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Newport Grand sues to expand

01:00 AM EST on Saturday, November 11, 2006

By Richard Salit

Journal Staff Writer

NEWPORT — Newport Grand has filed a Superior Court lawsuit against the city for blocking its efforts to expand its video-gambling operations.

The gambling facility will seek a summary judgment at a hearing slated for Dec. 4, according to court records.

Last summer, the city refused to issue a building permit for Newport Grand’s plans for a 23,000-square-foot, two-story addition to its complex. The additional space would support some of the 800 new video terminals the state has approved. The city determined that the expansion would be illegal because zoning for the site prohibited “casino-type gambling, including but not limited to video lottery terminals,” making Newport Grand “a non-conforming use.”

When Newport Grand requested a zone change, the City Council unanimously turned it down. Council members and residents cited concerns about any expansion of gambling at the facility.

In an agreement with Newport Grand last year, the state approved an increase from 1,301 to 2,101 video terminals and froze the tax rate on revenues for 10 years. In exchange, Newport Grand agreed to make $20 million in improvements, including a 90-room hotel and a doubling of the work force to more than 350 employees. The governor, legislature and Division of Lotteries all signed off on the deal.

“The Newport zoning ordinances conflict with the regulatory scheme enacted by General Assembly,” the lawsuit contends. “Because the Newport ordinances regulating video lottery terminals are in conflict with state statutes, this court must declare them invalid.”

The state first approved video gambling at the former jai-alai fronton, and at Lincoln Park, in 1992. In response, the city amended its zoning ordinance to prohibit the operation of “video lottery terminals.” The city then brought a lawsuit against Newport Grand seeking to restrain its operation of the machines. Newport Grand contested and the city ultimately dismissed the lawsuit in 1996.

“Since 1992, Newport Grand has continuously operated video lottery terminals at its facility without objection or interference from the city,” the new lawsuit states.

After the agreement with the state was signed, Newport Grand hired a contractor for an addition to the rear of the building. Newport Grand officials said the space would allow for the relocation of shipping and receiving, surveillance, cash counting and employee entrances. These improvements were recommended by state gambling overseers, owner Dianne S. Hurley told the council. Space would also be created for 500 video machines.

Jeremiah C. Lynch, Newport Grand’s lawyer, told the council that seeking a variance would be nearly impossible because of the strict standards for obtaining one. He warned that Newport Grand could go to court to force the city to allow the expansion. If the city approved the expansion, he said the owners were prepared to agree to not develop more than 15 percent of the 24-acre site for gambling operations.

But after residents voiced concerns at the meeting about expanding gambling, the council rejected the zone change for Newport Grand.

At the meeting, Newport Grand officials did not mention the possible sale of the facility. Hurley has confirmed that Newport Grand is entertaining offers and O’Neill Properties, owner of the exclusive Carnegie Abbey sport resorts, confirmed it was a bidder.