Connecticut Today
Connecticut's Casinos Challenged as Revenues Decline, Competitors Rise
BY ERIK OFGANG
The
battle finally seemed over.
About
a year and a half ago a lawyer for the town of Kent wrote to Bruce Adams, Kent’s
first selectman, informing him that the town’s fight to prevent the Schaghticoke
Tribe from receiving federal tribal recognition was essentially won. Federal
recognition for the Schaghticokes would have potentially paved the way for the
tribe to open a casino, possibly in Kent but more likely on purchased property
elsewhere in western Connecticut. It would have also lent weight to the tribe’s
argument that land once part of the Schaghticoke reservation but currently
occupied by the prestigious Kent School (a private boarding school) and housing
the town’s sewer treatment plant, as well as several private properties, should
be returned to the tribe. But with the arrival of the attorney’s letter, both
potential issues seemed things of the past.
“We
were of the belief that it was over,” recalls Adams. About a month later he
received another letter from the same lawyer, informing him that in Washington
there was movement to reform the tribal-recognition process in ways that could
drastically alter Kent and Connecticut’s tribal landscape.
(Foxwoods,
above, and Mohegan Sun, below, in photos from the state's tourism website,ctvisit.com)
The
draft of the proposed reforms, which was publicly released by the U.S. Department of
Interior’s Bureau of Indian Affairs (BIA) in May, calls for a
rewriting of the Federal Tribal Recognition process. Under the proposed changes,
tribes would only have to trace ancestry and continuity as a community back to
1934. Currently, they need to trace ancestry and continuity back to “first
contact” with European settlers, which in Connecticut means back to the 1600s.
In addition, the new proposed rules would make tribes with state recognition
virtual shoe-ins to receive federal recognition.
If
the proposed rule changes are enacted, three Connecticut tribes might be in line
to receive federal recognition: the aforementioned Schaghticokes in Kent; The Eastern Pequotsin North Stonington; and
the Golden Hill Paugussetts in Colchester and Trumbull.
If
these tribes receive recognition, three
more casinos could legally open in Connecticut. But with the existing
casinos,Foxwoods
Resort Casino and Mohegan
Sun, facing declining revenue and the prospect of increased
competition from proposed casinos in New York and Massachusetts, economists say opening more casinos here could
be quite a gamble.
IF
YOU BUILD IT, WILL THEY COME?
“[Gambling] is nowhere near the strength at
either Foxwoods or Mohegan Sun that it was 10 years ago,” says Peter M.
Gioia, vice president and economist for the Connecticut Business & Industry
Association (CBIA).
Over the past few years, the handle
(the total amount bet at slot machines) at Foxwoods has declined by more than $800 million
per year, from nearly $7.3 billion in
the 2011-2012 fiscal year, to $6.5 billion in 2012-2013, to $5.6 billion in 2013-2014. Mohegan
Sun has seen a similar decline. In the second quarter of this year the company’s overall profits were down 31.6
percent from the same period last year. In July 2014, both casinos
reported significant declines in slot machine betting and
revenue.
Gioia
says you can see the decreased casino business with your own eyes.
“I
remember going to those casinos five or ten years ago. You would go in on a
Tuesday afternoon or a Thursday morning and they would be packed,” he says. “You
go through there right now on a weekday and even weeknights before Thursday
and there’s a lot of sections that are
shut down.”
The
problem for Connecticut’s existing casinos is twofold, explains Gioia. Neither
business has fully recovered from the 2008 recession and now both are facing
increased competition from gaming facilities in nearby states such as Rhode
Island and New York, with even more likely to come. Plans are underway for three
casinos in Massachusetts—though the law allowing these casinos could be repealed
by a public vote in November; Mohegan Sun is actually behind one of the
projects, a proposed $1.3 billion resort casino in East Boston at Suffolk Downs
thoroughbred track. There are also multiple proposals for casinos in New York,
including one in Newburgh that could conceivably attract New York City and
Fairfield County gamers.
