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March 13, 2017

Jepsen sees ‘not insubstantial’ risk in casino expansion

Allowing Connecticut’s Indian tribes to operate a casino outside of tribal lands poses legal risks that “are not insubstantial” to the more than $200 million in casino receipts due annually to the state, Attorney General George Jepsen wrote Monday in a formal legal opinion.

Jepsen’s eight-page analysis could present a major political hurdle to the Mashantucket Pequot and Mohegan tribes’ plans to build a $300 million satellite casino in East Windsor.

The tribes say such a facility is crucial to blunt the projected loss Connecticut’s gaming industry faces from the $950 million casino and entertainment center MGM Resorts International expects to open next year in Springfield, Mass.

“The risks attendant to authorizing casino gaming facility operated by an entity jointly owned by the MPTN (Mashantucket Pequot Tribal Nation) and Mohegan (tribe,) while impossible to quantify with precision, are not insubstantial and cannot be mitigated with confidence,” Jepsen wrote in an opinion submitted to Gov. Dannel P. Malloy. “We are not in a position to opine on the nature or extent of the economic or other benefits that may result from approving such an entity or whether an such benefits justify the risks.”

According to Mashantucket Pequot and Mohegan officials, the benefits of a new casino are overwhelming when taken in perspective. Specifically they say, Connecticut could not eliminate, but could substantially reduce a major hit to its gaming industry.

An analysis prepared for the tribes by gaming consultant Clyde Barrow estimates that the MGM facility — which is more than halfway complete and expected to open in 2018 — would cause the loss of 9,300 jobs and $702 million in revenue to Connecticut’s casinos during its first three years of operation.

Barrow’s projections are that a satellite facility would recapture 46 percent of the jobs and 53 percent of the revenue the Connecticut industry otherwise would lose. The tribes also say the new casino would create almost 4,300 new permanent jobs — either at the casino or at surrounding related businesses — and 2,300 temporary construction jobs.

But MGM officials and others argue that legalizing casino gaming within the state — currently it only is permitted on sovereign tribal land — would lead federal officials to revisit a nearly 25-year-old agreement between the tribes and the state.

Under that agreement, Connecticut suspended legal objections it had to casino operations and the use of video slots — in exchange for 25 percent of video slot revenues. That compact is worth an estimated $267 million to the state this fiscal year, though the take is projected to drop by 2019 to just below $200 million.

“Attorney General Jepsen’s legal analysis reiterates and underscores what he stated so effectively two years ago,” Uri Clinton, MGM”s senior vice president and general counsel, said Monday. “Once again, the conclusion is clear and unmistakable:  Connecticut risks hundreds of millions in annual revenue if it proceeds with a commercial casino — even if that casino is to be operated jointly by the two federally recognized tribes.”

“Connecticut cannot afford to take this and the other risks identified by Attorney General Jepsen, especially in the midst of budgetary shortfalls and economic uncertainty,” Clinton added. “There is a better, no-risk option. Connecticut can generate more revenue, create more jobs, and drive greater economic development for the state as a whole by establishing a competitive bidding process.”

Neither Malloy, nor the Mashantucket Pequot or Mohegan tribes commented immediately after the opinion was issued.

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