Arlene Violet: The IGT/Bally’s deal is still a dog
GOP House leader, Blake Fillipi, has correctly called out the continuing deficiencies of the reworked, no-bid lottery deal for IGT and Bally’s, formerly known as Twin River. Before the two giant gambling conglomerates married each other, the then-Twin River excoriated IGT by noting that its gaming machines were among the lowest in the nation for return, about $52,000 per machine less than their new England competitors. A consultant was paid $165,000 to analyze the past proposal. He had stated in the analysis that the 20 year no-bid contract would result in an opportunity loss of $2.5 billion, a deficiency of $520 million in General Fund contributions, $130 million in retailer commissions, and $1.7 billion in prizes. While the present bill adds $5 million here and there, it is, nonetheless, a mere embroidery on a bad idea to restrict bidding out the contract and its deficiencies are still manifest. Only hubris could lead the House to think it cold match wits with the gaming industry without professional negotiators.
As Representative Fillipi pointed out, the first bill at least didn’t extend Twin River’s (now Bally’s) agreement with the state for 13 years. He further questioned why R.I. would agree to give the casino 84.43 percent of the net table game revenues, thereby leaving the state with 12.7 percent after expenses, a paltry amount when compared to Massachusetts’ take of 25 percent. That’s $20 million a year for the next 20 years, which equals $400 million.
The GOP leader addressed an issue brought up continuously in this column, i.e. the technology tsunami which is bound to occur over the next two decades. In the past IGT was more intent on its take rather than investing in upgraded software and hardware for the coffers of the state on a pure cost benefit analysis. Representative Fillipi reminded us that 20 years ago we had flip phones. Without stringent requirements to update and upgrade technological fixes to the gaming machines, Rhode Island risks continuing to lag its neighbors’ takes.
Rhode Island Democrat House leaders have pointed to the obligation that IGT will have to maintain 1100 jobs in R.I. Of course, during the last years, the Journal reported at least 5 times that IGT, without incurring any penalties, had not met past jobs requirements. There is nothing to suggest that the state would be any more vigilant than it has in the past. Yes, there is a $6,400 penalty for every employee the company falls short on hiring, but it could still be economically feasible on a cost benefit analysis to ditch employees and pay the penalty even if IGT could be caught.
One has to gag at the spin put on this deal by IGT. Its Chairman referred to the no-bid deal as one of the largest economic development packages put forth in recent history. Yeah, that’s right! IGT is all about R.I.’s economic development rather than reaping its profits from a continuing sweetheart deal.
So, after frittering away 16 months without putting out a bid for the gaming contract, the Rhode Island General Assembly seems poised to pass a 23 year contract since 3 years still remain on the old deal. No pat on the back is forthcoming here.
Arlene Violet is an attorney and former Rhode Island Attorney General.