Stephen Crosby mulls interests of casino developers, critics

In sit-down, gaming chair mulls interests of casino developers, critics
By Kyle Cheney / State House News Service

When it convenes this spring, the Massachusetts Gaming Commission will face an immediate conundrum with multimillion-dollar implications: how closely should gambling regulators partner with and advance the interests of the industry they’re charged with nurturing and policing?

Stephen Crosby, chairman of the new commission, is grappling with that question as he prepares to build a casino industry from scratch over the next two years. In a wide-ranging interview, Crosby wondered whether it is in the public’s interest to encourage gambling, whether casino regulators should work with licensed developers to ensure they maximize their economic impact, and if the commission should conduct its own review of the negative economic consequences of expanded gambling.

“What is the public good here? We know we want to avoid the bad. We know we don’t want criminals in the system. We know we don’t want undue political influence. We know we don’t want crony hiring. We don’t want skimming at the casinos, and all that kind of stuff. We know we’d like to have as much economic impact as possible,” he said. “But do we want to promote the gaming industry? Is that part of our job? Is that a public good? And if so, how do you do it?”

Crosby’s questions underscore the challenge of building an industry with the promise of generating billions of dollars of economic activity in a state with a deep dichotomy of views on gambling; Massachusetts boasts the most successful per capita lottery in the country, but a vocal, persistent anti-gambling constituency appears to have no intention of laying down for casino moguls. How aggressively the Gaming Commission partners with the gambling industry also carries great implications for the strength of the Lottery, another paradox with which gaming commissioners must contend.

In legislation that sanctioned up to three casinos and a slot parlor in Massachusetts – signed by Gov. Deval Patrick in November – the Gaming Commission is imbued with sweeping powers to build and regulate the gambling industry, including the authority to design the criteria applicants must meet to win a casino license and to enforce gambling laws.

Crosby is the commission’s only member so far, appointed as its chairman by Gov. Deval Patrick in December. Four other commissioners are due to be named by March 21, one appointed by Treasurer Steven Grossman, another by Attorney General Martha Coakley and two consensus picks by Patrick, Coakley and Grossman. Crosby said he’s offered his help to Grossman and Coakley in making commission picks, should they seek it.

“I said both to the attorney general and the treasurer that I was very interested in this but I knew I had no formal role, but if they were interested in my participation, I’d be more than happy to do it because obviously this matters to me as much as anybody else on earth,” he said. “Steve Grossman reached out and said, by all means ... make suggestions if you have any.”

“That’s what it’s all about with these four people, is personal integrity – demonstrated personal integrity,” he said, “the ability to deal with the kinds of pressures, the kinds of temptations and the kinds of challenges we’re going to deal with, and wisdom and the ability – the demonstrated ability – to exercise that wisdom and sound judgment.”

During the interview, Crosby made clear his own reservations about expanded gambling, but stopped short of saying an anti-gambling advocate belongs on the Gaming Commission.

“I don’t know that it would be a good idea to have somebody who’s explicitly opposed. We don’t want to refight the battle about whether to do this or not. I don’t think we should interpret the law as inviting us to oppose casinos,” he said. “Personally, if I felt like I couldn’t permit casinos to come, I would resign. I don’t think that’s the right way to go here. That would probably be too far on the continuum.”

But Crosby said he’d be willing to attend a forum convened by anti-gambling groups, some of whom criticized Crosby for participating in a conference with potential developers and gambling industry stakeholders last week. That conference was organized by NAIOP, an association representing commercial real estate developers.

“Sure, I’d be open to that,” he said. “The NAIOP experience shows that I have to be very, very careful not only on the reality of a conflict but in even the remotest appearance of a conflict.”

In a nod to gambling critics, Crosby said he’s heard their appeals for a more detailed examination of the ills of expanded gambling, and he said he is reviewing existing data to see whether it is conclusive.

