Legislature Scrutinizes Gaming Agreement

The 34th Legislature considered the terms of that agreement, which forms the basis of the governor’s pending legislation–Bill No. 34-0224–during a session of the Committee of the Whole on March 22nd on St. Thomas.

In 2018, Southland Gaming sued the Government of the Virgin Islands and claimed that the USVI had violated an exclusive contract to operate Video Lottery Terminals (VLTs) on St. Thomas in response to the government’s entrance into a contract with VIGL for $27 million to install slot machines in STT and STX. A district judge had initially ruled in favor of Southland Gaming, saying there was no functional difference between slot machines and VLTs, but that judge’s successor would ultimately direct the matter for mediation, according to The Virgin Islands Daily News. 

The governor relayed the results of that mediation and a legislative proposal to the 34th Legislature through Senate President Donna A. Frett-Gregory on Feb 24th. In the letter to the Senate President, Gov. Bryan outlined the terms of the agreement:

• Southland will develop and subcontract for the construction of facilities at the St. Thomas Racetrack. Southland will commit up to $100,000 per race day, up to $600,000 annually, to fund purses for the St. Thomas Racetrack during the term of the Southland contract, including contract extension, provided that races are being run at the St. Thomas Racetrack. Southland will install 50 VLTs in a space built by Southland in the grandstand structure for VIGL to operate as a video lottery retailer.
• Southland’s Contract with the GVI will be extended for an additional 13 years (or until July of 2041), marrying the duration of the terms of Southland’s Contract and VIGL’s Franchise Agreement.
• VIGL will be the promoter of races at the St. Thomas Racetrack. VIGL will lease and operate the St. Thomas Racetrack and the St. Croix Racetrack in order to begin renovations at the St. Croix racetrack, and, once the Southland agreements are approved by the Legislature, VIGL and GVI will further amend the Franchise Agreement to move the development of the St. Thomas Racetrack as needed.
• The GVI also agreed to allow VLTs instead of slot machines at St. Thomas Racetrack under Lottery regulation; to correct Casino Revenue Fund allocation (32 VIC 517(c)) to add up to 100% (not 101%), and to provide for Racetrack gaming tax to go toward St. Croix purposes only.

The governor further stated in his letter to the Senate President:

“Once the amendments to the Virgin Islands Code have been approved and the Southland agreements have been approved and ratified, the amendment to the VIGL Franchise Agreement will then be finalized.”

During the Committee of the Whole’s March 22nd meeting to discuss the proposed agreement, a dozen stakeholders appeared in St. Thomas to discuss the merits and potential pitfalls of the agreement and resulting legislation. From the outset, VI Attorney General Denise George underscored the importance of legislative approval and seemingly envisioned an ominous legal scenario should the measure receive an unfavorable outcome from the 34th Legislature.

“If the legislation does not pass then the lawsuit will continue,” said Attorney General George. “As the litigation remains pending, my first priority is to assure that the Virgin Islands Government’s interest in defending the lawsuit is fully protected and not compromised in any way. I must continue to uphold my legal and ethical responsibility to act in the best interests of the People of the Territory in defense of this lawsuit. However, if this body were to approve or ratify the proposed measures, then consequently, the lawsuit would be settled and dismissed.”

Representatives from the GVI, Southland Gaming, VIGL and members of prominent horse racing organizations offered mixed opinions during their respective testimonies to the lawmakers gathered in the Earle B. Ottley Legislative Hall on St. Thomas.

“With the reopening of the racetracks on both St. Thomas and St. Croix, the Government of the Virgin Islands as a whole, can expect to eventually see more in the way of higher revenues through increased tax collections from additional employees being hired, business license applications, and gross receipts,” said Jennifer O’Neal, Director of the Office of Management and Budget and Chairperson of the VI Lottery.

Chairman and CEO of the Virgin Islands Casino Control Commission (VICCC), Marvin L. Pickering offered a counter and argued that the agreement and its matching legislation could potentially undercut his agency’s ability to oversee gaming in the Territory.

“The proposed legislation before the Committee of the Whole today seeks to amend certains provisions of the CRCA, that, as proposed, will have a major impact on the manner in which ‘racinos’ will be regulated, or not regulated as the case may be, in the Virgin Islands,” said Pickering, Chairman and CEO of the VICCC.

Lawmakers shared their own concerns when allotted their seven minutes for questioning of the dozen stakeholders in attendance. From the outset, representatives of the 34th Legislature highlighted a number of glaring open-ended agreements.

