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Jerome Lyle Rappaport

Jerome Lyle Rappaport
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Edward Glaeser

Edward Glaeser
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Monika Bandyopadhyay
Suffolk University Law Student

David Barron
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Linda Bilmes
Senior lecturer in public policy at the Harvard Kennedy School. Assistant Secretary of Commerce during the Clinton Administration.

Brandy H.M. Brooks
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Felicia Cote
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Amanda Eden
Suffolk University Law School student

Sara Farnum
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Kristin Faucette
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Benjamin Forman
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Arthur Hardy-Doubleday
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Theodore Kalivas
Boston Green Blog, Dukakis Center for Urban & Regional Policy

David Linhart
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Antoniya Owens
Research Analyst, Mathematica Policy Research, Inc.

Susan Prosnitz
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Ben Thomas
Boston Green Blog, Dukakis Center for Urban & Regional Policy

Matthew Todaro
Student at Boston College Law School

Alexander von Hoffman
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Brett Walker
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Margarita Warren
Student at Suffolk University Law School

Harshbarger releases "Top 10 Areas of Concern Surrounding Proposed Casino Bill"

Monday, September 19th, 2011

Citizens for a Stronger Massachusetts
Special Report - Casinos in Massachusetts
September 13, 2011

Top 10 Areas of Concern Surrounding Proposed Casino Bill
1. Gambling Commission Discretion & Power
In this proposal, the Governor and Legislature are yielding broad and significant powers to the proposed Gaming Commission. The commission, as proposed, will have vast and often non-reviewable, discretion over every aspect of the operation of casinos and slot barns. Those sweeping powers will range from deciding who gets a license, who will work in a casino, how the money received from operations is spent by the commission and other related regulatory units and to whom it is distributed.
On the one hand, this vesting of centralized power in a commission insulated from political and special interest pressures could ensure actions based solely in the public interest.
We believe the greater risk is the potential for abuse and lack of accountability.
The most obvious concern with the commission’s over-arching power is that, aside from a simple reference to consideration of the proximity of proposed gambling establishments, the bill that expressly establishes no objective criteria the commission should apply in choosing among more than one qualified candidate for a Category 1 or Category 2 license. Ideally, legislation would include a framework for the evaluation of proposed gambling establishments that codifies the priorities and justifications for expanding predatory gambling. Absent legislative guidance, the broad discretion to disqualify or approve applicants is, at best, lax or naïve and an invitation to litigation and, at worst, negligent and an opening for undue influence, intentional favoritism and corruption.

Although the Attorney General and state Treasurer also select a member of the commission, the overall scheme gives the chair of the commission authority to control
most day-to-day operations, delegate decision-making responsibility to other commissioners and exercise broad, essentially exclusive, authority over nearly all personnel and budgetary matters. As such, the commission chair must be beyond ethical and professional reproach, and an exceptional leader and administrator.
In addition, the commission, in the interest of preserving its independence, has the responsibility to self-fund through assessments, penalties and trust funds – to say nothing of the $15 million loaned to it from the Stabilization Fund (a.k.a. Rainy Day Fund). It is then the sole province of the commission to ensure that gambling licensees, which provide the commission’s funding, mitigate all potential problems and implement all the objectives. When selecting among candidates for licensing, the commission is given broad subjective latitude. So, while the bill is replete with requirements for applications and minimum qualifications, there is no express directive to comply with Open Meeting Laws and virtually no recourse for independent, thorough review beyond the commission and, in some cases, no recourse beyond the internal investigatory phase.

