Recently thwarted in its attempt to promote federal legislation that would have undermined the construction of a competing casino in a neighboring state, MGM Resorts International (NYSE: MGM ) is now looking to regroup and find another way to prevent its new gambling house in Massachusetts from being debilitated. Mgm casino.
Nevada's two U.S. senators backed a bill that would have prevented tribal nations with casino operations on tribal lands from building additional gaming centers off those lands. Although Sen. Dean Heller (R-Nev.) described it as "making sense" for his state, it was clear the legislation was aimed at the Mashantucket Pequot and Mohegan tribes that operate the Mohegan Sun and Foxwoods Resorts in Connecticut, and are looking into building a third casino in the state, but outside of tribal lands. Connecticut's Senate contingent ended up blocking the attempt.
MGM Resorts is focusing a lot of its attention -- and capital resources -- on completing its MGM Cotai resort on the Chinese island of Macau. Most of the $1.5 billion in capex it's spending on Macau is going toward getting that project completed by the first quarter of 2017. Its National Harbor casino in Maryland is due to be finished by the end of the year, and is on track to account for $650 million in capex in 2016. By contrast, the MGM Springfield in Massachusetts will only see $100 million in capex over the next year or so.
Yet MGM needs to protect that last investment because by 2018, there will be four casinos operating in Massachusetts, including Penn National Gaming's Plainridge Park, which has been open for a year, the Mashpee Wampanoag tribe's casino in Taunton, scheduled to open next summer, Wynn Resort's new hall in Everett, scheduled to open later in 2018, and MGM's Springfield operation.
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The casino operators must already deal with the Indian tribe paying a lower tax rate on gross gambling revenues. Instead of the 25% other casinos pay, under the tribal-state gaming compact, the Mashpee Wampanoag resort will be paying just 17%.
It's that uneven playing field that MGM says informs its opposition to the potential competing casino in Connecticut. Because of Springfield's location in southwestern Massachusetts, a rival casino just over the border in eastern Connecticut is obviously a concern, but MGM also says it should be allowed compete for the rights to build a casino in the state. It wouldn't build one so close to its Springfield operation, but there might be other opportunities elsewhere, and thus far it and other operators have been shut out of the process.
MGM filed a federal lawsuit over the process that established the framework for casinos being built, but the case was dismissed. Now, it has teamed up with another local Indian tribe which filed a similar lawsuit. It's also challenging the state's airport authority for holding closed-door meetings about hosting a casino at Bradley International Airport, which is located about 12 miles from the MGM Springfield site.
Rich Duprey has no position in any stocks mentioned.