During her line of questioning, Senator Alma Francis Heyliger demonstrated that the agreement and subsequent legislation would allow for amendments “as needed” and left a large margin of wiggle room for interpretation. The term “up to” also drew the senator’s attention as it pertained to the contributions agreed upon by Southland Gaming.

“I’m a very funny person when I see words like ‘up to’,” said Sen. Francis Heyliger. “Because ‘up to’ means you could have a race for $50,000 etc. It still means you meet the agreement of saying you did up to that amount. So I have a concern with that. And how is that aspect going to be resolved? Because at the end of the day, we're here to guarantee when we're dealing with our horsemen, because they've waited a long time for these agreements to get into place. Our St. Croix horseman has been going through quite a bit here in the district of St. Thomas, St. John. And I'm very concerned as to how do we clean this part up of just saying up to because there's no real guarantee that these amounts will actually materialize. And I have witnessed on the Senate floor where wording in contracts could bring about a totally different result after he passes this legislature. And that is a major concern for me, and I'm sure it is with the horsemen here in our territory.”

In response, the attorney for Southland Gaming, Jason Hicks, said that indeed, Southland’s annual contribution for horse race gaming would not exceed $600,000.

“So you're never gonna go over that amount. That's what you're saying. So that's it. Okay. I catch what you're saying,” said Sen. Francis Heyliger. “I think we need to clean that up a little bit because I know it's going to become a concern later on. I guarantee it.”

After further questions regarding the promotion of events, collection of revenues and differentiation between the tax collections of gross receipts versus gross revenues, which would later resurface during the session, Sen. Francis Heyliger concluded:

“I have not made a decision on this particular contract as yet,” said Senator Alma Francis Heyliger. “I will make a decision accordingly based on listening to the testimony. But one thing that I do know: we have to put our horsemen at the front of this entire process. Because, growing up here in the Territory, horse racing has been a fundamental part of who we are. And one of the things that I would insist that does happen that even if this contract does go forward, that we have to make sure that there is some type of racing in the interim while all of this is happening instead of having these individuals sit around for another few years waiting for all of these things to be figured out. So that is my hope. And that is something that I would be pushing for to see happen on behalf of a horseman while we go through this process.”

As the chamber proceeded with its vetting, more questions seemed to concern the representatives. Senate President Donna Frett-Gregory reminded representatives of VIGL that the gaming company had requested to be removed from the litigation and later stated its intention to not seek renewal of its temporary promoter and temporary license agreement with the Territory. CFO and Managing Partner of VIGL, Andrew Dubuque, said he did not believe this would affect VIGL’s franchise agreement

“I have to differ,” responded Sen. Frett-Gregory before turning to Senator Kurt Vialet for a point-of-inquiry.

Sen. Vialet noted that while Southland Gaming had taken action to block VIGL from installing slot machines or VLTs, the court had never issued a decision, which ultimately allows VIGL to proceed with its plan.

“Despite a case being filed,” said Sen. Vialet. “There was no word from the court.”

Senator Javan James expressed disappointment with the legal quagmire’s effect on all parties involved and inquired regarding the monetary losses the government and VIGL had endured as a result of the lawsuit. Attorney General George noted that the government had indeed suffered a loss but could not quantify the dollar amount. Similarly, CFO and Managing Partner of VIGL, Dubuque could not put a specific dollar amount to the losses but pointed to some of the more obvious impacts.

“Of course, we've experienced financial loss,” said Dubuque. “If I were to quantify it, I'd really have to think about it, but we would have racing by now if it weren't for this case, on St. Thomas and on St. Croix. We were stopped in 2018 from moving forward, because our entire franchise agreement itself was a question due to this court case. No businessman in his right mind would continue to throw money after something if he thought it was going to be pulled from beneath him.”

With mounting concerns about regulation and licensing, much of the sentiment in the chamber appeared to favor the ultimate goal of resuming horse racing and bolstering the Territory’s ability to accommodate horsemen in the Virgin Islands yet the fate of the legislation remains unclear.

“It looks like it reads like and it sounds like special interest to me,” said Senator Kenneth L. Gittens. “And I went through this document from beginning to end. Obviously, colleagues, this one needs some real fleshing out and should be either assigned to the committee of jurisdiction or when it comes to session. It needs to be dead on arrival.”

The full body of the 34th Legislature will consider the measure further when it convenes on March 24th in St. Thomas.