Interim Gambling and Employee License Authorization.
Of particular concern are provisions allowing the commission to authorize an “interim authorization” of a gambling establishment and temporary operating licenses to key employees. As Citizens for A Stronger Massachusetts has consistently stated, it is imperative that a comprehensive, mature and capable regulatory body be in place prior to the first day of expanded casino gambling. Anything less than a fully-established regulatory body devoted to the oversight and control of the gambling industry invites another wave of patronage and corruption scandals, a run-away train of continually expanding gambling, social harms, and criminal activity.
Other licensing decisions within the commission’s discretion include:
• Deciding which municipalities are considered “surrounding communities” and “live entertainment venues” for purposes of granting protection and compensation for casinos’ impacts on them.
• Establishing “parameters” for the host community referendum elections.
• Granting exemptions to license applicants and gaming establishment employees who would otherwise be disqualified by the statute for felony convictions, misconduct,
affiliations with undesirable persons, among others, but whom the commission finds to be “rehabilitated.”
Therefore, all this begs answers to the questions:
• Who will be selected to serve on the hugely powerful commission?
• And, more importantly, why would the Governor and Legislature leave so much power, and the prospect of such great influence, to a small band of political appointees who are not elected and, therefore, not accountable to the general public?
• Is this avoiding the tough issues, intentionally passing the buck for when things go wrong or just laziness?

2. Fiscal Concerns: Questionable Funding, Unanticipated Costs
Rainy Day fund seeds expanded bureaucracy
The proposed law creates one of the largest regulatory and enforcement agencies in Massachusetts. To start-up, the bill appropriates $15 million from the Rainy Day Fund and an additional $5 million goes to the Governor for, “certain costs associated with the implementation of expanded gaming” and, “other professional services required for the negotiation and execution of a compact with a federally recognized Indian tribe to establish a tribal casino.” This appropriation more than doubles the Governor’s current FY2012 line-item appropriation.

While the statute specifies that the first $20 million in licensing fees will be used to repay the Fund, this is an interest free bridge loan from the Rainy Day Fund, repayable only when casinos are licensed to operate in Massachusetts. Aside from the obvious pressure (and conflict of interest) this creates on the commission to expedite the approval of licenses so fees and revenue are generated, this interest free loan from the citizens of the Commonwealth to assist in the development of a new bureaucracy at a time when essential services have been eliminated statewide requires scrutiny. At a minimum, the loss of interest over the period of the loan should also be assessed to the licensees in addition to the principal.
Further, absent an independent cost-benefit analysis and the inclusion of anticipated and unanticipated cost provisions, the bill offers no credible proof that there might be a net
fiscal gain to the commonwealth from this $20 million investment (an investment that could have been made to other more economically sound interests).

Money Management Costs
As currently written, the proposed bill establishes multiple funds and sub-funds, presumably to be managed by hundreds of new state employees, or contracted to private, for-profit vendors. The collection and management of all this money, especially the newly-created funds to be held by the Gaming Commission and other agencies as trustees, will be daunting and thus extremely costly to administer. Not only does this interconnected web of funds provide multiple avenues for monies to disappear, it will cost a large sum of money to administer that is not specifically provided for by the bill. And, in addition to omitting the direct costs of administering the funding among various projects and agencies, the bill fails to provide for an independent public finance professional’s oversight and audit/certification.

Economic Viability
Serious fiscal concerns were raised again recently in The Boston Globe report that projected casino revenues and job creation in this legislation are based on the assumption that the recession is simply an "economic blip" that will be in the Commonwealth's rearview mirror by the time casinos open for business. However, Moody's Investor Services now predicts that casinos here might not fare as well as proponents of expanded gambling have stated, given the recession's potentially permanent effects on consumer spending and availability of capital. Furthermore, we saw just this week that the “race to the bottom” for gambling revenue has already begun by our neighboring states.
3. Political and Ethical Problems
The bill contains no prohibitions (nor even “cooling off” periods) against legislators, former legislators, or their family members from being hired by applicants, licensees, or lobbyists connected with the gambling industry (either in Massachusetts or elsewhere), creating a virtual retirement plan for legislators and their family members in exchange for political favoritism. Further, while any parties with any financial interests are limited in making campaign contributions to state elected officials, there is no such limitation on contributing to local town or city officials.