“I’ve heard criticism that they aren’t objective or they’re not comprehensive. I’ve started to read some of them, but I just don’t have my own opinion. But we absolutely do need good, baseline data,” he said. “What kind of economic impact is realistic to expect? What kinds of revenues are realistic to expect? What are the negative consequences? What does it tend to do to compulsive gambling? How does it aggravate compulsive gambling? What does it tend to do in terms of associated criminal activities? If the Legislature and the governor have not done really thorough and objective analysis of that, then I would think the commission would want to do that.”

Opponents of expanded gambling have demanded that the state conduct a cost-benefit analysis of three casinos, arguing that introducing gambling facilities in Massachusetts would drive up addiction, organized crime and drunk driving, shutter small businesses, and simply shift consumer spending in other parts of the economy to casinos. Beacon Hill leaders opted against such an analysis last year, saying numerous studies already exist that measure the economic and other impacts of casinos.

Crosby said the commission, when formed, will be immediately tasked with deciding whether to work as a “partner” of the gambling industry, offering guidance and advice to maximize their success, or whether to act strictly as a regulator and take a “hands-off” approach to industry decisions.

“The question is, What role is there for the commission to become a proactive ally of the industry in Massachusetts?” he wondered. “Do we want to try to think proactively, what can we do to advance our industry’s objectives versus a competitor ... Do we want to become their partners, sort of? Do we want to work with them or not?”

In particular, Crosby said, the potential advent of internet gambling or sports betting, as well as the potential reaction to Bay State casinos by border states like New Hampshire or Connecticut, could put pressure on Massachusetts casinos, and working with casinos to address these potential challenges could fall under the commission’s purview.

Other critics of expanded gambling have argued that it would divert money from the Massachusetts Lottery, which generated $4.5 billion of sales per year and sends hundreds of millions of dollars in profits to cities and towns as local aid. Crosby noted that the gambling law’s requirement that casinos minimize harm to the Lottery would require the Gaming Commission to tap into “new markets.”

“But how big are the new markets?” he wondered.

Crosby indicted that however the commission proceeds, Bay State residents are unlikely to see gambling facilities for years.

“We have to build an institution from the scratch. We don’t have office space yet. We don’t have any bylaws. We certainly don’t have any specifications for proposals. We don’t have an executive director. We don’t have anything,” Crosby said. “I would imagine that it’s going to be the better part of this year before we’re even able to really appropriately solicit proposals. So it would be a year or two before even a license 2” – the designation for a slot parlor license – “goes out.”

Crosby said that as soon as the commission reaches three members, enough to constitute a quorum, it may begin signing leases and conducting basic, organizational business.

“You can’t sign a lease, do anything formal until you have a quorum ... we’re looking at places where other public agencies have vacated space. We don’t even know how many employees we’re going to have,” he said. “We’ll probably get some interim space that’ll hold 10, 15, 20, 30 people while we’re getting organized and figure out how much space we really need. Do we need space for 200, 100, 300? None of us really knows yet.”

Crosby acknowledged that the new gambling law counted on awarding the slot facility license more quickly than the casinos licenses.

“Because it’s much less capital intensive, much less construction to be done, much less community impacts probably, it certainly could happen more quickly,” he said. “But as I’ve said many times, we’re not going to rush this. And I think a big slots parlor is going to require as much scrutiny and care on our part as a casino. So it probably will happen more quickly, but I’m not going to feel rushed by that.”

Crosby also agreed that a brewing patronage scandal within the state Probation Department will challenge the Gaming Commission to look “clean.”

“It just creates an environment where nobody trusts anybody and it’s all the more important why I, and we, have to be just as assiduous as we can to make it look like we are really paying attention to transparency and equity and merit-based hiring and everything else,” he said, adding, “Knock on wood – the least we’re going to do is not hire under some corrupt system ... the challenge is to look as clean as you are. And in this skeptical environment, that’s hard to do.”

Crosby said he expects the commission to adopt anti-patronage reforms proposed by a task force that investigated the Probation Department scandal in 2010.