Fred
Carstensen, professor of Finance and Economics at the University of Connecticut
and director of the Connecticut
Center for Economic Analysis, says that “historically 70 to 80
percent of the betting has come from people outside of the state of Connecticut
at Foxwoods and Mohegan Sun.”
Thanks
to casino development in surrounding states, the number of out-of-state gamers
who visit Foxwoods and Mohegan Sun will likely decline, regardless of whether a
new casino is built in the state or not.
“The
question isn’t will Mohegan Sun and Foxwoods lose some customers to the new
casinos, because they will,” Carstensen says. “The really critical question is
how much they’re going to lose. If the Massachusetts casinos do get built along
with the New York ones, they can easily lose 20 to 25 percent of their betting
base.”
Gioia
of CBIA says he’s not convinced a new Connecticut casino would be a safe bet. “I
don’t’ know if I’d be someone who would want to financially back that
expansion,” he says. “You have a market
that may be becoming saturated.”
CAN
YOU BUILD IT?
Even
with the increasingly crowded casino market, gaming issues are often at the
heart of the debate about federal tribal recognition in Connecticut.
In
the early 2000s, the Eastern Pequot Tribal Nation and The Schaghticoke Tribal
Nation (one of two major factions within the Schaghticoke tribe), both received
federal recognition before political pressure from then attorney general Richard
Blumenthal and other Connecticut politicians. A court appeal led to a reversal
in 2005.
Almost
a decade later, Connecticut’s current attorney general, George Jepsen, says the
reemergence of this issue is concerning.
“It’s
immensely frustrating to have played by the rules and fought and won and put
this issue to bed, only to have all that hard work [potentially] undone by a
change in the rules, a change that when you take ten steps back, doesn’t make
any sense,” Jepsen says. “It wasn’t prompted by any change of policy, it’s not
like new information came to light or Congress changed the laws. This is just
unilateral action by the BIA.” He adds, “We think the existing regulations are
adequate and fair and oppose the dilution of them which would be a consequence
of this proposal.”
Of
particular concern, says Jepsen, are the provisions of the proposed rule changes
that require tribes to trace ancestry and community only as far back as 1934,
and the increased importance placed upon state recognition. Connecticut would be
affected because it is the only state that has reservations for tribes who have
been previously denied federal recognition.
Jepsen
says state and federal recognition are two very different things. Connecticut
has recognized the Indian ancestry of groups and designated reservation land for
them, but has never dealt with its state-recognized tribes as sovereign nations,
which is required if a tribe receives federal recognition.
“[Under
the proposed reforms] the mere fact that the state recognizes a tribe for the
purpose of allowing them to have a reservation becomes a proxy for continuous
community and political existence back to Colonial times,” Jepsen says. “The
criteria by which the state has recognized these tribes has a very different
purpose over the years than the federal-recognition process. So this [rule
change] would have the perverse outcome of allowing tribes that could not prove
that they existed from a political organization standpoint, or from a community
standpoint, to bootstrap themselves into recognition.”
Adams
agrees with Jepsen that by recognizing tribes at the state level Connecticut
policy makers never intended to grant them the status of sovereign nations.
“If
you do some research you’ll find that the state reservations in Connecticut were
granted with relative ease and as sort of a goodwill gesture to the Native
American tribes,” Adams says. “It was given so long ago.”
Jepsen’s
office is currently preparing comments on the proposed rule change and will
submit them to the BIA over the summer. Efforts to prevent the tribal
recognition rule change have bipartisan support within Connecticut and strong
support from Gov. Dannel Malloy and U.S. senators Richard Blumenthal and Chris
Murphy.
“We’re
not denying that people who live on the Schaghticoke reservation have
Schaghticoke blood in them,” Jepsen says. “It’s not a denial of their ancestry
but state recognition does not confirm or say the Schaghticoke have been in
existence as a continuous political community all these years.”
WHO
WILL BUILD IT?
