Forecast low, casino investor says
Asserts racetrack revenues could rival Conn. take
An investment bank that is looking to put together financing for a casino at Suffolk Downs says that a gambling resort at the Boston racetrack would instantly become one of the most successful in the Northeast and reap even bigger riches for the developers and the state than Governor Deval Patrick has envisioned.
A casino in the Hub would generate at least $1.5 billion in annual gaming proceeds, according Kenneth Shea, the chief gaming investment banker at Bear Stearns. The firm has been involved with financing developments in Las Vegas and the Mohegan Sun casino in Connecticut, and it is now in talks with Suffolk Downs executives.
A casino would also make Boston one of the country's highest-grossing gambling markets outside Las Vegas and Atlantic City, Shea said. He said it could provide nearly as much revenue as both Connecticut casinos combined.
"If you can do $1.7 billion in the middle of the Connecticut woods, you should be able to do $1.7 billion in Boston with your eyes closed," he said in an interview yesterday.
Shea also confirmed that Massachusetts could expect $800 million through licensing fees, whether the state auctions off a single license, or three licenses Patrick has proposed. A single casino would be worth more and attract higher bids from developers because of the lack of competition, while three casinos would dilute the value of each license, Shea said.
The numbers confirm previous licensing-fee predictions by the governor, who has estimated each 10-year license would bring in $200 million to $300 million apiece. Shea's annual casino revenue estimate appears to exceed forecasts by the Patrick administration, which has anticipated $2 billion in revenues from three casinos statewide.
Michael J. Widmer, president of the Massachusetts Taxpayer Foundation questioned the estimates by Bear Stearns as potentially self-serving, because he said the firm has an economic incentive to paint a positive picture for state lawmakers. The Foundation, citing regional competition and the possible saturation of the New England gambling market, has previously said Patrick's revenue estimates are excessively rosy.
"There's no shortage of hyperbole, but, excuse the pun, we're not betting on hyperbole; we're betting on real revenues," Widmer said. "If there ever was a need for numbers, it's certainly around the casino debate. But we need independent numbers."
Suffolk Downs is using a letter it received from Shea as ammunition in its bid to persuade lawmakers to adopt the governor's plan. Suffolk executives told officials in the Patrick administration last week that the license fees could be on the table as quickly as the 2009 Fiscal Year, in which the state could be facing a possible budget gap of up $1 billion or more, according to some estimates.
"We are prepared to pay our proportional share of the license fee should we be fortunate enough to be awarded one of the licenses," Richard Fields, co-owner of Suffolk Downs, said in a statement provided to the Globe yesterday.
Suffolk Downs and other would-be casino developers who have been attracted by Patrick's proposal are expected to attend a hearing today at the State House to discuss the financial benefits casinos would bring to the state.
The hearing, the highest-profile to date since Patrick unveiled his three-casino plan in September, will be held before the Joint Committee on Bonding, Capital Expenditures. It is expected to include testimony from Sheldon Adelson, a Dorchester native and multibillionaire casino developer; Gary Loveman, chairman of Harrah's and former Harvard Business School professor; Mohegan Sun chief executive Mitchell Etess; and representatives of celebrity businessman Donald Trump. Governor Deval Patrick and Mayor Thomas M. Menino also plan to testify.
Owners of the state's other three racetracks - Wonderland Greyhound Park, Plainridge Racecourse, and Raynham Park - will also attend the hearing, but will put forth a different case than Suffolk Downs. They want legislators to consider a previous proposal to add slot machines at their tracks.
If each of the four tracks were allowed to install 2,500 slot machines, the state would get at least $600 million annually, according to estimates presented to the Patrick administration by Gary Piontkowski, president of Plainridge.
But Patrick reiterated to reporters yesterday that he would veto any legislation that included slots at the racetracks. The track owners have all said they would try to bid for one of the casino licenses if their arguments don't gain traction.
Patrick filed legislation in October that would license one resort casino in Western Massachusetts, Southeastern Massachusetts, and metropolitan Boston.
The Boston license has been coveted by developers as an ideal location for capturing visitors traveling south from Maine and New Hampshire, and catering to an international clientele flying into Logan Airport. Backers say casinos could also help broaden the tourist base by creating a new draw and by providing a reason for convention-goers to stay an extra day. Industry analysts have long said an urban casino would be positioned as the biggest potential money-maker for the state, which, under the governor's legislation, would receive at least 27 percent of gambling revenue.
Still, several studies have suggested that casinos in areas with an existing tourist base don't increase revenues as dramatically and can hurt local businesses by drawing visitors and residents to a casino hall instead. Urban clergy and gambling foes also warn that a casino in Boston would be worse than one in rural areas, in large part because more people would be enticed to gamble. Studies have shown that the number of problem gamblers increases in proportion to the proximity of a casino.
Shea sent his letter to Suffolk Downs officials after a lunch meeting earlier this month to discuss Bear Stearns' interest in working with the track on its casino bid.
"A world-class city like Boston deserves a world-class resort," Shea wrote in a letter to Fields on Friday. "I believe your project will be the premier resort-style casino east of Las Vegas, bar none."
Shea said in the letter that his estimates, which say Suffolk Downs could generate between $1.5 billion and $2 billion in annual revenue, could be lowered slightly, depending on how many licenses the legislature authorized, and where the other casinos were placed.
Suffolk plans 5,000 slot machines and 150 table games, an amount Shea thinks may not satisfy demand and would need to be doubled.
Another gaming industry analyst, Maine-based Christiansen Capital Advisors, has also said that building three casinos would not saturate the market, and has even suggested the state consider building four.
"In a state of Massachusetts's size and per capita personal income, tax revenue and economic development would be significantly increased by creating at least one additional license," said a report released by the firm last month.
The report also includes rough annual revenue estimates for casinos in Central and Western Massachusetts, ranging from $154.3 million for a Pittsfield casino to $572.1 million for a Worcester casino.
Matt Viser can be reached at maviser@globe.com. 