Harrah’s touts R.I. casino plan

Michael Mello

Thursday, May 27, 2004 | 9:25 a.m.

PROVIDENCE, R.I. -- Harrah's Entertainment executives told a Senate panel a proposed casino will be a boon to the state, creating more than 3,200 direct jobs and $150 million in state and local taxes in its first year of operation.

Critics say that rosy scenario discounts the concerns of existing gaming operations in Lincoln and Newport. Those operations say a casino will steal their business, threatening what this year will be $220 million in revenue from video lottery terminals paid to the state.

Las Vegas-based Harrah's told the Committee on Constitutional and Gaming Issues on Monday that concerns the West Warwick project will hurt existing gaming operations in the long term don't make sense because the casino wouldn't compete with them.

"We very strongly believe ... Newport and Lincoln will continue to prosper," Harrah's President Gary Loveman said.

Harrah's has guaranteed its West Warwick project would not lead to a drop in state gambling revenue. The company has promised to make up the difference for at least two years if proven wrong.

Loveman said Harrah's can make the promise because its casino will compete primarily for Massachusetts and Rhode Island customers now traveling to two Indian-run casinos in Connecticut.

A study released in January by the University of Massachusetts-Dartmouth Center for Policy Analysis estimated Massachusetts and Rhode Island residents spent $829 million and $301 million respectively last year at the two Connecticut casinos. Loveman said those numbers suggest the region can support at least one more casino.

"When you make them more convenient to people, they consume more," Loveman said of casinos.

Harrah's is a partner in the West Warwick project with the Narragansett Indian tribe. Both testified before a House panel earlier this month about the $600 million project. The casino would have 3,000 slot machines, 100 table games and a 500-room hotel. The company also has offered to pay a $100 million licensing fee over 10 years.

Some lawmakers think Harrah's should pay a higher licensing fee, based on bidding it was involved in for an unused Illinois casino license. The Illinois Gaming Board in March accepted the $518 million bid of Mississippi-based Isle of Capri Casinos Inc. Illinois' attorney general has since moved to block the sale due to concerns about mob influence around the proposed site.

Loveman said the Rhode Island casino would cost more to build than what Harrah's proposed in Illinois. He added that he doesn't believe any other casino operator in the country has had to pay a licensing fee.

He said after Monday's hearing that the company is willing to negotiate, but "there is not much room to give away more in this deal."

The company and tribe project sharing about $40 million in profit in 2007, the casino's first year of operation.

Voters must approve any casino before it can be built. Harrah's and the tribe want their project on the November statewide ballot.

Gov. Don Carcieri opposes the project, citing in part the potential drain on state revenues from video-lottery terminals.

Lincoln Park and Newport Grand both want to be taxed at the same rate as a casino operator. Both give about 60 percent of their profit from video slots to the state.

Harrah's has offered to pay a gambling tax of up to 35 percent.

Lincoln Park officials say that the legislation's proposed casino tax rate discriminates against their operation and could face a legal challenge if approved. Park officials will testify before the committee on Tuesday.

Loveman told the Associated Press that if the current tax rates for Lincoln and Newport are reduced, Harrah's offer to make up for any lost revenue to the state would "at a minimum, have to be modified."

Committee Chairwoman Maryellen Goodwin, D-Providence, said after the hearing she hasn't made up her mind on the project. She said lawmakers will likely take several weeks to decide.

Sen. Michael Lenihan, D-East Greenwich, sits on the committee and wasn't impressed with Harrah's pitch.

"Gambling is an enterprise designed to benefit the company that runs it," he said.