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Where’s the Legal Clash Over Tiverton Casino?
There was something odd about a news report that Tiverton’s Interim Town Administrator Christopher Cotta and Town Council President Patricia Hilton were “livid” and “doubly frustrated” upon learning that Governor Gina Raimondo had permitted the reopening of the Twin River casino in town without consulting them.
The Gambling Giants Make Nice-Nice
Just a short while ago, Rhode Islanders were treated to a refreshing opportunity to see our system of government work the way it should. With one of the two major managers of the state’s gambling line of business challenging a no-bid deal the governor had worked out with the other, it looked like the Ocean State might benefit from an open-bid process bringing in competing proposals and driving down the cost of the contract and/or the benefits to Rhode Islanders.
Oh, well. Twin River and IGT have teamed up to present unified front to the state government:
If the proposed agreement is approved by lawmakers and state gambling regulators, Twin River would evolve from a casino-operating company to one that provides video-slot machines, giving it a large source of the revenue now going to out-of-state game manufacturers and suppliers.
International Game Technology would emerge as 60% shareholder of the new company, with a clearer shot at winning the 20-year contract it has been seeking from the state, without Twin River executives — and the big-name gaming industry players that Twin River had lined up as potential partners in a rival bid — nipping at its heels. Twin River would have a 40% stake.
And as if to capture the full circuit of issues that have illustrated Rhode Island’s flawed approach to government and economic development, Twin River has pledged to open up a new headquarters in the Wexford Innovation Complex, a recent addition to Providence that the governor has huge incentive to see filled with tenants.
Republican candidate, lawyer, and historian Steven Frias has it right when he says, in the first linked article above: “This deal does not automatically become a good one for taxpayers because IGT and Twin River will now be business partners.”
We benefit from competition, whether it’s political parties or private vendors for state, and we shouldn’t assume that it’s a good thing when they work together.
Political Monday with John DePetro: Many Forms of Political Performance Art
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, for December 9, included talk about:
- Cicilline v. Trump
- Energy protesters at the State House
- Empty Wexford
- Sports gambling lawsuit goes forward
- Truck toll lawsuit goes forward
- The Transportation & Climate Initiative (TCI) tax
Political Monday with John DePetro: Hints of a Constitutional Crisis
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, for November 18, included talk about:
- Raimondo fundraising as governance
- The governor sues the General Assembly
- Municipalities sue the state government
- Protestors’ liberal-meeting interruptions
- Cranston seeks investigation of another department
Twin River and Raimondo, an Unhealthy Relationship, to Say the Least
What is going on in the governor’s office that Gina Raimondo is picking petulant political fights with the state’s casino contractor?
The appropriate statement through all of this should have been easy. Something like this: “I am not aware of any threats’ being made, but of course that would be completely inappropriate. So, I’ll be speaking with my staff and reaching out to our friends in Twin River to make sure nothing like that was done and to resolve any misunderstandings there may have been.”
Instead, she makes a blanket denial and casts shade on the company, answering a question from Steve Klamkin of WPRO as to who made the threat:
“Absolutely no one,″ Raimondo said. “That’s clearly baseless and untrue. We have been nothing but professional with Twin River at every step.”
“I am so disappointed in Twin River. In addition to the way they are behaving through this process, you know what they did in breaching the regulatory agreement with the state is very serious and I am concerned,″ she said of the debt limit dispute, which arose from Twin River’s out- of-state expansion moves, which Crisafulli contends it kept the state apprised at every step.
“I am concerned,″ Raimondo said. “Their revenues are down. They are doing layoffs. they are breaking the regulatory agreement and it is our job to protect taxpayers and to hold Twin River accountable. And that’s what we are going to do.
“So we sat down with them. We are trying to help them. We were collaborative. We came up with a settlement They are going to make millions of dollars of investments into Twin River, thankfully. It’s about time. Anyone who has been to Twin River knows it could use a bit of a facelift.”
So, what comes of this? Twin River President Marc Crisafulli decides to stop playing coy and comes right out and names Raimondo Chief of Staff Brett Smiley, which politics watchers will likely find credible. Not only that, but Crisafulli gives additional details, such as that Smiley called his cell phone three times one afternoon after Twin River decided to vocally oppose the IGT deal. The contrast makes Raimondo’s denial look like a knowing lie.
If nothing else, this is an indication that Raimondo is not a very good executive. But Rhode Islanders already knew that. This episode adds a little more evidence that she’s actually not a very good politician, either.
