Casino deal would pay Boston $18m annually

Funds, hiring preferences for East Boston in pact

The site of a potential Mohegan Sun casino at Suffolk Downs. David L Ryan/Globe Staff

Mohegan Sun and its Revere casino would pay East Boston at least $18 million annually for neighborhood improvement under an agreement negotiated with Boston Mayor Martin J. Walsh, a person familiar with the offer and the negotiations said.

The deal, which would be the most lucrative in the state for a community that is not actually hosting a casino, could enhance the standing of the Mohegan Sun project in the fierce contest for the Greater Boston resort casino license and give the city a template to use in arbitration to try to leverage a similar agreement from a rival casino developer, Wynn Resorts.

Lawyers for the city were still combing through the nearly 100-page agreement Tuesday; it had not yet been signed.

The deal would also include $30 million for local capital projects, paid over 10 years, and hiring preferences for local workers. It also reiterates Mohegan Sun’s commitment to pay for about $45 million in transportation improvements in East Boston and Revere, and it would preserve Suffolk Downs, the thoroughbred racetrack that straddles the East Boston-Revere city line. The track would be the casino’s landlord if Mohegan Sun wins the license.

The yearly payment for East Boston is less than the $32 million committed to the city annually under a defunct Caesars Entertainment casino proposal in 2013, but it is more targeted to the Eastie neighborhood, the person familiar with the offer said. Caesars, which was part of an application to operate a casino at Suffolk Downs on a portion of the property in East Boston, withdrew after investigators for the state gambling commission raised red flags during background checks.

The current casino proposal is entirely in Revere, denying Boston the bounty of real estate taxes enjoyed by casino host communities and limiting the city’s power to drive a bargain on compensation. As a “surrounding community” under state law, Boston cannot block either casino proposal by refusing to negotiate or by asking for too much.

Mohegan Sun’s annual payment for East Boston could increase, according to a formula in the deal, if the casino is highly profitable, a similar structure to the agreement Mayor Thomas M. Menino struck with Suffolk Downs in 2013, the person familiar with the deal said.

East Boston voters killed the original Suffolk Downs casino plan in a referendum last November.

Massachusetts voters will decide this November whether to repeal the 2011 expanded gambling law and banish all casino proposals from the state.

By taking Mohegan Sun’s offer, Walsh will forgo his insistence that East Boston hold a neighborhood vote on the Mohegan Sun casino and that the Charlestown neighborhood should decide the fate of the Wynn casino plan in Everett.

Walsh considered suing the state gambling commission to win more power over the developments, including the right to hold binding neighborhood votes, but in the end, he decided that a negotiated deal was less risky.

“If we go through a lawsuit and we basically end up with nothing — and if the voters [keep the casino law] in November — we get stuck with a casino with no benefits to anybody in East Boston or Charlestown,” Walsh said in a brief interview Tuesday at an unrelated public event. “Which is very unfortunate. To some degree, our backs were up against the wall.”

He would not comment on the details in the deal, but he said the agreement would be publicly released in about a day.

The head of the citizen-led movement to repeal the casino law criticized the mayor Tuesday for deciding to take a compensation deal from Mohegan Sun.

“It should come as little surprise that the City of Boston is cutting another deal with the casino industry that is based on dollars and cents, not what is in the clear interests of our capital city, its people, and its long-term economic future,” said John Ribeiro, chair of the Repeal the Casino Deal campaign, in a statement.

Despite the threat of repeal, the state gambling commission is pressing ahead with its review of the two applicants for the Boston-area license.

Barring an unexpected breakthrough, the Walsh administration will settle the city’s compensation package with Wynn Resorts in arbitration, as outlined by state law and gambling commission regulations.

The parties must exchange their “best and final offers” for an agreement by Thursday, according to the commission’s timetable.

Negotiations may continue over the next several weeks while arbitration hearings are ongoing. If no deal is reached, the arbitrator, or a panel of arbitrators, will decide which of the two final offers will become the surrounding community agreement between Boston and Wynn. The arbitrator cannot modify the offers submitted by the parties and must simply choose one or the other.

Boston is leaning toward submitting the general terms of its deal with Mohegan Sun as its final offer in arbitration.

Walsh said Tuesday that Wynn “hasn’t stepped up to the table, thinking that Boston isn’t worthy of a real good agreement.”

In response, Wynn spokesman Michael Weaver said, “We have offered Boston a total package worth millions of dollars per year. In accordance with the Gaming Commission’s schedule, our best and final offer will be delivered on Thursday.”

The person familiar with the negotiations said Wynn offered to pay interest on city bonds for infrastructure improvements, make payments to the city for public safety, pay for environmental cleanup in Boston, improve traffic at Sullivan Square, build a water transit system to serve the site, and offer hiring preferences for Charlestown residents, among other benefits.

Arbitration could be a risky path for Boston, as Wynn has already won arbitration hearings with Chelsea and Somerville, requiring Wynn to pay each community about $650,000 annually, along with providing job preferences for local residents, road improvements, and other recurring and one-time benefits. The cities had asked for larger compensation packages.

But under state law and the commission’s regulations, surrounding community deals are to compensate communities for “known impacts” of the development, which has generally meant effects on traffic and public safety and drains on city services. Wynn prevailed in arbitration because the cities could not document some of the potential costs they had claimed, according to the arbitration decisions.

Paul DeBole, assistant professor of political science at Lasell College and a specialist on gambling regulation, said Mohegan Sun’s ability to strike a deal with Boston should impress the four gambling commissioners who will decide which firm wins the license.

“With an arrangement in which all parties agree, I think that has to give them an edge,” he said.

But Carl Jenkins, managing director at the financial firm Duff & Phelps, who has studied the local casino market, doubts the fate of the lucrative license will depend on compensation to the surrounding communities.

“I just don’t think it matters if the deal comes by negotiations or arbitration,” he said. “No matter what, there will be people unhappy with the agreements.”