State expects slots payments from tribe to continue
The governor’s budget chief and Attorney General Richard Blumenthal said Wednesday they expect the Mashantucket Pequots to continue to make slot machine payments to the state despite the tribe’s financial troubles.
”The state takes its piece of the slot machine revenue off the top, so we’re not worried about interference with cash flow,” budget chief Robert L. Genuario said. “We also do bill them for regulatory costs (and) we have an agreement on that; (there’s) no indication that that agreement would not be honored.”
The tribe, which owns Foxwoods Resort Casino and MGM Grand at Foxwoods, is seeking to restructure $2.3 billion worth of debt. It could default Monday on the terms of a $700 million line of credit with a syndicate of banks.
The slots payments are required for the tribe to operate a casino under the compact between the state and the tribe. The tribe paid the state just under $200 million last year and about $2.8 billion over the last 16 years, according to the state Division of Special Revenue.
Blumenthal said that the tribe’s “obligation to the state has a higher priority than their financial debts to lenders under the law,” and it’s in the state’s and lenders’ interest to see the casinos continue to operate.
”Our hope is they avoid default, because it could negatively impact employment and financial opportunity as well as the tribe’s own situation,” Blumenthal said. “And even if they do default, there is no reason to believe they would fail to pay their monthly slot revenue obligations, because clearly they would be violating the law if they did so.”
The Mashantuckets issued a statement Wednesday indicating they intend to continue to operate the casinos as they work to restructure their debt.
”We have sufficient resources to continue to operate our businesses as normal and it will be business as usual,” the tribe stated. “… We do not anticipate that the financial restructuring being considered by the tribe will affect our employees, customers, vendors or business partners.”
The state has a memorandum of understanding with the Mashantuckets and the Mohegans that girds the terms of the compact governing the tribes’ arrangement to operate casinos in this state. The Mohegan tribe owns and operates the state’s other casino, Mohegan Sun.
Earlier this month, the Mashantuckets paid $15.8 million in slots-revenue contributions to the state for July, said Paul Young, executive director of the Division of Special Revenue, the state regulator that oversees gaming. The next installment for this month is due Sept. 15, he said.
”This year, they’re coming in at lower levels,” Young said. “We project maybe $190 million this year. (But) a default on the bond (held by lenders) is not necessarily related to the slot contribution to the state. If the check doesn’t come in the mail, we would sit down with legal counsel and react accordingly. I clearly don’t anticipate that occurring.”
After a press conference at her office in the Capitol, Gov. M. Jodi Rell noted that the larger predicament the tribe is in is of concern.
The tribe is a sovereign nation and its casinos are on sovereign land, so only the tribe, according to state law, is allowed to operate them, Blumenthal said. The state could appeal to a federal court to enforce the memorandum of understanding, which has the force of state law, if necessary, he added.
Less drastic options than shutting down the casinos also exist, including a court order or putting money in escrow, he said.