KG Urban says tribe's casino head start stymies their efforts

KG Urban says tribe's casino head start stymies their efforts
By Steve Decosta


A prospective New Bedford casino developer isn't just bothered by the fact that the Mashpee Wampanoag could be handed a tribal casino by the state government without any challenge.

KG Urban Enterprises, which has filed suit in an attempt to overturn the advantage given to Indian tribes in Massachusetts' new gaming law, figures the tribe also is getting a leg up in the competition should the Wampanoag fail in a bid to run a tribal casino and instead channel its efforts into acquiring a commercial license.

The new law gives tribes an exclusive window until July 31 to negotiate with the state for a tribal casino in Southeastern Massachusetts — not regulated by the state. If a tribe cannot meet certain specific conditions by that time, the southeastern casino license, one of three across Massachusetts, would be put up for public bid.

But because of its head start in the process, the tribe "would be in the catbird's seat for trying to get a commercial license," attorney Paul Clement said in arguing KG's case in a hearing in U.S. District Court in Boston last week.

An affidavit filed by KG Managing Director Andrew Stern outlined why that might be the case.

While developers and casino operators are scrambling to put together their proposals for casino licenses in the other two sections of the state — Western Massachusetts and Greater Boston — "The Southeast ... remains a dead zone for everyone other than Indian tribes," Stern said. "Because of pervasive uncertainty about whether non-tribal applicants will ever be able to apply for a casino license in the Southeast, gaming operators and investors are unwilling to consider non-tribal development projects in that region."

In the west and greater Boston, "gaming operators have every incentive to invest in the best possible development projects because they know that each application will ultimately be evaluated on its competitive merits," Stern argued. "Those operators are taking concrete steps — conferring with local officials, developing partnerships, and the like — that will allow them to file an application as soon as the commission accepts such applications, and to move forward as soon as a license is granted."

But the Southeast is different, with the tribe's advantage and the possibility that the area's license may never go out to bid.

"KG's ability to move forward on a project ... depends on partnering with a gaming operator and acquiring significant financing from outside investors," Stern said. "Gaming operators and potential investors will not partner with us or participate in any non-tribal development project in the Southeast as long as the Act's tribal set-aside is in force.

"The Mashpee Wampanoag tribe's efforts to obtain a gaming license are being financed by the Genting Group, a Malaysian conglomerate that operates gaming projects around the world. Even if an exclusive tribal compact is not approved by July 31, 2012, the Mashpee's ability to coordinate with Genting gives the Mashpee a significant advantage in formulating a proposal for a commercial license in the Southeast. Every day that passes in which Genting and the Mashpee can coordinate and KG cannot coordinate with a gaming operator exacerbates KG's competitive disadvantage and injury," Stern said.

"If it were able to obtain a gaming operator partner and additional investors, KG would be taking numerous steps, right now, to improve its development proposal for the Cannon Street site. In particular, KG would be conducting public outreach with elected officials, local businesses, and citizens in the New Bedford region, as all of the announced applicants in the Eastern and Western regions are doing at this writing."

KG has been laying the groundwork for a casino development at the abandoned Cannon Street power plant for four years. Stern said the company already has spent more than $4.5 million on the project and projected total spending of more than $1 billion if the group is ultimately awarded a casino license. That includes about $50 million for a privately financed cleanup of extensive environmental contamination.

"KG is incurring substantial, ongoing costs — including but not limited to option payments on two different sites — to maintain the viability of the Cannon Street project," Stern said. "It is very unlikely that KG would continue to bear those costs indefinitely based on the mere possibility that someday it will be permitted to apply for a gaming license based on the economic merits of its proposal."

Clyde W. Barrow, who has studied the New England gaming scene for better than 15 years as director of UMass Dartmouth's Center for Policy Analysis, speculated that KG's difficulty in securing partners might be for reasons other than the tribal preference.

"We don't know, but many other factors could be at play, such as location (at the end of a road that is being calmed for pedestrian traffic through boulevardization) and the type of facility (most operators are not attracted by abandoned power plants, but prefer to build new, despite KG Urban's one success in Bethlehem, Pa.)," Barrow said in an email.