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Partnering Now Another Way to Get a Casino License

Aug. 15, 2004 – The casino-licensing rules have just changed radically in the Virgin Islands. With Gov. Charles W. Turnbull's signing on Friday of legislation introduced on the Senate floor on July 13 and passed the following day, any hotel that allows the government at least 25 percent ownership by Sept. 30, 2005, will qualify at once for a gaming license, provided that it complies with certain requirements such as the number of rooms.
This was the deal proffered to any hotel with at least 150 rooms and a convention center nearly a decade ago in the Casino and Resort Act of 1995 that was the enabling legislation for the introduction of casinos on St. Croix. But the law specified that the government must have held that 25 percent or more ownership as of Jan. 13 of that year.
There were, of course, no takers at the time. The territory's first – and to date only – casino, at Divi Carina Bay Resort, didn't open its doors until March of 2000.
The Divi went through the extensive review and investigation process established by the Casino Control Commission, the body created to license and regulate casino gaming in the territory. Two other would-be licensees, Golden Gaming and Robin Bay Associates, subsequently initiated the process, with the commission "reserving" licenses for them – in effect giving them provisional approval. Both still have that status.
July's legislative action was the second time around for the measure to amend the 1995 act to get around that long-ago deadline; in both instances it was presented specifically with Carambola Beach Resort as a potential partner and casino licensee.
Last Dec. 11, the Senate, meeting as the Committee of the Whole, heard Joe Sinicrope, JS Carambola managing partner, state that his company was prepared to invest $41.3 million in upgrades to the resort that would include adding 100 rooms, a conference center of 15,000 square feet and a casino of 12,500 square feet. Also testifying in favor of the bill were Nathan Simmonds, director of the governor's Office of Fiscal and Economic Recovery Implementation, and Attorney General Iver Stridiron.
A day earlier, Lt. Gov. Vargrave Richards had endorsed the government partnership with Carambola, saying in a release that "the economic impact of this project will be tremendous." He also stated that the governor had signed a limited partnership agreement with JS Carambola on Oct. 22 which provided for the acquisition, upgrading and expansion of the resort, subject to ratification by the Legislature. (See "Views Mixed on Carambola Casino Deal".)
And Frank Schulterbrandt, chief executive officer of Economic Development Authority, had said in November that JS Carambola had applied for tax benefits but that licensing by the Casino Control Commission was among the issues needing to be resolved before a decision could be made.
Eileen Petersen, who chairs the casino commission, was not at the Dec. 11 meeting but wrote to Senate President David Jones suggesting that the commission seek out the views of gaming industry officials, investors and the local community before the Senate voted on the bill to amend the 1995 act.
Representatives of Divi and Golden Gaming came out publicly against the bill, the latter expressing concern about a potential "proliferation of casino licenses" that would work to the disadvantage of those who had already gone through or were going through the license-application process.
The 1995 act provided for no more than six casino licenses to be issued: one for a hotel of 150-199 rooms (held by the Divi), two for hotels of 200-299 rooms, two for hotels of 300-1,499 rooms (the two "reserved" ones) and one for a hotel of more than 1,500 rooms.
The bill was scheduled for a vote on Dec. 17. However, the Senate voted to remove it from the agenda after having spent hours discussing it and having heard Petersen state that she would like to see the language of the bill changed from "shall automatically qualify and receive a casino license" to "may receive a casino license if qualified pursuant to the licensing requirements of this act."
She also told the senators: "The casino commission cannot, and will not, ever give an automatic license to anyone."
Also testifying that afternoon were Simmonds and Stridiron, again in favor of the bill.
The immediate cause for the vote to remove the bill from the agenda was not Petersen's objection but an opinion from legislative legal counsel Yvonne Tharpes that the arrangement between JS Carambola and the government "may be void and unenforceable inasmuch as the government cannot lawfully become a limited partner under the Uniform Limited Partnership Act." (See "Senate Skips Vote on Carambola Casino Bill".)
JS Carambola officials had said that they could not obtain financing for the acquisition of the resort without agreement on casino licensing in effect – and that they were facing a Dec. 19 deadline to close a deal to acquire funding.
In June, Sinicrope said his company JS Management LLP would close on the purchase of the property in the next couple of weeks and that a casino, a conference center and the Tom Shaw Sports and Fitness Center would all open by summer of 2005. (See "Carambola Owner-to-Be Plans Sports Center, Casino".)
The administration bill introduced on July 13 changed the 1995 cutoff date for the government to acquire one-quarter interest or more in a hotel to Sept. 30, 2005.
The Senate on July 14 voted to switch from regular session to the Committee of the Whole to hear again from Petersen, who again asked that the "shall automatically qualify" language be removed and that language be inserted making licenses contingent on hotels adhering to certain requirements such as the number of rooms. Simmonds also testified anew, again endorsing the measure.
The lawmakers amended the bill to meet Petersen's objections. The bill then passed on an 11-4 vote with Sens. Adlah "Foncie" Donastorg, Usie Richards, Ronald Russell and Celestino A. White Sr. voting against both the amendment and the bill itself. The act was sent to the governor on Aug. 2.
Jones said the purpose of the act was to increase the number of hotel rooms on St. Croix, not the number of casinos. (See "Senators Work Late Changing Casino Control Act".)
The latest players to enter the gambling arena – the managing partners of William and Punch Partners LLP – say they plan to develop a 400-room hotel, a convention center and a casino, among other things, on 588 acres of West End land. They have not indicated which route to a gaming license they intend to take.

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