The Familiar Names When Money’s on the Table
The lottery company seeking a 20-year, no-bid contract from the state of Rhode Island has acknowledged its failure to report $776,000 in lobbying expenditures over the course of three months, according to Katherine Gregg in the Providence Journal. Some of the names involved are very interesting — which may explain some of the reluctance to report them:
In an updated lobbyist-disclosure report filed Wednesday in response to Journal inquiries, IGT disclosed a total of $776,000 in payments to its media strategist and spokesman Bill Fischer’s company, True North Communications; the Providence public relations and media placement company (NAIL), where Gov. Gina Raimondo’s former communications director, Mike Raia, now works; Signature Printing; Big Tony’s Pizza. The total includes $15,000 a month in both August and September to the only named news outlet in IGT’s report, GoLocal 24 LLC.
Raia, remember, was a Raimondo staffer who left her administration-campaign network earlier this year in order to take the small step into a private company that has been working with her office. Now we find that company involved in the giant financial transaction for which Raia’s former boss has been inappropriately advocating. Add this to the connection with former IGT Chairman Donald Sweitzer, who has been working with Raimondo in the Democratic Governor’s Association.
Whatever the specifics of the deal, Rhode Islanders can’t have confidence that the governor is acting entirely without self-interest. It should go out to bid in a conspicuously transparent process.
An Imbalance in the Testimony Competition
Katherine Gregg’s article providing some insight into how political consultants helped IGT get its employees to the State House to testify on its proposed 20-year, no-bid deal with the state provides tremendous insight into the process:
First came a “Dear Colleagues” email from a senior vice president in IGT’s Global Brand, Marketing and Communications division. Provided to The Journal by an employee who asked to remain anonymous, it said, in part:
“As you are aware, this is a critical week for our RI lottery agreement …. Select employees are testifying at the House hearing. But we need as many as possible employees at the State House on Thursday October 3, 2019 …. We are asking employees to bring friends and family along as well.”
The series of emails informs employees that they’ll be able to dress down that day and maybe work from home the next. It promises reimbursement for parking, instructions on how to secure a seat in the hearing room and move around the State House, and assures participants of a free dinner.
Anybody who has made a go at grassroots organization at the State House will see the value of this — and the imbalance it indicates between special interests and the public at large. For the public at large, testifying on legislation is a bear. Where do they park? When should they arrive? What should they wear? The hearing rooms are either frigid or sweltering. There’s no food other than a vending machine tucked in the hallway (which is none too modern, to my recollection).
Ultimately, there’s nothing wrong with a private company hiring political consultants and giving employees incentive to support the organization’s mission. Still, IGT appears to have required managers located in Rhode Island to attend and to have provided amenities of some value to all employees. At what point should these things be reportable as lobbying activities? I remember when unpaid Tea Party members were registering as lobbyists simply so they wouldn’t be tripped up.
My preference is to minimize all such regulation of political activity, but consistency and equal application are crucial if we’re going to have it.
What’s in..What’s out…10/4/19
A run-down of items in Rhode Island political news for the week.
Political Monday with John DePetro: In Search of Motives
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, for September 23, included talk about politicians’ school choice, the state’s gambling choice, the motives for a speaker conference, the motives for an announcement, and an inappropriate put-down from a taxpayer-funded spokesman.
Hints About an iLottery Should Be a Red Flag
The prospect of iLottery apps puts in perspective the importance of holding the constitutional line on sports betting, so Rhode Islanders can answer the question: Is this really what we want our government doing?
Tales of Corruption in Southeastern New England
Rhode Islanders don’t have to look too closely to see the threads that run through various stories about local corruption and to (hopefully) learn a lesson.
Very Political with John DePetro: Betting on Candidates and Casinos
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, for September 3, included talk about potential gubernatorial candidates for 2022 and the various questions surrounding state-run gambling.
What’s in… What’s out… 9/6/19
A run-down of items in Rhode Island political news for the week.
Twin River vs. Encore… All Bets Off
Public sentiment about casino gambling forced Twin River to build up little by little, but it may be time for the state and the company to decide whether to go the rest of the way to full resort casino.
Casinos and Government Non-Competitiveness
As more casinos open their doors in Massachusetts, Rhode Islanders are at least presented with an important lesson in government.
Insider Senator Frank Ciccone (D, North Providence, Providence) has demanded to know “How can we compete?” The answer, in short, is to stop requiring an act of the General Assembly for Twin River to do so.
