Gateway or anchor? Newport Grand’s next bet will impact city, state

SHRINKING JACKPOT: The VLTs at Newport Grand make up he third largest source of revenue for the state, when combined with that of Twin River in Lincoln. But Newport Grand's slots revenue has declined 30.4 percent since 2009. / PBN PHOTO/KATE WHITNEY LUCEY
SHRINKING JACKPOT: The VLTs at Newport Grand make up the third-largest source of revenue for the state, when combined with that of Twin River in Lincoln. But Newport Grand's slots revenue has declined 30.4 percent since 2009. / PBN PHOTO/KATE WHITNEY LUCEY

For Newport Grand, 2015 could be the year the slots parlor pivots between subsistence and a grander metamorphosis befitting its name.

Even those closest to the casino, which a developer says he has a tentative deal to purchase, aren’t sure or won’t say what exactly is in store. But change is considered inevitable for the former jai alai fronton-turned slots parlor by those in the gaming industry and in Newport.

With Massachusetts appearing ready to put out a welcome mat to gamblers — Plainridge Park Casino in Plainville opens later this year and three resort casinos are in various stages of evolution over the next couple of years — Newport Grand’s future is at stake, city councilors, a Newport lawmaker and gaming experts say.

Its fate will affect both the city and state, albeit in different ways.

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For Newport, the facility is still a significant employer, although those jobs are down. According to the PBN Book of Lists, Newport Grand reported 200 employees each year from 2007 through 2014, but 175 for 2015.

And as one of only two gambling halls in Rhode Island, Newport Grand remains a major, though declining, revenue producer for the state. Rhode Island relied on about $26.4 million of the yearly slot take, or net terminal income, from Newport Grand to buttress its annual budget in 2014. That’s about $10 million less than the state received in 2010, said Paul L. Dion, chief of the state office of revenue analysis.

Labeled “tired” by developer Joseph R. Paolino Jr. as he and two partners sought to add table games and year-round entertainment in 2014, an effort Newport voters rejected, the slots parlor hasn’t been freshened since a $28 million renovation in 2008. But in early February, Paolino confirmed he has a tentative agreement with owner Diane S. Hurley to buy the property.

New Vision?

So far he’s declined to share his latest vision for the facility, although the November 2014 rejection of expanded gaming at Newport Grand was not the first time such plans were rejected. Voters voted down a similar plan in 2012

In 2014, Paolino’s plan included a concert venue, spa and other amenities. The commitment by Paolino and partners of approximately $40 million to improve the venue was contingent, however, on voter approval to add table games. While voters across the state gave their approval, Newport voters rejected it.

City officials would clearly welcome any investment in the property.

Just named a top 20 tourist “city to stay” by Trivago in early February, Newport has evolved into a tourist hot spot. And Newport Grand, which looks more like “a gymnasium with the word ‘slots’ at the top,” doesn’t entirely fit, said Newport Mayor Jeanne-Marie Napolitano.

“Certainly, something has to happen there, because that facility hasn’t been improved in … years,” she said. “It could be so much more even without the table games. It could be a much better facility.”

But what could it be? The slots parlor’s future may stay closely to what it has been.

The building, built by Newport Grand CEO Hurley’s father, the late Arthur W. Silvester, opened in 1976 as Newport Jai Alai.

The operation included betting on sports play and, according to Napolitano and state Rep. Marvin Abney, D-Newport, “even then” generated debate whether it was “a good fit” with the city’s identity as a tourist destination.

By 1991, Hurley was running Dinart Vending Corp., a company her father started to supplement his founding of Newport Jai Alai with food and beverages. Simulcast dog and horse racing had been added, and in 1992, Hurley took the lead as video lottery terminals were installed.

But in 1993 Silvester passed away and a decade later Hurley got rid of jai alai, which had been losing money.

She would renovate the former jai alai arena into a 22,000-square-foot gaming space in 2008, enhancements planned but temporarily sidelined in 2007 when The Procaccianti Group proposed a $1.4 billion “O2 Newport plan” to develop the North End and expand Newport Grand, add a Ritz-Carlton hotel and even, possibly, a waterpark.

The Procaccianti plan died when lawmakers failed to act on a bill that would have extended the state tax rate for video-slot revenue by five years.

Had The Procaccianti Group made the investments it was planning, including mixed-use development, a water park and a hotel, said Justin S. McLaughlin, one of Newport’s councilors at large, “there’d be a lot of different things in Newport [today].”

But that didn’t happen. Now comes Paolino, who says he expects to consummate the deal to purchase the property “soon.” Hurley has declined public comment on her plans for the facility.

Even those opposed to expanded gambling, however, understand the local importance of the jobs at Newport Grand.

McLaughlin has opposed adding table games – but based on economic, rather than moral, principles. The state’s economy – with its third-highest revenue stream coming from gambling – should not be propped up by slots revenue, he said.

But he’s open to hearing what Paolino might do.

