Some key lawmakers are reluctant to support a Harrah's casino referendum because they believe the state could do better.

01:00 AM EDT on Sunday, May 14, 2006

BY KATHERINE GREGG
Journal State House Bureau

PROVIDENCE -- A key House committee may vote as early as this week on the latest bid by the Las Vegas-based Harrah's Entertainment for an exclusive, no-bid casino license in Rhode Island.

But a majority of members on the House Finance Committee are not yet convinced the state has gotten the best deal it could for an exclusive casino license, according to the findings of an informal survey of the 19-member committee by The Providence Journal.

Only 5 of the 17 committee members interviewed said they were likely to vote for the legislation as it stands.

They have before them a bill calling for a referendum this fall on changing the state Constitution to specifically allow the proposed Harrah's-Narragansett Indian casino in West Warwick, at a tax level well below what the state gets from Lincoln Park and Newport Grand.

The five likely yes-voters included a former naysayer, Rep. William San Bento, D-Pawtucket, who said: "You've got a $1 billion investment and a lot of jobs. . . . It's a good deal."

"Is it the best deal? Enough is never enough. I've learned that from being up here," but "I honestly believe it's a good deal," echoed Rep. Anastasia Williams, D-Providence.

Rep. John Savage, R-East Providence, said he too will probably vote for the bill, despite misgivings.

"Personally, I think when I go into the booth, I will vote against a casino. I am not sure it is in the best interest of Rhode Island . . . but I believe that that decision belongs with the people of Rhode Island and I am perfectly willing to give it to them and abide by their decision," he said in an interview last week.

But a majority of committee members described themselves as undecided on how they will vote on the referendum bill for the proposed casino in Democrat House Speaker William J. Murphy's home-district, and not particularly keen on the current proposal.

Typical was this response from Rep. John Patrick Shanley, D-South Kingstown, when asked how he intended to vote. "The people in my district seem to tell me that they'd like an opportunity to vote on something. But, if this is it, I'm not crazy about it," he said.

Also typical was Rep. Henry Rose's response when asked if he believed Rhode Island had already gotten the best deal it could from Harrah's:

Said Rose, D-East Providence: "I think you could squeeze them for a little bit more."

As of late last week, no one on the committee knew how much the Narragansetts stand to get from the proposed casino on non-Indian land in West Warwick. Rep. Raymond Gallison, D-Bristol, was bothered by that.

"I asked that question specifically, 'Can we see the contract?' They said, 'We have a private contract.' Okay, I get the message: that's their private deal, but I don't think that's appropriate at this time," said Gallison after his committee's May 4 hearing.

Rep. Peter Lewiss, D-Westerly, voiced discomfort with the very notion of writing a special tax deal for a privately owned business into the state Constitution.

After listening to the legal "experts" Harrah's brought to the State House for the hearing, Lewiss said: "No other state has tied a tax rate and a private entity [together] in their constitution, and I still have some fundamental concerns about that."

Rep. Kenneth Carter, D-North Kingstown, said he remains convinced of the wisdom of offering an exclusive license up for bid, as recommended by a House gambling-study commission in April 2003. "I kind of like that," he said. "I believe the state would get a better deal that way."

"I think we should get a better deal," chimed Rep. Thomas Slater, D-Providence. "I think we definitely should get a better deal if they want exclusivity in this whole project,".

Then there is Rep. Jan Malik, D-Warren, who said he would not vote for the proposed ballot question unless the vague and undefined promise of "property tax relief" is spelled out, along lines he has proposed. "'If I don't see it go directly toward property tax, I am not going to support it," he said.

Stunningly, House Finance chairman Steven Costantino said: "I'm not sure what deal is actually out there right now. The [proposed ballot] question says that there is a [state tax] range and that there should be a Narragansett Indian casino in West Warwick."

But, "in terms of the 'best deal,' I don't think the [proposed ballot] question refers to a deal at all. Much of that 'best-deal' discussion will be after the question is answered by the public.'

East Providence Democrat Elizabeth Dennigan's conundrum: "I am still debating the best path to take to ensure that Rhode Island does not have a casino."

The debate centers on a three-page bill -- written by Harrah's lawyer Lauren Jones -- to amend the state constitution to specifically allow "a resort casino in the town of West Warwick, to be privately owned and operated in association with the Narragansett Indian tribe, with tax proceeds from the casino being dedicated to property-tax relief."

Also written into the Constitution would be this sentence locking the casino tax rate down to levels Harrah's proposed two years ago:

"The per annum tax rate shall be established by the General Assembly with a minimum tax rate of 25 percent and a maximum tax rate of 40 percent of net casino gaming income with all such tax proceeds to be dedicated to property tax relief."

The sponsor -- Rep. Timothy Williamson, a West Warwick Democrat who also serves as town solicitor -- told his colleagues the tax range needs to be included in the state Constitution to head off potential legal challenges from Lincoln Park and Newport Grand.

But lawyer Joseph Larisa told the lawmakers that locking in the tax rate -- at a level well below what the state gets from Lincoln Park and Newport Grand -- would provide no such guarantee.

In a letter he wrote to lawmakers on behalf of the Rhode Island Hospitality & Tourism Association, Larisa said the proposed amendment could "violate the promise of equal-protection" under the law in two ways.

It could provide an "illegal special state preference for a tribe over all other entities." It could also "unreasonably treat the proposed casino differently from similarly situated gambling facilities in Lincoln and Newport" that turn over close to 60 percent of their slot revenue.

All of which begs the question: why would Rhode Island lawmakers want to limit themselves to what Harrah's is willing to offer, when other states, such as Pennsylvania, set their own terms?