Rhode Island takes a high percentage of gambling revenue, reducing the incentive for private investors to be involved. The state dictates details about how many of what games from what company should be on the premises, and the governor is even now seeking to lock in a restrictive contract with IGT for 20 whole years. Read through the state’s laws pertaining the the casinos, and it is clear that Twin River is little more than a management company for a state-run casino.
How can we compete? Change that around.
Steve Frias notes that Rhode Island has already been down this path with horse racing, writing that it declined and disappeared for three reason:
First, competition from horse race tracks located in other New England states caused Rhode Island horse race tracks to lose customers. …
Second, the number of horse racing gamblers shrank as the sport failed to attract younger fans. …
Third, the quality of Rhode Island horse racing became poor due in part to a high tax burden. Rhode Island politicians steadily increased the state’s share of horse racing revenues from 3.5 percent in 1934 to 9 percent by 1971. This caused race track owners to invest less money into their facilities and it reduced the quality of the horses they could attract for races since the prize money was smaller. By 1976, Rhode Island race tracks were being called “the most miserable race tracks in America” with “the most miserable horses in America.” In 1978, horse racing in Rhode Island came to an end.
This is a microcosm of the way Rhode Island operates. Simply put, you can’t compete when you have to cut a state’s worth of insiders in on the deal. As life becomes less and less dependent on where you live, the captive audience will shrink, and business (any kind of business) will shift to the best competitor.
Thus, mobile sports betting (or wind turbine production or whatever) is no answer for the long term. Even if Rhode Island is first to market, we’ll never be able to compete until we change the way the state runs.
What’s in… What’s out… #WaterFire,#Sharks, #TwinRiver, and more. 8/16/19
A run-down of items in Rhode Island political news for the week.
Another Big Casino Player Enters the Ring
News and commentary in Rhode Island have focused on the battle of the two big players in our gambling market. Casino.org reports that the dispute has attracted another interested party:
The ongoing spat between Twin River Worldwide Holdings, Inc. (NYSE:TRWH) and International Game Technology Plc (NYSE:IGT) regarding the latter’s dominance in Rhode Island’s gaming machine market has a new participant: Scientific Games Corp. (NASDAQ: SGMS).
Scientific Games, one of IGT’s primary rivals, is reportedly in talks with Twin River, the operator of Rhode Island’s two casinos, to bid for Ocean State business. …
Earlier this week, two SG lobbyists met with Rhode Island House Speaker Nicholas Mattiello (D-RI). Mattiello has previously expressed dismay with Raimondo’s dealings with IGT, while questioning whether the governor’s proposal could hold up to legislative scrutiny.
Gambling is big business and, thanks to the government’s having claimed a monopoly, that business operates in a restrictive market that doesn’t spread out leverage very well. Now that gambling isn’t restricted to lotteries, bingos, and isolated casino districts, the number of players will grow, but they’ll still be big, making every policy change highly political.
What’s in…. What’s out… 8/9/19
A run-down of items in Rhode Island political news for the week.
Two Giants’ Gaming Wars in Rhode Island
The political stakes are heating up as two major political forces come head-to-head seeking a big-money, long-term gaming contract with the state.
Raimondo-IGT Shows Some Campaign Finance Rules Are Good
Having posted this morning on the problem with overly aggressive campaign finance laws, I should point out the latest evidence pointing in the other direction. This news about casino-game-company IGT’s big contribution to the Democratic Governor’s Association (DGA) shows that some level of transparency is a good thing, indeed, especially considering that the DGA has been bragging about its record fundraising under Democrat Governor Gina Raimondo’s leadership:
Records show that IGT donated $150,000 to the Democratic Governors Association in the last six months, while Rhode Island Gov. Gina Raimondo was leading the group as chairwoman and former IGT Chairman Donald Sweitzer was serving as treasurer.
The contributions came while the Raimondo administration was negotiating a 20-year, no-bid Lottery contract extension with IGT. Twin River, which has led opposition to the proposed contract extension, donated $100,000 to the Democratic Governors Association on Feb. 28.
The association said Tuesday that it had broken its previous fundraising record during the first six months of the year.
Campaign finance regulations can become a way for political insiders to trip up newcomers. They also allow activists to create the impression of improper relationships based on the likelihood of people knowing each other in a small state like Rhode Island.
That said, the governor’s bringing in a giant donation for a political organization that she leads while also preparing a long-term, no-bid deal with the donor company looks a lot like a quid pro quo.
