CANTLON: XL CENTER IN THE MIX OF GOVERNOR’S GRAND BARGAIN 

BY: Gerry Cantlon, Howlings

HARTFORD, CT – Nobody ever saw this one coming.

Over the past several months, Connecticut’s newly elected Governor, Ned Lamont, has been in secret negotiations with the state’s two Indian tribes, the Mashantucket Pequots and the Mohegans, who each own and operate the two most highly recognizable casino’s, Foxwoods and The Mohegan Sun respectively. The purpose of these “secret negotiations?” The governor has been pitching them to potentially buy the troubled XL Center and put a casino and sports betting emporium within the confines of the arena.

The concept of this grand bargain proposal came out last Sunday night in an exclusive piece by the Hartford Courant’s Chris Keating. A proposal of this large scale, and as out of the box proposal as it is, it has some real rewards, but also some very high risks.

There’s no denying that this is a complicated proposal being discussed as Keating reported.

In Keating’s piece, for months, Lamont and the tribes have said little about the confidential negotiations. Mashantucket Pequot tribal chairman, Rodney Butler, said during the legislative session that the behind-the-scenes negotiations with Lamont had been complex as all sides try to agree with the legislature and the executive branch.

“We’re looking at a global solution — looking at sports betting, online gaming, extended liquor hours, casinos in Bridgeport, casinos in Hartford, and we’re trying to wrap it all into one conversation,” Butler said. “It’s complicated.”

The substance of the grand bargain would allow the Native American tribes to renovate the XL Center and operate a casino with a sports betting operation within the structure and would take state dollars out of the project making it privately financed. This is a move to try and rescue the XL Center from potentially closing within the next few years as there are massive mandatory repairs that are incredibly long overdue. Add in dwindling revenues for the XL Center, especially in the concert business, but the casinos could, in theory, save that portion of the XL financial ledger by owning it allowing them to book the big shows there.

All of this is wrapped up in a major casino battle. The legislature has given tentative approval to build a casino in Bridgeport as well as shelving the proposed East Windsor plan which was meant to blunt the impact of the new MGM casino in Springfield’s influence.

Recently, initial financial projections were released and they show that the MGM Springfield is falling far below expectations. The building is the first of its kind in an urban small city setting. It raises the question if Hartford would be any better?  If the casino is halted in Bridgeport, and East Windsor is built, an MGM lawsuit is coming. The Governor is seeking to forestall that mess while getting a third casino built while saving the XL Center all in one fell swoop.

Currently, the governor is on a two-week holiday with his family in Maine, so the state capital will remain quiet until his return, but that hasn’t stopped the wheels from moving.

Work has started on the East Windsor site. Permits were issued and site work has begun with promises being made. MGM wants to run the one in Bridgeport if they fail, litigation is sure to follow putting the project in East Windsor in jeopardy of beings gutted before It has even begun.

Efforts to get further clarification with CRDA Executive Director Michael Freimuth, who heads the agency that oversees the XL Center, and which has been bogged down in a six-year plus so far, a futile effort to reboot the arena with bonding via the legislature was unsuccessful as he too is on vacation.

The irony here is that both casinos were invited two years ago to the XL Center by the CRDA when the RFP process began as they were seeking an outside entity to “buy” the building. The casinos came, took a look, and politely said, “No, thank you.” The lone bidder from that RFP process, Oak Street Realty LLC of Chicago, Illinois, submitted a bid that was ultimately rejected by the CRDA formally two months ago. It seemingly never was under serious consideration because the payback of upfront financing at 7.5% was considered far too high for the now 45-year-old structure.

One of the biggest complications is the XL Center Atrium title, still owned by Northland Corporation and its CEO, Larry Gottesdeiner. The hefty price tag to obtain the property title Gottesdeiner has given to the CRDA to part with the atrium has been in a two-year plus stalemate. This news now makes it likely that the Northland price tag will be quite a bit heftier since the casinos have deep pockets and have the wherewithal to write the check he seeks.

The other complication is would the state still seek to retain at least some form of ownership of the XL Center, or would they really sell the whole building, lock, stock, and barrel?

Then there’s the question of if the XL Center was owned and operated by a gambling entity, would that propose an issue for three of the four main tenants, UCONN men’s and women’s hoops and ice hockey teams? The NCAA even has relaxed its stance on this subject on schools playing in arena casino sponsored venues.

Right in the middle of a CRDA inspired proposal with House majority leader Matt Ritter (D-Hartford), they are seeking up to $40 to as much as $60 million dollars in their proposal to receive bonding money to start the long-stalled re-boot of the arena. If the Finance committee approved the package it would have to go to the General Assembly for passage to be put on the bond package docket in the fall.

The votes have been lagging to go all in the project in part because of politics from last year’s budget where the city of Hartford received a $550 million dollar bailout to avoid bankruptcy. That left many of the delegations especially the other big cities like New Haven, Waterbury, Bridgeport New London and Stamford less than enthralled with giving Hartford another big check.

The question is though, have their feelings changed over the past few months?  That remains unknown.

In 1998, under former, and disgraced governor, John Rowland, Bridgeport lost out on a casino and instead got in return, a new hockey arena that would lead to the end of the New Haven Coliseum and they also received a baseball stadium that no longer exists and is in the process of being converted to an outdoor concert amphitheater.

New Haven opted to get a mall on Long Wharf, but that state funding never materialized. Then when the state imploded the New Haven Coliseum, Northland, who was to develop on the hallowed grounds of the Coliseum, reneged on their commitments because of the stock market crash of 2008. The city of New Haven also paid $1 million dollars a year for three years after it knocked the Coliseum down, to pay off the original constructions bonds issued in 1968!

The Webster Bank Arena in Bridgeport is now approaching its 20th-year of operation. It too will soon need funding to fix its outmoded mechanical systems. Also, the original 20-year lease with the AHL’s Bridgeport Sound Tigers expires in two years. That arena is now managed by OVG (Oak View Group).

OVG is an arena management and investment company. Their primary financial backer is–MSG. The group, along with the NY Mets ownership and the Islanders, just received unanimous approval from all six members of the Empire State Development Corporation last Thursday, on building the new home of the NHL New York Islanders at the Arena in Belmont Park, as its currently known. The scheduled groundbreaking is likely coming in September as the $1.3 billion, 19,000 seat arena and hotel project on a 43-acre site owned by New York State will get underway.

New York Governor Andrew Cuomo announced last month an LIRR (Long Island Rail Road) station would be built just near the arena as well.

OVG is also currently working on the new building in Seattle that will house the 32nd NHL franchise starting 2021. They are also in a partnership with MSG, courtesy of a $100 million dollar loan on the now expected $930 million dollars (up from its original $600 million price tag 10 months ago) overhaul of the Seattle KeyArena.

In Calgary, Alberta, Canada, the NHL Flames, and the City of Calgary has reached a tentative deal on a new 18,000 seat arena deal pegged between $550 and $600 million (Canadian) to replace the 49-year-old Scotiabank Saddledome. Them there is Quebec City built a $450 million dollar facility called the Videotron Centre in anticipation of getting an NHL expansion franchise four years ago that is presently home to the Quebec Remparts (QMJHL).