Also, the commission is given broad discretion in hiring decisions, has no prohibitions on who it can hire, no explicit requirements of merit hiring or use of best practices and can even hire an applicant who has been convicted of a felony. Thereafter, most commission employees can, after brief cooling-off periods, then get jobs in the gambling industry.

Conflict of Interest: Pressure to Increase Revenues
The bill sets up drastic conflicts of interest for the commission, most notably with its initial source of funding. While the commission is responsible for ensuring the mitigation of the 12 to17 specifically identifiable “harms” through preventative review and conditions prerequisite to licensing and siting, it needs the revenue derived from licensees in order to repay the $20 million borrowed from the Rainy Day fund to fund its operation. While each license applicant submits a non-refundable $350,000 application fee, that is only to defray the costs of reviewing and processing the application. The Commonwealth will receive the funds necessary to replenish its Rainy Day fund ($85 million each from three Category 1 licensees and $25 million from a single Category 2 license) only upon final approval of an applicant’s license. In addition to its internal need to approve licenses to repay its $20 million interest-free loan from the public coffers, the commission will face pressure not only from the contractors/designers/licensees themselves, and their lobbyists, but even more so by the politicians who approve casinos and slots in Massachusetts with the persistent battle cry of, “jobs and revenues.”
As such, the commission may be conflicted in every decision it makes, especially if there is no qualified licensee in any one of the proposed regions. Unless and until there are three operational casinos and one slot barn approved for licensure in the Commonwealth, the commission will be under huge pressure, including litigation, to avoid withholding much-needed revenues and jobs from Massachusetts – regardless of the qualifications of licensees and the maturity of the Commonwealth’s regulatory body. The potential for hastily approved, politically motivated, and inappropriate licensing, is crystal clear.

Further, unlike the 5-year license granted to Category 2 licensees, the duration of a Category 1 license is not specified. While it appears they must be effective for a minimum of 15 years, there is no maximum. So while the commission is able to revoke a license for cause (e.g. for being “unsuitable” to operate a casino in Massachusetts), it is arguable that the privilege of licensure, once granted, lasts in perpetuity unless revoked or voluntarily ceded or transferred.
4. Timeline
In the best of circumstances, Massachusetts can anticipate the following timeline, just to get to the stage of issuing its first license:
• Legislative process: 1 month.
• Vetting and appointment of commission: 2 months.
• Vetting & hiring Executive Director, support staff, consultants, acquiring facilities and equipment: 2-3 months.
• Promulgating regulations for application process: 2-4 months.
• Procuring and reviewing applications, making determinations regarding surrounding communities and impacted live venues, vetting applicants and key parties: 4-6 months.
• Public hearings on applications: 2 months.
• Publication of selection decision: 2 months.
• Financing and closing time: 2-3 months.
Therefore, the total time to first casino and slot ground breaking will be an estimated 18 to 30 months post legislative passage. As a result, the pressure to proceed immediately to authorize slot barns (Class II) will be dramatic. In fact, the legislation specifically requires an expedited, interim authorization process. This is a recipe for disaster and a clear, special interest boondoggle.

Absent inappropriate pressure, once licenses are actually issued, the construction of the facilities, depending on the extent to which permits can be expedited and vendors licensed may take another year to 30 months (less so for Category 2 slot barns). The proposed Region C Native American casino will probably have at least another year due
to the tribal issue legal complications, meaning that the first disbursement of gaming revenue could be 5 to7 years away. The point is that the commission is required, repeatedly, to make a Hobson’s choice between revenues promised and protecting the public interest.