A Political Explanation for a Local Contract
Michael Graham offers a national political perspective as an explanation for the strange long-term, no-bid contract that Democrat Governor Gina Raimondo has proposed for IGT’s video slot machines:
To outsiders, the story sounds like an episode of the TV show “Scandal:” A governor with close ties to a lottery company secretly negotiates a no-bid, twenty-year, $1 billion contract, while the company’s former chairman works as her top fundraiser.
But in Rhode Island, the home of legendary political operator Buddy Cianci, some consider it business as usual.
The governor is Gina Raimondo (D-R.I.), the new head of the Democratic Governor’s Association. The corporate exec is Donald Sweitzer, who until recently was chairman of IGT Global Solutions Corporation, the company that currently has Rhode Island’s lottery and electronic gaming contract.
Beyond the shady politics, Graham emphasizes the length of the deal. In an evolving gambling market on a rapidly changing technological landscape, can a 20-year contract even conceivably be worthwhile for taxpayers?
Andrew Cline of the Josiah Bartlett Center, a free-market think tank, adds that a 20-year contract, regardless of transparency, also raises questions about whether taxpayers are the priority in this deal.
“Setting aside the question of who the vendors are and what the contract says, the idea of any 20-year contract with the government is a problem, particularly for taxpayers,” Cline said. “It takes the pressure off the vendor to compete and improve. Give them a five-year contract and they know that they’re going to have to find ways to lower costs and improve quality if they’re going to compete.”
What are we getting in exchange for all that fiscal certainty for the company?
Naturally, in Graham’s view, it all comes down to the political ambitions of the governor, with which a guy like Sweitzer could be extremely helpful. Given new poll results showing Raimondo to be (just barely) the second least popular governor in the country, Raimondo will need all the help she can get.
A Strange Disagreement Over No-Bid Slot Deal
It’s strange to see the company with which the State of Rhode Island contracts to operate its state-run casinos objecting via a public-opinion campaign to the proposed contract for its electronic gambling machines:
If passed by lawmakers as proposed by Raimondo, the Lottery would be required to get 85 percent of its 5,000-plus electronic gambling machines from IGT, even though state law currently caps the number at 50 percent. The company would potentially get a bigger slice of the revenue pie.
And, as Twin River sees it, Rhode Island would lose the opportunity that other states — including Massachusetts — had to extract better deals from IGT by putting their contracts out to bid.
“We think R.I. taxpayers should be terrified by this deal,” Marc Crisafulli, the executive vice president of Twin River Worldwide Holdings — and president of the company’s Rhode Island casino operations — told The Journal on Friday as the opposition campaign was about to launch.
His argument: There’s a potential $10 billion in state gambling revenue riding “on the belief that the governor’s office did this 20-year secret deal entirely correctly. That’s a pretty big leap of faith when you consider the lack of process, the absence of any competition, the rushed nature of the deal … and the fact that the deal doesn’t seem to make any business sense. There’s no reason to do it now. The terms are very bad. … It undermines competition.”
A key point explained later in the article is that IGT’s machines are apparently the worst performers in terms of which games actually attract customers. IGT machines average $258 per day, while machines by Everi average $303 and those by Scientific Games average $401.
I expect that there are considerations that don’t come across in the article, but from a distance, this looks like a classic example of RI’s way of doing business. Why not seek maximum flexibility? Why not give the people actually operating the casino more of a say in what it provides to customers?
The State’s Casino Monopoly and a Wall Street Gamble
For practical purposes, the Twin River casinos are government run, with the state contracting its monopoly of the gambling market to the private company. However, it’s worth remember from time to time that isn’t how the market sees the business:
In just over three months as a public company, the owner of the Tiverton Casino Hotel in Rhode Island has rapidly gained a following in the hedge fund community. Currently, 10 hedge funds own shares of Twin River, a massive amount for a $1.22 billion company that does not have two full quarters of trading under its belt. …
Twin River owns the only two casinos in the Ocean State, giving it a competitive advantage there. While a new regional threat is emerging in the form of Wynn’s recently opened Encore Boston Harbor, TRWH has some avenues for stemming the rivalry, including a different target demographic and legalized sports betting.
The entire arrangement has long cried for a thorough public discussion of this unique business model, so as to understand Rhode Islanders’ perspective on having a government that has essentially displaced the mob. The interface with the investment markets adds another dimension. Because, as the linked article highlights, the monopoly standing of Twin River is a marketable financial asset, should state and local taxpayers continue to benefit only by our percentage of the gambling profits?
Donna Cook: Edwardses’ Effect on Taxes and Regulations
Tiverton resident Donna Cook notes that the General Assembly is too willing to impose difficulties on working Rhode Islanders while the Town Council is happy to put taxpayer dollars under its control.
