Question of the Day - 14 March 2020

[Editor's Note: This answer is written by LasVegasAdvisor.com Stiffs & Georges blogger David McKee.]

Don’t call them, they’ll call you.

In the case of Virginia specifically, the legislature has yet to legalize casinos and, if they do, they will go in five cities along the state’s southern tier, none of them a major market except Richmond. The investment is expected to be small, too. Except for Hard Rock International, which is partnering with Bristol for a casino push, no major players in the industry have shown an inclination to investigate the market (unlike Atlanta or Dallas-Fort Worth, which have been courted by the likes of MGM Resorts International and Las Vegas Sands).

MGM National Harbor is doing very well at siphoning customers from northern Virginia and is 1) inclined only toward very big projects and 2) a bit leery of regional casinos, currently getting burned in Springfield, Massachusetts. True, Caesars Entertainment is in Baltimore, but they’re really struggling there and unlikely to pursue southern Virginia, especially with incoming CEO Tom Reeg talking about cost-cutting and retrenchment.

The big player in Norfolk is the Pamunkey tribe, descendants of Chief Powhatan, which recently announced that it was downscaling from a $700 million tribal casino next to Norfolk’s minor-league baseball stadium to a $200 million commercial one, in hopes that will be the easier path to success. The city is favorable, but the federal government might not have taken land into trust for gaming, especially since the Pamunkey have gone back on a 2015 vow not to pursue a casino. 

It did stave off a challenge to recognition from Stand Up for California, a PAC that was a cats paw for MGM, trying to protect its National Harbor flank. “Thirty years of disappointment. That’s how long this has taken, and then to have an organization from the other side of the country doing something for whatever nefarious purposes that they have, it makes us angry,” fumed Pamunkey Chief Robert Gray about Stand Up’s bizarre intervention.

The Interior Department Board of Appeals ruled that Stand Up neither had standing nor any prospect of imminent harm from Pamunkey recognition. Sign Up warned vaguely of “significant impacts to the state and local government jurisdictions, surrounding communities, property owners, businesses, Indian and non-Indian individuals, and federally recognized Indian tribes as well.” (Six other Virginia tribes that were pursuing recognition got it from the Trump administration — in return for foreswearing their right to gambling.)

Fast-forward to a year ago and the Pamunkey were juiced into a commercial casino in a bill that authorized gambling in Norfolk, Richmond, Danville, Bristol, and Portsmouth. It did not, however, make it past Gov. Ralph Northam (Dem.) so it’s try try again this session.

Lawmakers on the Democratic side of the aisle balked at the 10 percent tax rate as too low (it was amended to 13 percent to 15 percent, based on gross gaming receipts) and, as they now hold the majority, that will probably go up. Republicans thought there was a rush to legalization, with too little preliminary study but their voices may now go unheard. There’s also some concern that the state is putting all its eggs in the North Carolina/Tennessee basket and ignoring the state’s wealthy northern tier (which is fattening National Harbor), but the selection of cities appears to be a done deal. Even if legalization passes this year, the Pamunkey would have to win a local referendum.

The Pamunkey are offering the city of Norfolk $10 million for a new riverfront casino site, plus 4% in gross-revenue taxes, and Norfolk likes what it’s hearing. The initial plan was huge: 4,500 slots and 250 table games. Reality eventually set in, but we’ll get to that. They also planned to throw in a 500-room hotel and 750-seat entertainment center. Revenue projections were, shall we say, optimistic: $825 million a year — more than Encore Boston Harbor. (The Innovation Group projects $970 million in revenue for the whole state.) The Pamunkey also hold title to 600 acres near Richmond, so their commitment to Norfolk is a bit, um, fluid. It’s not clear how much impact the Innovation Group study had on the downsizing of the project, but something on the order of 1,000 slots and 50 table games (and few amenities) looks far more likely.

The tribe bristled at the Innovation Group study, saying, “The Pamunkey Tribe has been marginalized for centuries and deserves some protections as they seek to gain financial independence and improve the lives of their members. The study recommendations do not sufficiently protect Virginia’s only tribe with federal gaming rights.”

With so many political obstacles remaining between the Pamunkey and a casino deal, the tribe might want to keep its powder dry.