5. Preference for Native American Casino
Absent a compact with a federally recognized tribe and subsequent licensing, it is feasible, although costly and lengthy with significant legal issues involved, for such a tribe to be able to obtain future “land-into-trust” and pursue opening a casino outside of the control of the Commonwealth. As such, it is in the Commonwealth’s interest to seek to control the process for any potential tribal gaming through a successfully negotiated compact.
However, according to the proposed legislation, if no compact is agreed to by July 31, 2012, the commission “shall” issue a request for a resort casino in the South-East Region C of the Commonwealth. The expedited process for licensing a Native America tribe requires a maximum of approximately nine months for negotiations between the Governor and a Tribe. In reality, the timing is more compressed due to sections in the bill which permit negotiations to begin only after a federally-recognized tribe purchases or enters an agreement to purchase land on which to place the casino.

That said, there are currently two federally recognized tribes in the Commonwealth, and the proposed legislation only provides for issuing a single preferential license. This virtually ensures preferential treatment for one over the other. Furthermore, any one compact does not limit the potential for more tribal gaming. Once class II or III gambling becomes legal, the barriers to tribal gaming erode significantly.
Due to its rush to get gambling up and running, the Commonwealth has limited negotiating options and invites legal challenges of all kinds.
Besides the problems associated with restrictive timing and the use of stabilization funds to negotiate a compact, preferential treatment for Indian Tribes curtails competition for bids in the state by one-third. Assuming that there is a successfully negotiated, albeit rushed compromise/compact, Massachusetts will be left with only two
remaining licenses, which seems patently unfair to other potential developers who may be more qualified and invites major lobbying pressure to increase the number of casino/slots licenses immediately.

6. Decentralized-Disjointed Oversight & Regulation
The bill, as currently written, divides the oversight critical to the successful operation of a gambling industry among the Commission, the Attorney General, the Alcoholic Beverages Control Commission and the state and local police forces. While urging collaboration between several different agencies and branches of government, this creates a potential logistical and communications nightmare and the lack of clear responsibility and inconsistent and incomplete regulatory oversight.
Furthermore, the lack of clarity in revenue allocation oversight is equally troubling. The sheer number of funds and revenues (i.e. licensing fees, industry assessments, taxes, “net gambling revenue,” etc.) to be deposited in certain funds, and then funneled into multiple sub-funds according to a complicated and interwoven formula, guarantees difficulty in “following the money.” While some of these funds are created with specifically defined uses, others are left vaguely defined in their purpose and administration.1 So while the bill will produce net revenues to the Commonwealth, questions remain as to who will distribute the funds, who will receive them, for what purposes, and who will oversee and be ultimately accountable?

7. Predictable Public Health and Consumer Protection Harms Outside of Commission’s Control
In spite of its broad general powers and discretion, the commission is, by law, precluded from acting in several major areas of potential public health and consumer impact. For example, the commission is barred from reducing casino hours of operations
1 The bill establishes:
1. A Gaming Economic Development Fund under Chapter 29, into which 10% of Category 1 gaming revenues are deposited “subject to appropriation” for such things as “summer jobs.” Ch. 29 § 2DDDD.
2. A Local Capital Projects Fund, which receives allocations of Category 1 revenues, in addition to part of the licensing fees received by applicants, but does not establish the authority or mechanism for disbursement from those funds. Ch. 29 § 2EEEE; Ch. 23K §§ 59, 91.
3. A Manufacturing Fund, a Community College Fund, and a Health Care Payment Reform Fund that receive a portion of the licensing fees, but does not specify the authority or mechanism for disbursement of those funds. Ch. 23K §§ 91, 96, 97, 98. below 23 hours and 59 minutes per day, banning junkets and complimentary services, banning temporary licenses, delaying public hearings on license applications, or restricting the employment of legislators (or their families) in the gambling industry. In addition, the Commission does not appear to have the power to establish merit and best practice hiring and promotions practices or limit political, special interest and local and host community employment recommendations.
The bill also permits casinos to give gamblers alcohol free of charge, “promotional gaming credits,” junkets, and other forms of “complimentary services, gifts, cash or other items” to patrons to encourage their continued play (read: losses) at the tables and slots. It also admits the problems associated with junkets, defining them as “arrangement[s] intended to induce a person to come to a gaming establishment to gamble, where the person is selected or approved for participation on the basis of . . . the person’s ability or willingness to gamble or on any other basis related to the person’s propensity to gamble.” In addition, the bill allows cashless wagering, all but guaranteeing huge losses for compulsive gamblers.

