Massachusetts may be the only state that requires casino developers to negotiate fees or other mitigation measures in written agreements with multiple communities located near a city or town where a casino would be built.
Casino companies in Western Massachusetts and municipal leaders are preparing for some high-stakes negotiations over impact fees and other measures to alleviate the effects of gambling projects on cities and towns that surround a community that would be home to a casino.
Massachusetts is among many states that require commercial casinos to negotiate contracts with municipalities where the resort would be built. But unlike other states, Massachusetts also requires developers to reach separate, written mitigation agreements with each community that might border or be close to a "host" community, casino executives said.
In Western Massachusetts, that means up to a couple dozen different communities could eventually be negotiating agreements for fees, traffic or sewer improvements, school funds or other ways to offset the impacts of casinos in a nearby city or town.
The Massachusetts Gaming Commission, the powerful five-member state agency that will issue licenses for casinos, would be ultimately responsible for designating some municipalities as "surrounding" communities, authorizing them to negotiate agreements with casinos.
At this point, no one knows for sure how the upcoming negotiations will proceed between casino companies and a surrounding community.
"That remains to be seen," said Edward S. Harrison, a selectman in Monson, which will be aiming to receive some funds for extra an police officer, road work on Main Street or other needs stemming from a casino resort being planned in neighboring Palmer.
The gaming commission is still drafting regulations to guide the process.
The requirement sets up some tricky dynamics. For instance, it forces a casino company to negotiate with a community that is seeking to be the site of a rival casino company.
MGM Resorts or Penn National, for example, which are planning casinos in downtown Springfield, would need an agreement with Springfield and at least one other with the town of West Springfield, where Hard Rock International is planning a casino. Hard Rock would sign an agreement with West Springfield and then would bargain a deal with at least Springfield.
In a letter to the Massachusetts Gaming Commission, an official with Penn National said the requirement for written agreements with so-called surrounding communities holds the potential in Western Massachusetts for a "host" community to cooperate with a developer while attempting to thwart the efforts of a competing developer in a "surrounding" city or town.
Carl Sottosanti, a vice president and deputy general counsel for Penn National, also wrote that the casino selection process could be dragged out by one or two small communities with little or no impact. He urged the commission to approve regulations to help prevent the "opportunity for mischief" by potential nearby communities.
The Mohegan Sun, which is planning a casino in Palmer, could face some possibly hostile talks in neighboring Monson, where there is strong anti-casino sentiment. The Mohegan Sun might also need to sign a contract with Amherst, which doesn't share a border with Palmer but might be heavily affected by a casino resort.
Under the state's casino law, the four casino developers are competing for a single state license reserved for Western Massachusetts.
The law also authorizes resorts in Greater Boston and in the southeast part of the state, plus one slots-only facility that could be anywhere.
The commission is planning to issue the first resort license in February of next year.
Casino developers have not yet started negotiations with the so-called surrounding communities, but both sides are already staking out some positions ahead of the talks.
Agawam Mayor Richard A. Cohen said he expects the city should be able to obtain a good deal, including impact fees, from casino companies in Springfield and West Springfield. Agawam has hired a legal consultant to help with negotiations.
"We will certainly make sure our assets and our people are protected," Cohen said.
The casino law mandates that casino developers reach written agreements with communities where they want to open a resort and then put the details in those agreements up for a vote. Casinos need voter approval before they apply for a state license.
The adjacent or surrounding communities don't get to vote on casinos, but they can negotiate with companies for fees, improvements to roads or other infrastructure and other protections. The agreements with surrounding communities need to be approved before the gaming commission grants a license.
Casino companies must reach mitigation agreements with surrounding communities as part of the process for applying for a state license from the gaming commission.
It's currently unclear what communities will be officially named as "surrounding" communities and allowed to bargain for agreements.
Under the commission's draft regulations, a casino company, as part of its license application, can designate a nearby community for negotiating an agreement, or a developer and a surrounding community can execute an agreement and submit it with the application. A community can also petition the commission for the designation.
The regulations said that if the commission approves a petition or if a company itself makes the "surrounding community" designation, the municipality and the casino company get 30 days to finalize an agreement.
If they can't settle on an agreement, the community and the casino would each present "a best and final offer" to binding arbitration.
Stephen P. Crosby, chairman of the gaming commission, said that generally any city or town with a "material impact" from a casino could be considering a surrounding community and eligible for mitigation.
Crosby said the commission's process will require a casino developer and a surrounding community to come to a reasonable agreement.
“There is a tremendous incentive on the part of bidders to negotiate with the community because otherwise their process is going to be slowed way down," Crosby said.