The
Schaghticoke tribe split in the 1980s and two major factions emerged, the
Schaghticoke Indian Tribe and the Schaghticoke Tribal Nation, which received
federal recognition in 2004 before the decision was repealed. Under the proposed
new guidelines those who applied and were denied previously would only be
allowed to reapply if all the parties who participated in the original hearings
agreed to the new application. In the case of the Schaghticoke Tribal Nation,
that would mean the attorney general’s office would have to sign off on a new
application—something Jepsen has pledged not to do. But there’s a catch.
“The
danger,” says Jepsen, “is splinter groups, for example, within the
Schaghticokes, who have never been part of the formal process—because they were
not credible within the formal process, because they’ve not been denied
previously—would arguably be in a position to say ‘we’re recognized by the state
and therefore we deserve federal recognition.’ So you have this ironic outcome
where groups who were very marginalized and on the fringe could leapfrog or
reach a deal with a more established member of the group.”
He
adds: “It’s also likely that the three tribes who sought and have been denied
recognition would challenge in court the requirement that parties such as my
office consent to their reapplication. So you would see litigation in lots of
different aspects of the case.”
If
either Schaghticoke faction received recognition, it is extremely unlikely a
casino would be built on the tribe’s reservation in Kent. Instead the tribe
would likely purchase property in a more accessible portion of Connecticut. In
the past, Danbury and Bridgeport have emerged as possible locations for a
Schaghticoke casino. Danbury officials have long opposed the concept, but
Bridgeport once welcomed the idea. In an unofficial referendum in 1995, a
majority of Bridgeport residents voted in favor of bringing a casino to the
city.
Paul
Timpanelli, president and CEO of the Bridgeport
Regional Business Council, says that today the prospect of a casino
would probably not be so warmly received.
“During
the mid-1990s, both the city and the Bridgeport Regional Business Council were
very aggressively pursuing the development of a casino in Bridgeport,” he says.
“Now I believe, and I cannot speak for the city, and I cannot speak formally for
the Bridgeport Regional Business Council because we don’t have a formal
position, but my guess would be that if
we were to be asked our opinion 20 years later, it would be the opposite—we
would not be in favor of the development of a casino in Bridgeport.
“There
are two reasons. One, we have two casinos in the state now, both of which are
struggling and we need to ensure that they succeed. Number two, Bridgeport is a
very changed city in 2014 as compared to 1995. We have made very significant
economic development progress and we’re very pleased with where we are today and
the growth that we see in the future in terms of job and tax base. The
introduction of a casino is not in keeping with the city’s current vision.”
Carstensen,
the director of the Connecticut Center for Economic Analysis, suggests that to
be viable a new casino in the state would need a prime location. For example, a
Bridgeport casino “would have the rail connection with Metro-North and Amtrak,
you’re along I-95 it’s easy access, and you would say, ‘Oh okay, that would be
quite attractive,’” he says.
Though
the respective businesses may have declined and there may be tough times ahead,
few people expect Mohegan Sun or Foxwoods to fold. Both are expanding the non-gambling aspects of
business, including high-end dining and entertainment options.
“They’re
trying to create competitive advantages through attractions that will overcome
the emergence of new gambling competitors,” Carstensen says. “Mohegan Sun and
Foxwoods have one advantage over any of these other places right now, which is
simply scale—they are huge. They have a good prospect of hanging onto a
reasonably good market share, but it’s going to be a tougher and tougher
competitive environment.”
In
Kent, First Selectman Adams continues to worry about the proposed rule changes
for reasons beyond a new casino opening in the state. He says if the changes
take place, “We’ll have a sovereign nation across the river from us that for the
most part can do what they want.”
Adams
adds: “Certainly, some changes were in order as the system for recognition was
unwieldy—and some would even say broken—but this is just too drastic. There’s no
questioning that Native Americans were not treated way back when as we would
like people to be treated today—but that was a long, long time ago and we don’t
feel it’s fair for such dramatic measures to be taken to make amends now.”
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