Pennsylvania was besieged with proposals after offering up 14 new casino-resort and slot licenses at a tax rate of 53 percent across-the-board. They include Harrah's bid for a slot-license at the Chester Downs harness track outside Philadelphia.

But San Bento believes people here will instead compare Harrah's offer to the 25 percent Connecticut gets from the slots-only action at the Indian-owned Foxwoods and Mohegan Sun casinos and "agree it's a good deal."

"We're going to get 25 percent of the total from the cards to the dice to anything under the roof. . . . I think they'll focus on that."

And San Bento is not the only lawmaker who has done a turnabout.

Three years ago, House Speaker William J. Murphy felt strongly about what should happen before Rhode Island ventured into the high-stakes world of casino gambling.

In a written statement, he said: "I believe the people of Rhode Island should have the opportunity to vote and make the ultimate decision on whether or not they want to have a casino."

"If a statewide referendum on the concept of a casino is approved, then I believe the voters of the entire state, not just the host community, should have the right to vote a second time once the specifics of a proposal are developed," he wrote in response to newspaper inquiries.

Murphy, D-West Warwick, made those comments on April 8, 2003, following the release a week earlier of the House gambling-study commission's report.

After months of study -- and 25 highly publicized hearings -- the commission concluded that competitive bidding would be the only way to ensure "the best agreement for Rhode Islanders."

The commission recommended a single statewide vote to determine whether Rhode Islanders would welcome a full-fledged casino somewhere in the state. If the answer was yes, an independent, five-member board -- appointed by the governor -- would oversee a "fair and open" competitive-bidding process.

Critics questioned whether voters would ever have a chance to vote on a specific proposal. Murphy's answer then: "The question is, do the people of the state want a casino . . . If they don't, then we don't have to expend further time, energy or dollars on the issue," but "if the people say yes, then the specifics would be discussed by an independent regulatory body, and at that point, I feel the people of the whole state should have a second vote."

But Murphy is no longer wedded to competitive bidding -- or a second vote.

His current thinking: "The landscape regarding the casino has changed since 2003. I have always believed that the people of the State of Rhode Island have the right to vote. The vote should be whether or not the people want a casino in West Warwick. If they do decide in favor of a casino, the specifics such as a licensing fee and other issues would be worked out after that."

And no one else -- except Donald Trump -- is talking much about competitive-bidding this year.

Trump's team has hired lobbyists. But they have not offered a specific proposal, which has led some lawmakers, Malik among them, to suggest that no major gambling company except Harrah's is seriously interested.

Even without any formal bidding process, "I think everybody had their fair shot to come into the state," said Malik. "I own a liquor store. If the neighoring community of Barrington is dry, I know if I heard they were going to open up a . . . liquor license, I would at least look into this. I don't know if any other casinos have looked into this."

Late Friday, however, the ground shifted.

The Johnston Town Council scheduled a special meeting for 7:30 p.m. Tuesday to consider Trump's bid for town backing to put a competing Johnston casino question on the November ballot. Getting the backing of a host community is one of the requirements, under current law, for getting a gambling proposal onto the ballot.

Harrah's, meanwhile, has been working hard behind the scenes to placate some of its sharpest critics, including Lynn Singleton, president and CEO of the Providence Performing Arts Center.

"It's about who gets the show," Singleton told the House Finance Committee last year and again recently. With Harrah's "clout and leverage," he predicted the proposed West Warwick casino could do to PPAC what the Connecticut casinos did to the Warwick Musical Theatre: shut it down.

But Harrah's executive David Satz disclosed -- and Singleton confirmed last week -- that Singleton has had informal conversations with Satz and other Harrah's representatives about having PFM Corp., a wholly-owned PPAC subsidiary, manage the entertainment within the proposed casino.

Singleton said Harrah's initiated two meetings with him. The first was at PPAC about a year ago, where Singleton aired his concerns; the second was over lunch at Cafe Nuovo a month ago, with Harrah's consultant Josh Fenton and senior vice president Jan Jones.

At the time, he said, they were "very mirky about what they were going to build and what the facility was going to look like," but their subsequent announcement that they intended to build a 1,500-seat theater led him to approach Satz after the May 4 hearing.

"I said, you know my issues. If you want to sit down [and talk about] developing some type of strategic alliance with PPAC that is mutually beneficial and serves both facilities . . . I am willing to have that conversation."

Unbeknownst to many, the PFM -- founded in 1989 in an attempt to augment PPAC's finances and give it more leverage in booking national acts -- manages a number of venues outside Rhode Island: in Fort Myers, Fla., Coral Springs, Fla., Skokie, Ill., Beaver Creek, Colo., and Waterbury, Conn. Chaired by J. Joseph Kruse, the board of directors includes Nortek CEO Richard L. Bready, Providence Journal Publisher Howard Sutton and lawyer-lobbyist Joseph W. Walsh, whose clients include the greyhound owners association at Lincoln Park.

Singleton said it is not yet clear to him how PPAC and a casino theater could happily co-exist. "The issue becomes, okay, how would that work . . . is there a middle ground? I don't have an answer. I'd like [Satz] to tell me."

Watching from afar while recovering from surgery, Rep. Paul Crowley, D-Newport, hopes to make it back to the State House in time to try to talk his House Finance Committee colleagues out of making what he considers a mistake.

His immediate concern: putting a tax rate in the Constitution. If Rhode Island had such a cap on sales taxes in 1991, he notes, the legislature would not have been able to raise the tax to bail out the tens of thousands of people left financially stranded by the credit union crisis.

Crowley said he will aim his strongest arguments at colleagues who think they can straddle the public-opinion line by voting the proposal out of committee and in the next breath saying "but I am going to recommend people not approve this."

"What if the public makes the wrong decision?" he says.

kgregg@projo.com / (401) 277-7078