Updated March 11, 2021 - 8:17 pm
Casino companies are jockeying for position in response to expansion opportunities in New York City, Chicago and, the biggest potential prize of all, Texas.
Higher expenses and reduced tax collections resulting from the pandemic-fueled recession have pushed lawmakers to seek new revenue sources and employment opportunities in their states. Despite some previous misgivings, they are looking to the construction of new resorts to prop up their economies.
In Texas, where casino gambling is illegal, legislation was introduced in the state’s House and Senate on Tuesday that would permit the construction of resorts with casinos in the state’s four largest metropolitan areas — Dallas-Fort Worth, Houston, San Antonio and Austin.
The push for gaming began in January when Las Vegas Sands Corp. hired a team of lobbyists to convince lawmakers of the benefits of resorts in the state. Sands has acknowledged its interest in Texas.
“Our commitment is to develop transformational destination resorts that create tens of thousands of jobs and produce billions in revenue for the state while also providing robust economic benefits to the local host communities,” Sands CEO Rob Goldstein said in an emailed statement. “Destination resorts have proven to be excellent drivers of economic growth and enhanced tourism, and we are excited about the possibility of bringing the concept to the Lone Star State.”
Sands is looking for new opportunities after announcing March 3 that it is selling the real estate beneath The Venetian, Palazzo and Sands Expo and Convention Center to Vici Properties Inc. and those properties’ cash flow to Apollo Global Management Inc. for a total of $6.25 billion. The deal is expected to close by the end of the year.
Ever since Sands disclosed last fall that it was considering selling its Las Vegas assets, the company’s leaders have said they want to focus on Asian properties in Macao and Singapore and look for new investment opportunities.
The Texas gaming bill, introduced as a joint resolution with three sponsors, would establish a Texas Gaming Commission and allow limited casino gambling at horse racing tracks in Dallas-Fort Worth, Houston and San Antonio and at greyhound racetracks in Corpus Christi and Harlingen. The bill also would expand gaming from limited operations at tribal casinos in El Paso, Eagle Pass and Livingston.
The bill would impose a 10 percent tax rate on table games and 25 percent on slot machines. By comparison, Nevada has a rate of 6.75 percent on its largest casino revenue generators.
The legislation includes investment parameters that should assure Texans that only the most financially stable casino companies can apply. The bill would require a minimum $2 billion investment in land and resort development in Dallas-Fort Worth and Houston and $1 billion in San Antonio and Austin.
The bill would enable sports wagering in the state, but separate legislation introduced in February, backed by an alliance of professional sports teams and sports wagering platforms, also is under consideration by lawmakers.
The casino legislation introduced this week may face a steep climb for approval. Because gambling is prohibited by the Texas Constitution, lawmakers in both houses would have to approve the bill by a two-thirds majority. The proposal then would be forwarded to Texas voters in November.
Texas Gov. Greg Abbott has indicated he wants to hear from lawmakers about what constituents think before committing to whether he would sign it.
The Texas proposal is by no means a slam dunk. In a report to investors, Truist Bank gaming analyst Barry Jonas said Global Market Advisors research indicates there could be roadblocks in the Texas Senate.
“(Texas) Lt. Gov. Dan Patrick has basically drawn a line in the sand saying that (casino legislation) will not happen under his watch,” Jonas wrote. “As previously noted by Global Market Advisors, sports betting seemed a potential for this session but with the push for land-based gaming, it seems to cloud the issue further. Even though Sands has changed its stance on sports wagering, legislators tend to say no when they do not understand all of the specifics.”
Sands is still working to promote the proposal.
“We appreciate the work of the bill’s sponsors and we are excited to engage in further discussion with elected leaders and community stakeholders on the possibilities for expanding Texas’ tourism offerings through destination resorts,” Sands Senior Vice President Andy Abboud said in an emailed statement.
While the Texas proposal is high on the priority list, Sands also has expressed interest in developing a casino resort in New York City, reiterating as much in January’s fourth-quarter earnings call.
Interest in New York
“Well, we’ve been looking at New York for, I think, about 100 years, it seems like,” Goldstein said during the call. “I don’t think it’s any secret that we’re big believers in New York. We think it’s extraordinary, the density population, ethnicity, like it’s a very good opportunity for anybody. … So we’re definitely on the hunt. We’ve been pushing for it for four, five years.”
In New York, three casino licenses are expected to be approved, two of which are likely to go to existing limited slot machine operations at Resorts World Aqueduct in Queens, run by the Genting Group, and the Empire City Casino in Yonkers, operated by MGM Resorts International.
The New York Post reported this week that three casino companies have shown interest in the request for information for the third license: Sands, Wynn Resorts Ltd. and Providence, Rhode Island-based Bally’s Corp.
Bally’s executives declined comment, but Wynn officials indicated they would have interest.
“When a city of significance decides to consider a gaming resort, we are always interested in exploring the opportunity,” a Wynn spokesman said in an email.
That may be the case for Chicago, which on Wednesday announced plans to release a request for proposals next month for a single resort in the Windy City. Wynn Resorts was one of three gaming companies that responded to a request for information from Chicago last year, resulting in the Illinois Legislature establishing a tax rate that was more palatable to potential investors.
In addition to Wynn, MGM Resorts and the Seminole Tribe’s Hard Rock International in Florida submitted information to lawmakers.
Illinois has a tiered tax structure that at one time peaked at a 70 percent tax rate. In May, lawmakers passed a law providing a lower rate — effectively, 40 percent — to make the project more financially feasible for an operator. Truist’s Jonas told investors that more companies could come forward when the request for proposals is released.
“While the tax rate continues to make it challenging for an operator, the reformed legislation from last year could make it more tolerable,” Jonas wrote. “Several major operators including MGM Resorts, Wynn Resorts, Hard Rock and (Chicago-based) Rush Street (Gaming LLC) have all expressed interest in the opportunity.”
Grant Govertsen of Las Vegas-based Union Gaming Analytics drafted a white paper in August explaining the changes in the Illinois law that could make the proposal to build a resort in Chicago more attractive. He said another major Nevada company, Caesars Entertainment Inc., probably wouldn’t have an interest in the Chicago project.
Govertsen said Caesars already has properties in Illinois and Indiana near Chicago and may not be able to resolve antitrust concerns that could arise from regulators.
The Review-Journal is owned by the family of Sheldon Adelson, the late chairman and CEO of Las Vegas Sands Corp.