A Relatively Small Sports Gambling Payoff for Host Communities
As I highlighted on Tiverton Fact Check, the budget proposal from the Rhode Island House would change the legislation initiating sports gambling at the two Twin River establishments:
Now another chunk of cash looks likely. When we mentioned that a Supreme Court ruling had put sports gambling on the table for Twin River, supporters of Budget #1 took to social media to say it was misleading even to hint that the town might receive revenue from this new source. Well, with the introduction of the Rhode Island House’s version of the budget, Friday, a number has been put on that windfall:
The state shall pay the Town of Lincoln an annual flat fee of one hundred thousand dollars ($100,000) and the Town of Tiverton an annual flat fee of one hundred thousand dollars ($100,000) in compensation for serving as the host communities for sports wagering.
Of course, while that’s something, it doesn’t seem like much in comparison with the $23 million the state’s expecting for itself. Why the state wouldn’t simply define sports gambling as either a table game or a video slot for the purposes of calculating host community shares (which would be 1% or 1.45% of revenue, respectively), is not clear. Local residents of Tiverton and Lincoln should hope their representatives and senators are still pushing for more.
When Government Can Get a Project Done Early
The week before Tiverton’s financial town referendum (FTR), I reported that state estimates of revenue from the Twin River casino in Tiverton were based on a September 1 opening — a full month before earlier estimates and two months before the date that some preferred for local purposes. The budget that I submitted, Budget #2, which would have reduced the tax levy by 2.9% and finally brought our tax rate back into line with neighboring Portsmouth’s, used the September 1 estimate (although with revenue estimates still lower than the latest from the state).
Well, wouldn’t you know it, the week after the town government’s higher-tax budget won the referendum, with questions about casino revenue front and center, Twin River could no longer contain its enthusiasm and proclaimed:
Twin River beat the odds and will get gamblers to the tables a month earlier than expected.
John Taylor Jr., chairman of Twin River Management Group, said the casino will open on Sept. 1 instead of the previous forecast of an Oct. 1 opening.
In the past, the elector petitions have tended to win by 60% versus 40%, but this year Budget #2 lost roughly 45% to 55%. The Budget #1 advocates managed to erode or eliminate the typical margin relying heavily on exaggerated warnings about what would happen if the assumed casino revenue didn’t materialized. The victory, however, arguably came from the defection of people who typically vote for the lower-tax budgets but found use of the casino revenue to conflict with their conservative inclinations.
In fairness, on our side of the aisle, when we talk about government projects, we tend to assume that they can never come in on time. In this case, that assumption misses the key fact that the state government is relying on this revenue. Roads, bridges, and public works projects can take forever because the money is endless and the economic downsides primarily hit the private sector. The casino is part of a race to get ahead of the competition with other states.
Twin River’s optimism may still prove to be misplaced, but it looks unlikely, and frankly, my expectation is that the initial revenue estimate for the town is likely to prove to be about half what comes in. We’ll see.
The Coy Calculations for Sports Betting
I’ve got a post on Tiverton Fact Check that might be of some interest statewide. Most of it has to do with the increased expectations for revenue from the Twin Rivers location soon to open in town (which argues against the pessimism that some have about estimates in the 2.9%-tax-reduction budget that I submitted for a vote this week at the financial town referendum [FTR]). But the introduction of the topic of sports betting has broader implications:
Also this week, the United States Supreme Court “struck down a 1992 federal law… that effectively banned commercial sports betting in most states,” as a New York Times article put it. Expecting this outcome, Rhode Island Governor Gina Raimondo had already included a provision in her proposed budget for the upcoming fiscal year suggesting that referendum votes across the state and in Lincoln and Tiverton had already provided authority for the state to conduct sports betting. She estimated $23.5 million for the state from this source.
However, no language yet exists describing whether this betting would count as a VLT, table game, or something else. Therefore, although Rhode Island is apparently planning to allow only in-person betting, probably at the two Twin Rivers locations, how much the host communities would receive from these transactions is not yet known. State officials are coy on the matter, even on the way in which the $23.5 million estimate was calculated, but it is clear that negotiations are underway.
I haven’t been able to find any evidence of how the state thinks this money should be attributed or any calculation that led the governor to estimate her millions, even after communicating with multiple state departments.
Last Impressions Podcast Episode 16: The Light of the World
Awards, earned and maybe not yet earned; Fight Club; Twin River; and it’s my birthday.