Risky Business

Harrah's Casino and Rhode Island's Newest Get-Rich-Quick Scheme

BY CRISTI LAQUER

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Illustration by John Gruen
Rhode Island

ACCORDING TO RHODE ISLAND law, three features can identify a lottery: "consideration [money paid to play], chance, and a prize." That definition blocked the creation of a new casino in West Warwick last year when the Supreme Court judged that it was a privately operated lottery, and thus unconstitutional. Harrah's Entertainment Inc., and the Narragansett Indian Tribe, who would jointly control the casino, have brought the matter before legislators again. The legality of gambling, the distribution of the casino's revenues and its impact on local communities are also at issue. Lawmakers, casino officials, and advocacy groups have chosen sides in the battle for West Warwick and are carefully considering taking a chance on the casino's promise of a huge prize for Rhode Island.

The proposed casino would represent a $650 million investment on the part of Harrah's Entertainment Inc., which is based in Las Vegas, to create a new luxury resort and gaming facility in West Warwick. According to plans presented to the state legislature by Harrah's officials, the new casino would include 100 game tables, a 500-room hotel, 55,000 square feet of ballrooms, and 3,000 slot machines.

In an attempt to compete with Foxwoods and Mohegan Sun, the two established casino resort facilities in the region, investors would target wealthy gamblers with a $35 million spa, fine dining, and entertainment. Jan L. Jones, a spokesman for Harrah's was quoted in the Providence Journal comparing the prospects of the new Casino with Lincoln Park, a casino with no resort facilities, "If you bring in higher amenities, then you anticipate longer room stays, larger gambling budgets. So much of what drives revenues in these properties is just not gaming. That's why Lincoln can't [currently] compete with Foxwoods and Mohegan Sun."

All Eyes On The Prize

Since proceeds from resort casinos figure in the billions of dollars, much of the debate surrounding the new casino has concerned where that money will go. Last May, when the Harrah's casino was proposed but failed to be approved by the State Senate, representatives of the company estimated that the new facility would generate $453.6 million in its first year, $478.8 million the second, and $504 million in the third. In the intervening year, Harrah's proposed investment has jumped from $600 to $650 million, and those revenue figures correspondingly climbed 8.1 percent, or about $40 million a year. Though the final details of the bill have yet to be determined, it is likely that the state of Rhode Island would receive roughly 25 percent of the casino's net income.

This week, Representative Jan P. Malik, (D-Warren) introduced legislation in the State Senate, independent of the bill to allow the casino itself, that would redirect the state revenue earned from the casino to property tax relief for Rhode Island communities. The state legislature must vote on whether a referendum question to decide that issue will appear on the November 8 special election ballot. Supporters of the casino hope that the bill will come to a vote before the Senate on the same day as the proposal to allow the casino.

Gary Loveman, Harrah's CEO, testified last year that his company would own the casino completely, but share its revenue with the Narragansett Indian Tribe. After 18 years (20 under this year's new proposal), the tribe would have the option to buy the casino from Harrah's. At the time, Senator J. Michael Lenihan (D-East Greenwich) asked Loveman, "Other than the fact that this polls better with the Narragansetts in the mix, why is it important to you to have the Narragansetts as partners in this proposal?" Harrah's officials responded by changing the flow chart representing the ownership of the casino. Last year, it showed that Harrah's Entertainment Inc. owned the proposed Harrah's Narragansett Casino completely, and demonstrated, with an arrow pointing to the side, that the Narragansett tribe would receive a share of the revenues; this year's chart shows both the tribe and Harrah's at the top of the chart as joint members in an organization that will run the casino. When asked about this change, Jan Jones responded, "There's not a change in the ownership structure. It's a PowerPoint presentation."

Governmental Considerations

Before a referendum on the casino can come before voters, the legality of the proposed legislation must be determined. Representative Timothy Williamson intends (and has said that he has Speaker William Murphy's backing) to ask the Supreme Court to decide this crucial question. The House and Senate are working together in a joint resolution to ensure that the Supreme Court deems the casino legal before the legislature wrestles with any specific decisions about the facility.

Last May, the bill for a referendum was defeated by the Supreme Court after clearing both houses and weathering a veto attempt by Governor Carcieri. The judges found that since most games at casinos "amount to nothing more than chance," Harrah's would be operating an "unconstitutional lottery"--one not appropriately monitored by the State Lottery Commission. This year, though, the pending legislation states that the casino would fall under a "master contract" with the Commission. But critics point out that the bill gave Harrah's more control over selection of slot machine vendors than is offered to Lincoln Park and Newport Grand, where such selections are made by the Commission. A new version of the bill that allows more state control has been introduced following lobbying by an investing group that plans to buy and expand Lincoln Park.

A study commissioned by the Senate, itself costing $34,000, found that the state stands to gain $118.9 million dollars in revenue from the casino. It also predicted that the minor losses suffered by Lincoln Park and Newport Grand's existing casinos could be offset by the addition of more games. But lawmakers must weigh the effects of the casino on their constituencies and existing businesses against the promise of more revenue.

Will Citizens Take A Chance?

Some residents of West Warwick are vehemently opposed to the casino's opening, which many in the town see as an intrusion. An advocacy group, West Warwick Citizens Against the Casino, states that the casino would be detrimental to local neighborhoods and might prove to be a tax burden rather than a relief. It is unlikely though, that grassroots efforts such as WWCAC's can compete with the marketing that Harrah's will undertake if the State General Assembly allows the casino to become a statewide referendum issue. In that case, Narragansett tribal spokesperson Guy Dufault said that Harrah's will play radio and television ads touting casino's potential benefits.

Dufault is drafting several pamphlets in an early effort to curry favor with Rhode Island lawmakers and citizens, both of whom may eventually vote on the fate of the casino. A new mailing campaign addressed to area residents follows the introduction of expanded plans for the facility. "It's a new proposal and a little bit bigger facility. We want to let [citizens] know what our intentions are," said Matthew Thomas, the Narragansett Tribe's chief sachem. Dufault's pamphlet for legislators promises to calm fears over potential traffic jams, bright lights and noise at night. It will be mailed along with a letter from Thomas, which states, "We know what it is like to have intruders on our lands and we will do everything to ensure that the local neighborhoods are protected." Other benefits for the state detailed in the letter include a revenue-sharing plan and a $100-million licensing fee.

Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts at Dartmouth, spoke at a State Senate caucus on the costs and benefits of the proposed casino, saying, "It would have a positive net fiscal impact." When he was asked by reporters about the possibility that the casino would monopolize consumers' disposable income, turning local communities (including downtown Providence) into ghost towns, Barrow explained that, due to a "spill-over effect," nearby businesses may actually benefit from the presence of tourists who come to the area for the casino.

The Hospitality Association of Rhode Island fears the promised spillover may not have such positive effects. Association spokesperson Amy Kempe said of Barrow's prediction, "I can show you three other reports that say just the opposite." Kempe stated, "It would most certainly have a negative impact not just in Warwick and West Warwick, but as far away as Newport and Federal Hill."

The casino debate highlights age-old tensions that drive the legislative process; lawmakers, at Harrah's lobbyists' insistence, must determine how to gain business and revenue for Rhode Island while avoiding the pitfalls of constituents' "not-in-my-back-yard" protests and the state's sober constitution.

Cristi Laquer B'07 can't currently compete with Foxwoods and Mohegan Sun.

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