Pequots bid for a Pennsylvania casino

MASHANTUCKET, Conn. (MCT) – In the 17th century, ancestors of the Mashantucket Pequot Tribal Nation lost their position as the dominant culture along New England’s Atlantic Coast.

Today, the Mashantucket Pequots – now owners of the world’s largest casino – aim to secure a position along Philadelphia’s Delaware riverfront to build a $560 million slots palace.

If Foxwoods Development Co. wins a license Dec. 20 to build on the 16.5-acre site on South Columbus Boulevard in South Philadelphia, its Foxwoods Casino Philadelphia will be the tribe’s first gaming venture outside Connecticut – confirming it as a major player in the casino industry.

“It’s certainly the next step for this tribe,” Foxwoods CEO William Sherlock said in an interview in his office next to the sprawling casino in Connecticut. “Philadelphia could be that first step for a plethora of projects throughout the United States.”

But Philadelphia presents some special challenges. Five companies are competing for two casino licenses in the city. And Foxwoods’ plans are opposed by community groups fearing the impact of the big slots parlor on South Philadelphia.

For Foxwoods, the stakes are enormous.

The tribe was made wealthy by its Foxwoods Resort Casino – a 5-million-square-foot gaming destination on a 1,200-acre reservation in southeastern Connecticut. The casino, which started as a high-stakes bingo hall, is now a $1.2 billion enterprise contributing 25 percent of its slots revenue to the state.

The tribe established the Foxwoods Development Co. in 2003 to oversee expansion of its Foxwoods brand. It has its eye on Las Vegas, Atlantic City and Biloxi, Miss. It’s also building partnerships with other gaming companies, including MGM Mirage.

And it assists other Indian tribes. In June, Foxwoods Development signed a seven-year management contract with the Pauma Band of Mission Indians to manage its $300 million casino north of San Diego. Last year it had a consulting contract with the Picayune Rancheria of the Chukchansi Indians, a tribe that runs a central California casino.

“They’ve blazed the trail in a new arena for gaming in this country,” said Howard Dickstein, an attorney who represents large tribes with casinos in California. “They’ve earned the respect of other tribes.”

In Connecticut, Foxwoods averages 40,000 visitors per weekday and up to 55,000 on weekends. About 1.3 million arrive on buses each year.

It employs 10,300 in three hotels, 30 restaurants, numerous retail shops, entertainment venues and two golf courses.

The Pequots and other tribes began gaming operations on reservation land under the 1988 Indian Gaming Rights Act. In Connecticut, the tribe was permitted to offer bingo and table games, such as poker and blackjack, which were legal in the state. Slot machines were not, so the Pequots opened a table games casino in 1992 by expanding the original bingo hall. The tribe entered into the slots revenue sharing agreement a year later in exchange for also being allowed to offer slot machines.

For the 12 months ending June 30, Connecticut took in $204.5 million from Foxwoods, according to the state Division of Special Revenue, the agency that tracks all forms of gaming in Connecticut. It received an additional $224 million from nearby Mohegan Sun – another casino operated by the state’s Mohegan Tribe – under a similar compact.

Foxwoods now has 390 game tables and 7,400 slot machines – the most of any U.S. casino. It will soon add 1,500 slots with its eighth expansion, and a hotel tower featuring a 4,000-seat theater and 824 rooms with MGM Mirage. The MGM Grand hotel, set to open in spring 2008, will allow the resort to compete with Las Vegas for conventions and top concert acts.

“In the early days, it was more about ‘just build it and they will come,’” Foxwoods Casino
President John O’Brien said. “Today, it’s much more strategic.”

The bingo hall, now the world’s biggest with 3,500 seats, attracts devotees such as Maria Marcinko, 51, a state government worker from Harrisburg. Marcinko makes the 5.5-hour trip to Foxwoods at least four times a year to take part in the big tournaments.

“Yes, I’ll go to the slots parks in Pennsylvania,” Marcinko said as she marked her game sheet with a lavender dauber on a recent Saturday. “But I won’t stop coming here – because of this bingo hall. There’s nothing like it anywhere.”

Foxwoods, which draws clientele mainly from New York, Massachusetts and Connecticut, does not report its earnings. But industry experts say the casino is one of the most profitable in the business.

Andrew Zarnett, an analyst with Deutsche Bank AG, estimates the tribe has generated about $350 million in cash flow – money left over after operating expenses but before taxes – per year. “They clearly have the ability to expand beyond Connecticut, and have been aggressively looking for opportunities in the last two or three years,” he said.

Income from their casino has helped the Pequots to rebuild their community, create jobs and provide health care, education and other services for the members, who now number about 900, according to Tribal Chairman Michael Thomas. Gaming has paid for a community center, a fire and police department, and new housing. It also financed the $250 million Mashantucket Pequot Museum and Research Center, which documents the tribe’s history.

The money has also helped the Pequots to build political and casino industry allies. Since 1995, the Pequots have given $3.1 million to Democrats and Republicans – from individual donors and through the tribe’s political action committee.

“The world has clearly changed, and we certainly need every ally we can get today,” Thomas said. “We’ve returned to this position of influence, and we hope to keep it alive for a long, long time.”

Sherlock, the Foxwoods CEO, said Foxwoods Development began looking at Pennsylvania in the summer of 2003 – a year before the Legislature approved slot-machine gaming.

Under the casino’s ownership structure, local investors would own 70 percent, and Foxwoods Development would own 30 percent and manage the casino.

Sherlock said Foxwoods fielded more than one offer to partner with a Pennsylvania slots license applicant, but found the group including Comcast Spectacor Chairman Edward Snider, developer Ronald Rubin, and Lou Katz’s daughter, Melissa Silver, to be the best fit.

Snider said that his family is close with the Rubins and the Katzes. He said the three families agreed to become involved with a casino development when the Legislature first considered legalizing slots.

“We decided that if this was going to happen ... we could step in and invest in one of them, and give back to the community,” Snider said. “That’s what motivated us.”

Snider said 42 percent of profits would benefit underprivileged children in Philadelphia and South Jersey through trusts established by the investors.

For an archive of coverage of legalized slots gaming in Pennsylvania, plus an interactive graphic showing the five proposals for the city and critiques of casino designs, visit http://go.philly.com/slots.

<i> Copyright (c) 2006, The Philadelphia Inquirer. Distributed by McClatchy-Tribune Business News.