“We are trying to develop the North End,” said McLaughlin. “We’d like to bring businesses in. Joe may see an opportunity to help to do that. … Joe and [his partners] are people who want to invest their money. I would sit down and tell Joe: ‘Tell us what you want to do.’ ”

“My concern, it has been from Day 1, is, it is in my district: [for] a lot of people, that’s their livelihood,” Abney said. “Our whole mantra [as a state] is jobs and the economy, and if Newport Grand isn’t there to employ [those workers], that concerns me.”

Under Pressure

The possibility Newport Grand could succumb to the pressure of expanded gaming in the Bay State and national economic pressures that have cut into the profits at Connecticut’s Foxwoods Resort Casino and Mohegan Sun is real, gaming experts say.

And while the city could lose jobs, the state would lose what has been a much-needed revenue source.

Over the past 10 years, the amount of Newport Grand slots revenue sent to the state has dropped by 47.5 percent, or about $24 million, from more than $50.4 million in fiscal 2005 to $26.5 million in fiscal 2014, according to data from the R.I. Department of Revenue. Meanwhile, the larger Twin River in Lincoln, which added table games more than a year ago, has seen its state contribution increase 51.8 percent in the same period, from $193.5 million in fiscal 2005 to $293.8 million in fiscal 2014.

In the 2014 update to the Rhode Island Gaming and State Revenue Forecast, state consultant Christiansen Capital Advisors LLC, of New York and Maine, projects that development in Massachusetts, particularly if casinos come online in New Bedford or Fall River, could trigger further slots revenue declines that could make Newport Grand “unable to continue operating.”

Two experts – Clyde W. Barrow, formerly the director of the University of Massachusetts Dartmouth Center for Policy Analysis, and now professor and chairman of the University of Texas – Pan American Department of Political Science, and Edward M. Mazze, professor of marketing and supply chain management at the University of Rhode Island and former dean of the College of Business Administration, say Newport Grand is in trouble.

“Without a major investment,” says Mazze, “that place is going to close. As casinos go online [in Massachusetts], I would suspect the Newport Grand is going to disappear within the next five years.”

The pressure on declining slots revenue has come, ironically, from Twin River’s expansion and success, but also from the Great Recession and the failure of the economy in South Coast in Massachusetts, the source of Newport Grand’s customer base, to recover, Barrow says.

On top of that, Barrow adds, Fall River gamblers are about an hour and half from Newport Grand, but only about an hour and 15 minutes from Foxwoods.

“Theoretically, Newport is a convenience gambling facility,” Barrow said, “but it’s not very convenient.”

Last year, then-Gov. Lincoln D. Chafee projected Rhode Island gaming revenue could suffer as much as a cumulative $419 million hit through 2019 if all four Massachusetts gaming proposals materialize. And those projections presumed Newport Grand would continue operating.

No surprise then that John E. Taylor Jr., chairman of the board for Twin River Worldwide Holdings, parent company for Lincoln’s Twin River, said it’s in the interest of both the state and his company to see Newport Grand “thrive.”

“It’s in the state’s best interest to have a viable Newport Grand that provides revenue as well as jobs,” Taylor said. “We’ve been consistent in our position since the 2012 referendum that a strong Newport Grand is a good thing, and we continue to believe that.”

Polarizing Property

Back in Newport, however, the facility’s future remains as polarizing a subject as ever.

Abney said that if Newport Grand were to close and Massachusetts casinos open as planned, “That’s eventually going to put financial pressure on the state to replace the kinds of dollars that are lost.”

And yet, the city and its inhabitants, including gamblers and people who enjoy the slots parlor’s food and entertainment, would “adapt,” Abney added.

Jody Sullivan, executive director of the Newport County Chamber of Commerce, declined to talk about the prospect of the future at Newport Grand in relation to the business community. During the period preceding the 2014 referendum, she also declined comment, calling the issue “divisive” for Chamber members. Months later, she still wouldn’t discuss any possible changes.

“Our board didn’t take a position [in November] because some were for and some were against it,” Sullivan said.

Meanwhile, Liz Taber, president of the Citizens Concerned About Casino Gambling in Newport, assures opposition from her group to any expansion of gambling at Newport Grand will persist. The group was founded in 1977, the year after Newport Grand’s predecessor opened.

“We feel expansion is detrimental to the local business and small-business owner,” Taber said. “We appreciate the fact that there’s quite a few folks who have made a living working there. We’re not necessarily opposed to Newport Grand per se but the geographic location of Newport is not ideal if gambling revenue is the state’s primary concern.”

Asked if the activist group would challenge a possible Paolino purchase and upgrade in the facility, Taber said, “My only opposition [is if] he would still be pursuing an active casino license going forward. So from that perspective I’m not encouraged. I am not incentivized to support Paolino as the purchaser because of our fear of [continued] efforts to expand gambling there.”

Yet, even if Paolino or someone else buys and improves Newport Grand, Barrow remains skeptical that it can survive the onslaught of new gaming in the Bay State.

“If you assume a facility gets located in Southeastern Massachusetts,” Barrow said, “all you can do is mitigate the losses; you can’t stop them. You’re not going to make Newport Grand a larger revenue or job generator. You’re at best going to slow … the shrinkage.” •

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