| Let’s get real here. Boston Mayor Marty Walsh’s lawsuit, ostensibly aimed at stopping Steve Wynn’s mega casino in its tracks, is nothing short of a classic, Massachusetts-style stick-up of a billionaire developer.
Reading the coverage of the lawsuit, you’d be forgiven for thinking that Walsh actually has a serious chance of blocking Wynn’s $1.7-billion gambling and entertain resort planned on the banks of the beautiful Mystic River in Everett.
Fat chance of that happening. A major loophole in the Bay State’s 2011 casino law enables Wynn to put his casino literally just over the Boston line in Everett, giving the Hub second-class status in negotiations, even though the only way into the casino leads right through traffic-plagued Charlestown.
It may not be fair, but it’s the law.
Yet Walsh, through the threat of protracted litigation, has at least a shot at forcing Wynn to pony up millions more each year in mitigation money compared to the rather measly deal on the table right now.
“I think this is the last card the mayor can play to be in a position to negotiate a better deal with Wynn,” said Samuel Tyler, president of the Boston Municipal Research Bureau.
When a city like Boston or rival builder takes a developer to court, it can inject a level of uncertainty into the project that can prove damaging, especially if there are bank loans and other forms of financing on the line.
A classic example is developer John Rosenthal, whose plans to build a Turnpike-spanning project next to Fenway Park went into a deep freeze for a couple years after a rival builder with an abutting lot filed suit. The case didn’t have all that much of a chance, but as the legal proceedings played out, the bankers got cold feet.
For developers, it’s just the cost of doing business here in the Bay State, as Wynn will surely find.
“Welcome to Massachusetts,” mused David Begelfer, chief executive of NAIOP Massachusetts, which represents developers across the state.
That said, the big question is whether Walsh’s classic leverage play will actually work against Wynn, who, after all, is not some skittish local developer afraid of offending Boston’s mayor, but one of the richest men in the world.
Wynn’s global casino empire pulled in more than $600 million in profit in the first nine months of 2014 and its sitting on a $2.8 billion cash stockpile, SEC filings show. There’s also another $200 million in investments that can be cashed in fairly quickly, and credit lines worth hundreds of millions more. Simply put, Wynn doesn’t have to worry much about some timid bank executive in Boston or New York bailing on his project.
Another Advantage
Walsh also has another potential leverage point – control of the permits Wynn needs for roadway improvements in Boston so gamblers can actually get to his planned Everett extravaganza. It’s a critical choke point and surely Walsh, like the late, great Mayor Thomas M. Menino before him, knows just how to use it.
We are not talking about anything untoward here, but Boston officials certainly won’t be doling out permits for tens of millions of dollars in roadway and traffic improvements without a lot of scrutiny, even if the city was embracing Wynn with open arms.
“Wynn may have a difficult time getting all the permits he needs from the city,” warned Mark Hichar, head of the gaming practice at law firm Hinckley Allen. “Not improper delay. There can be scrutiny – and [then] there can be extreme scrutiny – of all permit applications.”
But while Wynn won’t be easily bullied, he clearly is looking to make a statement with his grand, Boston-area casino, the fruit of years of searching for an East Coast gambling palace to complement his showcase Las Vegas and Macau casinos. Wynn can be a tough negotiator when it comes to local communities seeking multimillion dollar payouts, but the Las Vegas mogul may eventually find it worth his while to ante up so Boston’s pesky new mayor will go away, Hichar believes.
How much money is the million-dollar – OK, strike that – the $100-million question.
It would be a stretch for Boston to wring from Wynn the $18 to $22 million a year agreement it inked with Mohegan Sun and Suffolk Downs, which was in addition to $75 million pledged for roadwork and to bolster development projects in East Boston. Of course, Mohegan lost out in the bidding for the Boston-area casino license last fall, with Wynn taking the prize.
But Boston should be able to get more than the million or two it was awarded by the Massachusetts Gaming Commission in a default deal, with Walsh having refused to negotiate with Wynn during the bidding process.
Keeping Up Appearances
While Walsh may not have much of a case legally, in the court of public opinion, it’s a different matter.
The 2011 casino law, hammered out on Beacon Hill, has been praised as some sort of brilliant and enlightened piece of legislation practically worthy of the Founding Fathers, from funneling tens of millions of dollars into efforts to combat problem gambling to protections for local communities.
But the now three-year-old Massachusetts casino law failed to close a pretty basic loophole, enabling a shrewd business tycoon like Wynn to enjoy all the benefits of having what is effectively a Boston casino without the headaches of being required to cut an expensive “host community” mitigation deal with city officials. What developer wouldn’t rather deal with the yokels in an urban backwater like Everett rather than the big boys and girls in Boston?
Boston is getting screwed here. It’s Wynn’s choice whether he wants to play the scrooge, but for a business based on image over substance, that’s maybe not such a hot idea. And if he wants his grand Boston-area casino to open on time, Wynn had better deal.
And while I’m not much of a gambling man, that’s a pretty safe bet.
