A study said Virginia shouldn’t award casino licenses without competition. Do lawmakers agree?

By: - January 27, 2020 12:05 am

A rendering of the Pamunkey Indian Tribe’s proposed casino resort in South Richmond. (Courtesy Pamunkey Indian Tribe)

The big gambling report Virginia lawmakers asked for to help them figure out how to start a casino industry didn’t say exactly what the General Assembly should do.

But its recommendations were pretty clear on one point: No one should get a free pass at a lucrative casino license with no competition.

“A competitive licensing process introduces market competition into an environment where casinos will ultimately operate as monopoly-like businesses,” the Joint Legislative Audit and Review Committee said in its report issued late last year.

Unlike most states, the report noted, Virginia’s 2019 casino bill that sparked the gambling study didn’t include a competitive process for picking the best casino projects. As lawmakers take up the casino issue again this session, it’s not clear it ever will.

As written, some bills under consideration continue to tailor the casino legalization process to specific projects proposed for five chosen cities: Bristol, Portsmouth, Danville, Norfolk and Richmond.

Del. Barry Knight, R-Virginia Beach, the sponsor of one such bill, said he wants to empower localities to pick which casino projects work for them without throwing the door wide open to competition through a state-run bidding process.

“You’ll get Malaysia and Dubai and all these people coming here, putting a ton of money in here. Then the state will say ‘Oh this is the best deal for your locality. And you’ll have no say-so,” Knight said.

Lawmakers have yet to take up the casino issue in the current session, and the ins and outs of the licensing process will only have to be worked out if the legislature chooses to legalize casinos. If that happens, local voters would have to give their approval before any casino could come to their city.

The competition issue may be most obvious in far Southwest Virginia near Bristol, where two different casino projects are being proposed at virtually the same spot, but on different sides of a highway and a city/county line.

Coal barons Jim McGlothlin and Clyde Stacy are spearheading a proposal to bring a casino resort to the former Bristol Mall building, a project pitched as an economic lifeline for a struggling city. To help forge alliances in Richmond, the Bristol group started a PAC called Betting on Virginia Jobs, which has given more than $600,000 to Democratic and Republican lawmakers alike, including a $25,000 donation to Gov. Ralph Northam’s PAC on New Year’s Eve.

The Bristol Mall is currently vacant but soon will be home to a medical marijuana production operation and, potentially, a casino resort if state law makers agree to legalize gaming. (Ned Oliver/Virginia Mercury)

Right across Interstate 81 in Washington County, the Eastern Band of Cherokee Indians, a newcomer to the state’s gambling discussion, has proposed a casino resort of its own. The tribe announced its project the day before the 2020 legislative session began.

Given the limited customer base, it’s highly unlikely both casinos could be financially viable with a competitor so close by. So whose project will win out? It depends on how lawmakers write a casino legalization bill.

Under the original version, casinos would only be allowed in cities that match highly specific data points dealing with real estate characteristics, population numbers, unemployment rates and poverty rates, a technique lawmakers use to have bills apply to certain localities and not others.

“Bristol fits that criteria,” Knight said. “I’m not sure Washington County fits it.”

Several other Southwest Virginia lawmakers say they’re sticking with the Bristol project that’s been on their radar for over a year, not the one that just showed up.

“That’s certainly the one we know the most about,” said Del. Israel O’Quinn, R-Washington. “The only thing we know about the second proposed project is the press release that we got the day before session. That’s not to say it doesn’t have merit. It’s just to say that we don’t know anything about it.”

The Pamunkey Indian Tribe, which would get exclusive rights to Richmond and Norfolk under the original casino bill that passed in 2019, has said it opposes the statewide bidding process envisioned by the study. The tribe wants to operate a casino under state-approved commercial rules rather than use its tribal sovereignty to open a casino via a federal process. Nevertheless, Pamunkey representatives have said the tribe’s unique status and history in Virginia — which long predates the arrival of Europeans — warrant special consideration by the state.

The JLARC report said tribal considerations could be built into a competitive bidding process, just as officials try to give minority- or veteran-owned businesses favorable treatment in government contracting.

The Pamunkey Tribe has already announced plans for casinos in both Norfolk and South Richmond. Colonial Downs Group, the horse-racing venture that owns the track in New Kent County and several satellite betting parlors under its affiliated Rosie’s brand, has already opened a Rosie’s in South Richmond that features hundreds of slots-like historical horse racing machines.

A competitive process could give Colonial Downs a chance to ward off threats to the gambling enterprise it’s been building since 2018, when the General Assembly voted to legalize historical horse racing machines.

“We endorse a competitive bid process that gives consideration for partners with proven track records and a material investment in Virginia,” Colonial Downs Group Chief Operating Officer Aaron Gomes said in a written statement. “In our experience, other states have always made some provision for incumbents when expanding gaming legislation.”

Colonial Downs in New Kent County. (Ned Oliver/ Virginia Mercury)

Danville, the only city in the bill that doesn’t have a designated casino operator waiting in the wings, has already initiated its own competitive process, issuing a request for proposals to solicit casino plans from anyone interested.

The JLARC report suggested the state’s gambling regulator, likely the Virginia Lottery Board or an ad hoc casino selection committee, could set criteria and award licenses based on who’s most qualified to run a successful casino.

Sen. Jeremy McPike, D-Prince William, has introduced a bill that essentially heeds JLARC’s advice, creating a Casino Gaming Establishment Location Commission that would vet casino proposals at the state level. In an interview, McPike said he filed the bill to make sure the legislature has “all of the policy options on the table.”

“I don’t know which way the body is going to decide at this point,” McPike said.

McPike’s bill would also only apply to the five cities covered in the 2019 casino bill.

In order for the Eastern Band of Cherokee Indians to have a chance of competing with the Bristol project, the scope of the bill may have to be widened to cover the regions surrounding the targeted cities.

Greg Habeeb, a former delegate now working as a lobbyist whose clients include the Eastern Band of Cherokee Indians, said JLARC made it clear the state should pursue projects that have the biggest economic impact on the targeted regions.

“In a jurisdiction like Bristol, there can be no competition without adjacent jurisdiction competition,” Habeeb said.

In a statement, the Bristol casino group dismissed the new project proposed near its own, noting that the developer involved in the Cherokee project, Steve Johnson, has been more active in Tennessee than Virginia. Johnson is the developer behind The Pinnacle retail complex in Tennessee, and the proposed casino would essentially be an extension of that development into Virginia. The Eastern Band of Cherokee Indians already operates a casino in Cherokee, N.C.

“This 11th-hour ploy by this developer and his partner, a North Carolina casino owner, appears to be about protecting out-of-state interests, nothing more,” the Bristol group said. “It is highly doubtful this speculative idea could result in a serious proposal, but it sure could derail our plan to bring a once-in-a-generation economic development opportunity to Bristol and all of Southwest Virginia.”

Knight said his bill will include a state-run process for vetting potential casino operators’ backgrounds and finances. But the final call, he said, should be up to the locals.

“It’ll be a competitive process,” Knight said. “But the locality is going to control it.”

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Graham Moomaw
Graham Moomaw

A veteran Virginia politics reporter, Graham grew up in Hillsville and Lynchburg, graduating from James Madison University and earning a master's degree in journalism from the University of Maryland. Before joining the Mercury in 2019, he spent six years at the Richmond Times-Dispatch, most of that time covering the governor's office, the General Assembly and state politics. He also covered city hall and politics at The Daily Progress in Charlottesville. Contact him at [email protected]