Twin River: False Promises, Bad Mistakes, Job Losses

ARLENE VIOLET - Twin River's bad deal back on the table
The only thing worse than one mistake is many mistakes.

When it comes to the Twin River slot parlor (or the casino, as it calls itself on its Web site,) Rhode Island has bought into one bad deal after another. The newest proposal is another bad deal.

The first error made by Gov. Don Carcieri was to rush through a deal with BLB without bid after Wembley, the senior partner, ran afoul of legal trouble. Harrah's and other gaming giants had offered more money to the state to secure a license for full gaming. The then minor partner, BLB, struck a sweetheart deal with the state to continue its operation. Nothing was put into the state contract to require its own fiscal separation and liquidity maintenance from BLB's other corporations, his next major mistake. When BLB went into bankruptcy, it was its debt default primarily on its other operations as opposed to Twin River that brought them to the court.

Twin River could have survived on its own if there wasn't a diminution of its value by cross-collateralization and overextension. It was this expansion of its own empire that brought about the demise of the otherwise credit-worthy Twin River. Back in 2005 in this column I advocated for curbs on extended borrowing that might jeopardize the Lincoln site. The governor failed to set these limits in the contract, which has directly led to the situation today. Properties in Colorado and other places have run into red ink, thereby bleeding into Twin River, which ended up as collateral for these bad loans elsewhere.

BLB also managed to get a "slippage clause" passed by the state. This clause insulates the owners from losses to a competitor in R.I. although BLB was trying to get insulation from any nearby competitor. The original protection sought by the company was full of more moxie. At the time BLB's consortium of investors were trying grab some casino business via tribes in southeastern Massachusetts, which would directly compete with Twin River. They also owned part of Mohegan Sun. In effect, they were seeking financial protection for the very competition it set up. The legislature balked. Now the company is trying to "shore up" the clause, whatever that means. Vigilance is needed.

BLB Investors also tried to get an 18-year lease from the state under the guise that its finances required it. When Rep. Steven Cosentino of the House Finance Committee expressed skepticism and asked for financial data as to why such a lease was necessary, BLB refused to provide what it called "proprietary information." Cosentino tried to stop this train wreck, which the governor supported.

Now the company is seeking 10 times as much as its last deal with the state regarding the marketing. Carcieri agreed to pony "up to" a million dollars for advertising in the last deal. Now, Twin River investors want $10 million from taxpayers and a new $1.4 million of taxpayers' dollars paid to them to manage the facility.

Putting aside a moment how untoward it is for the state to be doing this promotion, again this proposal, including the gambling license is without bid. Of course, the governor will argue that the dog is already out on the track (oops, I guess not, since they want to drop the racing and the attendant jobs associated with greyhound racing) so there's no time to do this especially with the Speaker of the Massachusetts House stating that he looks favorably on casinos coming to the Bay State. In R.I. there will be a wringing of hands about being too late as the leaders on Smith Hill hope the taxpayers forget about the hosing that was given to the Narragansett tribe. How about letting the tribe and its backers run the facility for the banks that got stiffed by BLB? Shouldn't we at least entertain some proposals from other interested parties?

The jobs at the site have been shaved to 500 from about 1,200. Whatever happened to the argument made in the last deal about the necessity of concessions in order to maintain jobs? Getting rid of the dogs will ax more workers.

So what is this current situation really all about? Quite simply, it's about gambling and encouraging it in spades to fill the state coffers. Despite all the sanctimony of "how bad gambling is" and his opposition to it, gaming has expanded exponentially under this governor.

This state has failed to diversify its job base, so now it has to throw the dice. No doubt the "evil" of a full casino will be blinked at. The same leaders who went apoplectic over a full casino for the Narragansetts are poised to grant it to insiders who could care less about the state. They, no doubt, will give the same concessions as the tribe was looking for receiving a higher percentage from the gaming tables for itself. This will happen while competitive proposals are ignored again. The bankers will be happy but the Rhode Island taxpayer will roll snake eyes.

- Violet is an attorney and former state attorney general.