Harrah’s: Rhode Island can’t lose with a casino

Michael Mello

Thursday, May 13, 2004 | 9:18 a.m.

PROVIDENCE, R.I. -- Harrah's Entertainment Inc. executives on Wednesday guaranteed to lawmakers that a West Warwick casino proposal would not lead to a decrease in state gaming revenue.

The Las Vegas-based casino operator said it would make up the difference between what the state collects from existing gambling operations in Lincoln and Newport in the year before a casino would open and any lesser amount collected from the two and a casino afterward. The offer would also cover the possibility that one or both of those existing operations close.

But Harrah's President Gary Loveman told House Finance Committee members it is "almost inconceivable there would be a reduction (in state gaming revenue) after the arrival of casino."

The company also is willing to pay a minimum 25 percent gaming tax that could increase to 35 percent, depending on revenue generated by the casino. In addition, it proposed paying a $100 million licensing fee to the state over a decade.

Loveman said the offer to make up any loss in state gaming tax revenue would expire after that revenue meets a targeted amount for two years. It is designed to allay fears the project will reduce state tax payments from Lincoln Park and Newport Grand, which have video lottery terminals. The state expects to collect more than $200 million from those two operations this year.

Harrah's, which is working with the Narragansett Indians to build a West Warwick casino, projects gaming revenue will decrease less than 10 percent at Lincoln and 25 percent at Newport Grand in 2007, the first year a casino would open.

By 2009 Newport would still earn less than in the year before a casino opened, but Lincoln would rebound to see a slight revenue increase, Harrah's says.

Sebastian Sinclair, president of Christiansen Capital Advisors, said if Lincoln Park and Newport Grand were allowed to install coin drop machines, and the new casino was restricted to machines which issued winnings on paper slips, he believed the predicted losses would not happen, and Lincoln would actually enjoy a slight advantage.

Harrah's projects with its proposed casino, annual state gaming tax revenue would increase by 42 percent, to $412 million, between 2006, the year before a casino would open, and 2009, the casino's third year of operation.

Harrah's officials testified Wednesday at the year's first legislative hearings on gambling bills. The committee was not expected to vote on any of the bills.

The company proposes to spend up to $600 million to build a casino in West Warwick, with 3,000 slot machines, 100 table games and a 500-room hotel. The project also promises 3,200 direct casino jobs.

Committee members grilled the company on its revenue projections, which show a $43 million profit in the casino's third year for Harrah's and the tribe.

"I think you are going to make more than you are telling us," Rep. John Shanley, D-South Kingstown, said.

Loveman said the revenue projections are conservative.

He was also questioned about other bills before the committee, including one that would require any casino to make the same percentage tax payments to the state as do Lincoln Park and Newport Grand, which currently are at 60 percent.

Loveman said a Rhode Island casino couldn't compete with two existing Indian-run casinos in Connecticut at a 60-percent tax rate.

Another bill would ensure competitive bidding for any casino license.

Isle of Capri Casinos Inc. bid $518 million for an unused Illinois casino license. The Illinois Gaming Board in March accepted the Mississippi-based company's bid, but Illinois' attorney general is moving to block the sale due to concerns about mob influence.

Loveman said a Rhode Island casino faces greater competition than exists for that Illinois license, which Harrah's also bid on.

Bills before the House panel include several asking voters whether they support having a casino in West Warwick. One proposal specifies the Narragansett Indians' proposal in that town and calls for local and statewide referendums in November. Other bills name only the town as the location for a casino without specifying the developer.