Borrowed money would fund casino plan

AUGUSTA — A proposed Passamaquoddy gambling casino at Calais could pump $40 million into the troubled local economy, but casino developers, including the tribe, would invest very little upfront cash to start the project.

Instead, they would borrow money now to construct the massive gambling emporium, betting they’d earn enough money later from the moneymaking casino to pay off their debts.

The Passamaquoddy Tribe would own the Calais casino, under a bill up for debate this week in the Legislature. But the tribe would not invest any of its money in the project.

The casino and an adjoining hotel, both designed to look like a turn-of-the-century wilderness lodge, are estimated to cost $25 million to build and equip. They are expected to generate $48 million in gross revenue from an estimated 800,000 visitors each year.

Harrah’s Casinos of Memphis, Tenn., has agreed to put up $20 million to build the casino and would run the gaming operation for the tribe. Harrah’s would borrow the money and repay it from gaming profits.

Ralph Berry of the Promuse Companies, the parent firm of Harrah’s, said it is common practice for casinos to be financed with borrowed money.

“It shouldn’t really matter where the money comes from,” said Berry. “The fact of the matter is we put our name behind the project and that’s what counts.”

Building the hotel would cost an estimated $5 million to be drawn from a bond issue to be repaid from casino profits. Erin Inc., a chain of Holiday Inns headed by Larry Mahaney of Bangor, is expected to operate the hotel.

Besides the $25 million cost of the casino-hotel complex, the casino bill offers another $15 million to rejuvenate downtown Calais and surrounding businesses.

With $2 million a year in casino profits taken from $3.8 million a year in casino excise tax, the Passamaquoddys could raise an estimated $20 million bond issue.

Of the $20 million, $7 million would be earmarked for Calais and $13 million would be given to a Rising Tide Regional Development Fund.

Thomas Tureen, attorney for the Passamaquoddys, said $5 million of the $13 million fund could be used to finance the casino’s hotel. Other possible projects include $3 million for a new hotel in downtown Calais, and $3 million for acquisition and redevelopment of blighted properties.

Of the $7 million earmarked for Calais, $1 million would be for a revolving loan fund. Other possible projects include $2 million for doubling the size of the municipal golf course to 18 holes; $3 million for parks, sidewalks and landscaping; and $500,000 as a subsidy for trolley service from downtown to the casino.

It is not known if the Finance Authority of Maine would handle part, all or none of the $20 million in bonds.

Timothy Agnew, chief executive office of FAME, said FAME can only guarantee up to $7 million in tax-free revenue bonds. In the worst case, Agnew said, Maine taxpayers are liable to pay off state-guaranteed bonds in case of a default. But he said FAME has never had to ask taxpayers to bail out a loan in default.

FAME can offer more than $7 million in bonds that are not state-guaranteed and carry no risk to taxpayers. The casino developers also could go to the private bond market to issue their bonds.

“We’ve had only preliminary discussions,” said Agnew.

A chart developed by Tureen shows the full $20 million in bonds “supported by FAME guarantee.”

“They’re a little presumptuous in presenting it that way,” said Agnew. “There’s no commitment on our part, though we’ll certainly consider it.”

On Monday, Passamaquoddys joined with supportive legislators to promote the casino bill, which still had not been printed.

Rep. Susan Farnsworth, D-Hallowell, disagreed with Attorney General Michael Carpenter, who has interpreted a 1st Circuit Court of Appeals decision last week as meaning Maine Indians have no special right to a casino.

Carpenter said the court ruling bolstered his contention that the Maine Indian Land Claims Settlement Act of 1980 exempts Maine Indians from special treatment under the federal Indian Gaming Regulatory Act.

But Farnsworth said, “I think it’s very clear that litigation will result if we don’t pass this legislation and I think it’s clear that the tribe will prevail. To enact this bill is a far more conservative route than taking the gamble the attorney general would have us take.”

If a casino were enacted under federal regulations, rather than state control, Farnsworth said the state would lose the opportunity to regulate the casino and tax its profits.

Sen. Harry Vose, D-Meddybemps, sponsor of the casino bill, said, “Blueberries, aquaculture and port development are not enough. We’re not trying to develop a Sodom. There’s nothing wrong with going into a casino and having dinner and watching a floor show and you can gamble if you wish.