A common border doesn't necessarily mean a community is cleared to negotiate. In a letter to the commission, for instance, Northampton Mayor David J. Narkewiciz argued that Northampton, which does not have a common border with any possible casino "host" community, could be considered "a surrounding community," partly because the city's retail stores, restaurants and entertainment venues could be affected by a resort in Western Massachusetts.
The commission is also planning to offer grants to communities for hiring consultants or lawyers to help hammer our agreements with casino companies. The grants would come from the $400,000 fees that each of 11 casino developers has paid to the commission in preliminary license applications submitted in January.
Penn National Gaming, which is planning a casino in the North End of Springfield, including options to buy properties from The Republican, said that in the 19 jurisdictions in which it operates, Massachusetts is unique in requiring agreements with surrounding communities.
In his letter to the gaming commission to comment on the draft regulations, Sottosanti, the vice president of Penn National, said the requirement has "a significant and inordinate impact" on the company's proposal for Springfield.
Leaders of casinos companies are asking the commission to assure that the regulations account for the "positive impacts" on surrounding communities including jobs, increased tourism and sales and other taxes.
Michael Mathis, vice president of global gaming development for MGM Resorts, which is planning a casino in the South End of Springfield, said the company expects to pay impact fees in agreements with surrounding communities.
MGM and Penn National are in a fierce competition in Springfield, but Mathis and an official with Penn National agreed that In determining any agreements with surrounding communities, it would be important to "net" any positive effects from a casino, including increased sales and other taxes, additional tourism and jobs, with any adverse effects.
"We're going to be really thoughtful about the impacts," Mathis said.
"The real impacts -- pro and con -- need to be considered," added D. Eric Schippers, a senior vice president for Wyomissing-Pa.-based Penn National.
The officials said MGM and Penn National plan to complete negotiations on an agreement with Springfield before starting similar bargaining with nearby cities or towns.
Springfield Mayor Domenic Sarno will decide if one or both of those agreements go on the ballot.
Kevin E. Kennedy, chief development officer for Springfield, said there will be "a time and place" for Springfield to negotiate an agreement with Hard Rock in West Springfield, but he suggested that would be only after Springfield first seals a deal with one or both of the casino companies that want to build in Springfield.
"Our approach will be fact based, not emotional," Kennedy said. "It will be straightforward."
The gaming commission might not be designating "surrounding" communities until late this year after casino companies submit final applications.
A casino company in Springfield could potentially be negotiating such agreements with six other communities that abut the city.
Hard Rock could be in line for agreements with at least the five communities that are adjacent to West Springfield.
Mark Rivers, president of Los-Angeles-based The Bronson Companies, a consultant for Hard Rock, said a common border doesn't automatically qualify a community for getting a written deal with Hard Rock. Rivers said Hard Rock would definitely need agreements with Agawam and Springfield, but still is assessing other possible communities for such contracts.
"I don't think it's about fees as much as it is mitigating challenges," Rivers added. "Our focus isn't on fees. Our focus is on the issue."
West Springfield Mayor Gregory C. Neffinger said there could be "distinct differences" in the agreements West Springfield would need from a Springfield casino and what Springfield would need from Hard Rock in West Springfield.
On public safety, for example, Neffinger said crime from an urban casino in Springfield could more easily spill over to West Springfield than any such possible problems from what he said would be a more contained and controlled entertainment resort being planned by Hard Rock at the Eastern States Exposition in West Springfield. Neffinger said the plan by Hard Rock would discourage crime.
In Palmer, the Mohegan Sun might need to sign deals with seven abutting communities including Belchertown, Ware, Warren, Brimfield, Monson, Ludlow and Wilbraham.
Mitchell G. Etess, the CEO of the tribal authority that owns the Mohegan Sun, said the company is currently concentrating on reaching a host agreement with Palmer.
Emy Shepherd, of Monson, a member of Quaboag Valley Against Casinos, said she doubts that Monson will be properly compensated for traffic congestion, crime or problems with the schools and the environment that could come from a casino in Palmer.
"I don't have any confidence that we would get very much support, that we would come out ahead in this process," Shepherd said.
Paul E. Burns, a town councilor in Palmer and supporter of a casino for Palmer, said officials need to be careful to balance legitimate needs of a surrounding community with a legitimate right to develop a casino.
"Each community has to look out for its own interests," Burns said.
MGM and Penn National are asking the gaming commission to consider possible independent evaluations by the Pioneer Valley Planning Commission in determining whether to name surrounding communities.
Timothy Brennan , executive director of the Pioneer Valley Planning Commission, said the issues are complicated. He said there are no "cookbook answers" about what could constitute a city or town being designated a surrounding community.
Brennan said a casino could affect a neighboring community's public safety, storm water, drinking water, schools, environment and businesses. Brennan said potential surrounding communities and developers need to start talking. "The best time to do mitigation is before a developer has very specific construction drawings," he said.
Staff writer Peter Goonan contributed.