hasn't been made public. The figures are significantly higher than the governor's 2007 estimate, which was $600 million to $900 million.

"We think there is a market for this," said one of the treasury officials. "There's no appetite for casinos because nobody wants to - nor do they have the funds to - build the infrastructure. But for this particular market there is an appetite. At some point it's going to happen, and we have to capitalize on it."

Cahill's proposal appears certain to reinvigorate the debate on expanded gambling in Massachusetts and could be a bridge between Patrick's proposal for more elaborate and expensive resort casinos and House Speaker Robert A. DeLeo's desire to allow slots at racetracks, including those in his district.

It would not create the vast number of construction or hotel and restaurant jobs that resort casinos would, making key union support uncertain. Indeed, Cahill's proposal is a stark contrast to the lavish casino developments initially promoted by Patrick and supported by Cahill himself, designed to spur thousands of construction jobs before attracting conventions and visitors looking for high-quality dining and entertainment. Patrick has been lukewarm about slots without casinos.

But what they lack in amenities, they make up in immediacy: Slot parlors are often housed in quickly erected, warehouse-like structures that could supply a revenue stream at a time when Massachusetts is suffering its worst budget crisis in decades.

"We all know we're in a recession. This will allow for immediate revenue," one of the treasury officials said. "It's cash, and it's quick cash."

Cahill, who has been seen as a rival to Patrick and a possible gubernatorial candidate, will describe the plan in an address tomorrow before the Greater Boston Chamber of Commerce. The topic is expected to arise today when he testifies before the Legislature's joint Ways and Means Committee.

Under Cahill's plan, which would need approval from the Legislature and the governor, two or three licenses would be put out to bid. Each developer would be authorized to install 2,500 to 3,000 slot machines, potentially bringing as many as 9,000 slots to Massachusetts.

Twin River in Rhode Island has about 4,000 slot machines; in Connecticut, Foxwoods Resort and Casino has more than 7,000 and Mohegan Sun has 6,600. Cahill is proposing installing video lottery terminals, which are electronic versions of slot machines.

Cahill's estimate of up-front licensing fees is significantly higher than Patrick's estimate in part, treasury officials said, because the operating companies would make a smaller initial investment in parlors and be able to turn larger profits more quickly.

The target bidders would not be the large casino companies, but a combination of private equity and hedge-fund investors and slot machine operators like Scientific Games Corp. and GTECH Corp., according to the treasury officials.

As in Patrick's resort casino plan, the treasurer wants the slot parlors located in the Boston area and the western and southeastern regions of the state. His plan does not include any special rights for track owners, or for the Mashpee Wampanoag Tribe, which is facing an uphill battle in building a casino in Middleborough using its federal rights.

Faced with growing holes in their budgets, some state officials across the country have been turning toward expanded gambling.

Yesterday, the Atlanta City Council approved a plan to put a $450 million video lottery casino and a 29-story hotel in a downtown entertainment district. A proposal by the House speaker in Kentucky would allow video gambling terminals at seven horse tracks, generating up to $340 million a year for the state. Each track would pay licensing fees ranging from $25 million to $125 million.

But amid the economic downturn, critics of gambling need look no farther than Rhode Island for an indication that slot machines aren't a panacea. Twin River, a combined racetrack and casino operated at the former Lincoln Greyhound Park, is on the brink of bankruptcy and state lawmakers have been considering ways to keep it open, including purchasing the track.

In Maryland, voters approved a constitutional amendment in November that allows up to 15,000 machines at five sites, but developers have bid for only 6,550 machines.

When Patrick first unveiled his casino plan in 2007, developers from business mogul Donald Trump to casino magnate Sheldon Adelson were floating proposals for multibillion-dollar developments in Massachusetts.

But now, with tourism and gambling dollars shrinking with the economy, many casino developers are trying to stave off bankruptcy rather than drawing up plans for expansion.

Patrick's plan to license three resort casinos in Massachusetts failed last year in large part because of opposition from House Speaker Salvatore F. DiMasi. The debate was revived when DiMasi resigned in late January, making way for DeLeo, an enthusiastic supporter of adding slot machines at the state's racetracks.

DeLeo also ousted Representative Daniel Bosley, a North Adams Democrat, from his chairmanship. Bosley, a DiMasi ally and an ardent opponent of casinos, was chairman of the committee that narrowly issued a negative recommendation on the governor's casino legislation.

Matt Viser can be reached at maviser@globe.com.

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