RI: They own you!

Once legalized, predatory gambling necessitates that the state becomes promoter and stakeholder in the success of the ever expanding endeavor. As in the case of Rhode Island, the predators dictate the terms.

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R.I. Senate panel opens hearing on Twin River
By Katherine Gregg

Journal State House Bureau
PROVIDENCE — In 2004, the promoters of the proposed West Warwick casino offered the state a $100-million up-front payment for an exclusive license to operate Rhode Island’s first 24-hour casino, with blackjack, roulette and other draws that were unavailable at that time.
Voters ultimately said no to the proposed Harrah’s-backed West Warwick casino.
But now, another gambling license worth upward of $100 million annually to whoever acquires the right to run the bankrupt, 24-hour Twin River track-and-slot parlor is in play, and a state Senate committee is asking questions:

Why isn’t the state putting this license out to bid? Why is it ceding the ownership decision to Twin River’s lenders, who include many of the big-time New York banks and financial houses, including the Merrill Lynch Capital Corp., Deutsche Bank AG, JPMorgan Chase Bank, Wachovia, Morgan Stanley, BlackRock Inc. and The Carlyle Group? Who is looking out for Rhode Island’s taxpayers?


There were no clear answers, but the beginning of a high-stakes legal and political debate at the State House on Tuesday. A key Senate committee summoned the heads of the state Lottery, and the state Departments of Revenue and Business Regulation to the State House for the first in a series of hearings that spun off this declaration by Sen. Frank Ciccone, D-Providence: “This license is an asset of the state and should revert to the state.”


A lawyer representing the Carcieri administration in the bankruptcy proceedings told the lawmakers that nothing precludes them from giving the lenders the opportunity to put the license up for bid after the sprawling Lincoln gambling hall emerges from bankruptcy. Lawyer Shelley C. Chapman said she could not speak for the lenders, but “I can’t imagine they would be opposed.”


But later, she acknowledged her answer was premised on the lenders auctioning Twin River — and its gambling license — for the highest price they could get for themselves, not the state.
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“That’s business,” she said. “What if a beautiful facility opens in Massachusetts 35 miles away, and things go South. They are taking the equity risk; they are entitled to the gain,” she argued.

The Gambling Arms Race will be used repeatedly by surrounding states until we insist on an impartial cost benefit analysis and refuse to subsidize wealthy casino investors, just as New Hampshire has done.

Ciccone disagreed, and the jousting began.


THE GAMBLING HALL is home to more than 4,750 video-slot machines — including an armada of virtual roulette and Blackjack machines — placed there by the state Lottery, under terms where the state keeps roughly 61 cents out of every dollar a losing player leaves behind.
During the year that ended on June 30, that translated into $242.3 million for the state, $110.3 for Twin River’s owners, $27.7 for the machine providers, another $9.9 million for the Providence-based GTECH as the central-system operator, $5.7 million for the Town of Lincoln and $674,130 for the Narragansett Indian Tribe, which has no role in Twin River’s operation or ownership.


With that much money at stake, Ciccone urged a Senate inquiry into “the possible options of the state, in the event that the license is revoked, to reissue the license in accordance with a bidding process, or to a better location in the state, or on more desirable terms,” and, in the interim, “the right of the state to approve or disapprove the next owner or manager.”


His questions prompted Sen. Maryellen Goodwin, chairwoman of the existing Senate Committee on Constitutional and Regulatory Issues, to call Tuesday’s hearing, which she called the first in a series.


Chapman told the lawmakers that federal bankruptcy law prohibits the state from exercising the right, spelled out in a July 2005 contract with Twin River’s current owners, to revoke their right to operate the video-slots that are their big money-makers.


She also discouraged the lawmakers from entertaining thoughts about putting Twin River’s operating license out to bid while the case is still moving through bankruptcy court, under terms where the 50 banks and investment houses that hold Twin River’s debt will probably end up owning it, after writing off $290 million of the $590 million in defaulted loans.
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TWIN RIVER is owned by a subsidiary of BLB Investors, a holding company made up of the principals in Kerzner International, Starwood Capital Group and Waterford Group LLC.
In response to queries from Ciccone and Senate Finance Committee Chairman Daniel DaPonte, she acknowledged the “consensual” bankruptcy agreement endorsed by the state, the lenders and the current owners relies heavily on the legislature — which was not party to the negotiations — agreeing to change state law. The agreement hinges, in part, on the lawmakers uncoupling the video-slot play from a requirement that Twin River run at least 125 greyhound races each year.


Ciccone — who waged a losing fight during the last legislative session to preserve dog racing — said “that’s a big ‘if’ right now.”


Before signing off on any such agreement, he said, the lawmakers might want to pin down the value of the gambling license. “The license as kind of a standalone piece of paper doesn’t mean very much, uncoupled from the facility,” Chapman said.


But Ciccone disagreed, suggesting the state “can assign [it] anywhere we want it to be, and the quote — bond holders — your lenders, these 50 different bankers have a piece of property that would be worth nothing.”


Chapman said: “That’s correct, however, [you’d] have to build that facility again, and to be honest you are not going to find someone to come in with another $800 million to build a facility.”


Ciccone: “We’ve never tested the waters have we?”