With Milford voters set to deliver their verdict next week on a proposed Foxwoods casino, Massachusetts Gaming Commission investigators raised concerns Wednesday about the applicant’s lack of financing and the role the Connecticut-based tribe that owns Foxwoods would play in the casino’s operations.
The commission met Wednesday to consider the suitability of the applicant known as Crossroads Massachusetts to hold one of three casino gaming licenses in Massachusetts. Foxwoods, owned by the Mashantucket Pequot tribe in Connecticut, holds a minority ownership stake in the proposed project, and would manage the Milford casino.
The commission expects to issue its written suitability determination within days, hoping to make its ruling public before voters in Milford weigh in next Tuesday. If both votes swing in Crossroads’ favor, the applicant will be allowed to submit its Phase II casino application to the commission, for which the deadline is Dec. 31.
Karen Wells, director of the commission’s investigations and enforcement bureau, told the five-member panel that Crossroads had a “glaring issue” with its application because it had not yet secured a 55 percent equity ownership stake in the project.
“This hearing is somewhat unusual because I can’t make a recommendation because we don’t have a complete picture of what this applicant is going to look like,” Wells said.
Wells also said the background investigation raised questions about the group’s ability to operate a successful casino in Massachusetts given the debt and declining revenues at the Foxwoods property in Connecticut.
Scott Butera, president and chief executive of Foxwoods, told the commission that Crossroads has two “very, very strong offers” to fill the equity funding gap and was in active negotiations that should be wrapped up soon.
Though he did not disclose the potential partners due to confidentiality agreements, Butera said one is a private equity fund that had been involved in gaming and has been licensed in other jurisdictions. That group has offered to put up $350 million for the project, and would be involved in the project’s development and governance. Deutsche Bank would provide the loans to finance much of the project.
The second potential partner is a public traded company that would provide a seven-year loan to help finance the project, and purchase the group’s real estate assets to lease them back to Crossroads Massachusetts to operate the casino. Foxwoods, which would maintain a 10 percent ownership stake under both plans, would be the casino operator.
Butera also said that Foxwoods recently went through a restructuring process to reduce its $2.2 billion debt that became a problem after Foxwoods was in the midst of expansion when the recession hit in 2008, precipitating a decline in revenues. With restructuring completed in July, Butera said, the casino is now on strong financial footing, having reduced its debt by $550 million.
David Mackey, an attorney for the Gaming Commission, also grilled the applicants on Wednesday about the management structure of the proposal casino group and the reasons behind a change in the structure earlier this year that removed the Mashantucket Pequot Tribal Council from their position.
Under the new structure, a three-person committee that includes Butera and Tribal Council Chairman Rodney Butler would oversee daily operation of the casino, but would not report to the full council. Foxwoods would also be just one member of the overarching board of partners controlling the casino and its development.
Mackey questioned whether the change was made to ensure that members of the tribal council would not be subjected to background checks as qualifiers on the application, noting that former Tribal Council treasurer Steven Thomas had been indicted on federal felony theft charge.
Background investigators aired their concerns about the “firewall” between Foxwoods Massachusetts and the Connecticut tribe holding up after the licensing process is over. The applicants said the structure did help limit the number of people considered qualifiers on the application, and has been used in other jurisdictions with success.
Crossroads has proposed to build a $1 billion resort casino off Interstate 495 in Milford with unique New England characteristics and architecture. “The whole idea of this is something meant to be elegant, not opulent,” Butera said.
Located on 187 acres, only 15 percent of the land will be used for the casino development, while the remaining property will be converted into open spaces and greens, bike paths, nature walks and recreation facilities, according to developers. The applicants have pledged $100 million in transportation infrastructure improvements to widen Interstate 495 and build a connector road directly to the property that will decrease traffic through the town and allow easy access to the 200,000 square-foot gaming floor, 500-room hotel, restaurants, retail and more.
“We think that because we’re in the suburbs and that Foxwoods is used to operating in the suburbs we can be a great compliment to those businesses in Boston as opposed to competing with them,” Butera said.
Milford stands to receive $30 million upfront and $30 million annually from the casino in taxes and shared revenue, according to its host agreement with Crossroads, which has pledged to create 3,000 construction jobs and 3,500 permanent jobs in the town.
Despite similar perks offered in host community agreements signed with other cities and towns, casino developers have struggled of late to win over local voters. Residents in Palmer last week narrowly defeated Mohegan Sun’s proposal for a casino in western Massachusetts, while East Boston voted against Suffolk Downs’ bid to build a casino resort at the site of the horse racing track on the Revere-Boston border.
While Suffolk Downs is scrambling to reconstruct its casino bid entirely in Revere where voters strongly approved the project, Wynn Resorts is the only other bidder competing with Crossroads for the eastern Massachusetts license. Steve Wynn has proposed a resort on the Mystic River in Everett.
Butera said Crossroads, if successful in its application, could open its Milford casino by the fall of 2017.