It's a stark and unmistakable symbol of the financial crisis within Connecticut's multibillion-dollar Indian gaming empire.
After making and spending billions over the last decade, the Mohegans and their nearby neighbors, the Mashantucket Pequot Indians, are teetering on the brink of a financial meltdown.
Expansion plans have been canceled, employees have been laid off, credit ratings are in free fall, and bankers and bond holders are knocking on the door. In a sign of just how bad it has become, the Pequots last week defaulted on a Wall Street bond, signaling to creditors the tribe cannot meet its obligations.
All of this adds up to a toxic mix of problems that only a few years ago would have been unthinkable for two tribes with economic engines that once seemed geared for never-ending growth.
The Pequots in 1992 turned to Kien Huat Realty, a family-owned construction and development firm that made its fortune in Malaysian government projects. The deal provided $235 million to build the first version of Foxwoods.
The Mohegan Sun came on line a few years later under an arrangement with South African casino mogul Solomon Kerzner and his partner Len Wolman, a Mystic hotel chain owner and fellow South African.
The Pequot and Mohegan casinos quickly surpassed expectations. Foxwoods grew into the world's largest casino, featuring thousands of hotel rooms, dozens of restaurants and seven gambling areas. The Sun grew to 3.1 million square feet, offering three casinos, assorted hotels and other features.
Public records show in 1993, the year Foxwoods opened its doors, the casino earned $81 million from slot machines. By 2005, the slot take had swelled to $818 million.
The Sun earned $227 million in slot revenue in 1997, its first year of operation. Slot revenue ballooned to $916 million by 2007.
The Pequots bought the Lake of Isles Golf Course in North Stonington and the Spa at Norwich Inn, built a $200 million museum dedicated to Eastern Indians and invested in a Philadelphia casino plan.
The Mohegans purchased the Pocono Downs race track in Pennsylvania and added a casino. They proposed a $1 billion casino in Palmer, Mass., bought a golf course in Connecticut and a WNBA basketball team, and struck several deals with other tribes to build casinos outside Connecticut.
The building and buying mirrored what was happening nationally. The Native American gaming industry took off like wildfire, moving from a handful of bingo parlors and card rooms in the early 1990s to a $27 billion industry in 2008.
Reports filed by the Mohegans with the federal Securities and Exchange Commission show the tribe's net income dropped 11 percent in 2009; gaming revenue fell 8 percent; gross slot revenue was down 5 percent; and non-gaming revenue dropped 16 percent.
The Mohegan's interest expenses rose 19 percent compared with 2008, according to financial statements.
At the Sun, the revenue drop had a very visible impact. The Mohegans launched an $800 million expansion, but it was cut short. Although a third casino opened in mid-2008, at a cost of $113 million, the rest of the project, another hotel, parking garage and other features, was suspended because of lack of money.
Casino capitalism failed on a global scale. What makes Paul Burns think it will work in Palmer?
Please join us in calling for an impartial cost benefit analysis.
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