8. Inadequate Research and Protections Regarding Impacts and Costs
Even though the Governor has repeatedly stated that an independent cost/benefit analysis of expanded gambling in Massachusetts should occur and that such a study should be completed prior to the legalization of expanded gambling, the proposed bill explicitly requires such studies only after the expansion begins.
Even more egregious and conflicting, the pre-licensure requirement requires the applicant for a license to prepare a report detailing the impacts on the host communities, local and regional economies, local small business impacts, and general social impacts of the proposed casino. The bill does not even require the report to be independently prepared or validated. As such, the casino applicant itself, whose interest in being approved is plainly obvious, will provide the sole cost/benefit analysis of its own proposal. This is a plain conflict of interest and the commission will have no basis for ensuring the study serves the people of the region, let alone the people of the Commonwealth.

9. Unrealistic and Conflicting Expectations of the Commission
As an emergency law, the bill takes effect in 30 days after passage by the Legislature and being signed by the Governor. At the same time, the bill notes that “strict oversight” of the gambling industry through a “rigorous regulatory scheme” is the “paramount policy objective” of the bill. Given the Commonwealth’s current track record for public corruption, it is naïve to think that the commission, having been created weeks before, will suddenly be the cautious, balanced and wise, yet nimble and mature regulatory bureaucracy needed to restrain an industry ripe for corruption and uncontrollable expansion. In short, it is unclear whether even if Herculean leaders were appointed, the Commission, would be capable of implementing an effective and comprehensive start-up in the space of within several weeks, let alone a year.
Also, effective July 2014, the State Racing Commission is to be abolished and will merge with the Commission. The bill requires presumably immediate “preference” in hiring Racing Commission employees into the Gaming Commission. While there could indeed be synergies in merging the two groups, the transition is almost certain to be less than seamless. The oversight of live racing is an entirely different business than casino management and turning over regulation of live racing to the discretion of the Gaming Commission is a real risk. Inevitably, horse racing will become the “poor cousin” to casino gambling and will be given the shorter shrift in funding and oversight.

10. Procedural Issues – MA State Gambling Advisory Commission
As we have noted, there are a plethora of significant legal, drafting, process and policy conflicts, ambiguities, loopholes and details that invite full employment for lawyers, law firms, lobbyists and consultants, and ongoing challenges and litigation at every stage, in addition to the potential for undue influence in the selection and licensing and siting process. However, one glaring reality should be noted: the Massachusetts State Gambling Advisory Commission is, tasked with reviewing any and all “petition[s]” or “proposal[s]” relative to gambling in the Commonwealth. The statute provides that the commission is tasked with making specific findings concerning – among other things – the anticipated revenues and social impacts of a bill such as this one.2 This bill would:

2 M.G.L.c12B §2(d) states:
The commission shall review proposals to legalize and establish various forms of gambling within the commonwealth. The commission shall make advisory recommendations solely to the general abolish the advisory commission, even though this statute was designed be a tool to slow down the process, ensure a public airing of the issues, and a responsible evaluation of the costs and benefits of expanded gambling. Yet it is essentially defunct – and, as a result, a testimonial to a rush to judgment by our elected leaders, and a major missed opportunity. Unless and until the expanded gambling bill passes, it can be used as grounds for a public demand for the revival of the commission for an advisory review.

About Us
Citizens For A Stronger Massachusetts, Inc. is a 501 (c)(3) non-profit organization founded by Scott Harshbarger, former Attorney General of Massachusetts and national President of Common Cause. Its purpose is to educate the citizens of Massachusetts on issues of public policy in a sufficiently full and fair way so that they can form their own independent opinions or conclusions.


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