Senators were dubious Tuesday when the Committee of the Whole met to discuss the proposed settlement agreement with Southland Gaming of the Virgin Islands, Inc. and VIGL Operations LLC, regarding the construction of the Clinton E. Phipps Racetrack facility on St. Thomas.
The dispute arose in 2016 after the Legislature approved a deal shepherded by then Gov. Kenneth Mapp to allow slot machine operator VIGL up to 200 slot machines at St. Thomas’s Clinton Phipps horse track and run the slot parlor at St. Croix’s Randall “Doc” James horse track in exchange for rebuilding the tracks and running the races. Southland Gaming runs video lottery slot machines all over St. Thomas and objected at the time that it violated its government-granted monopoly. (See: Horse Racing Slots Plan May Be Risky )
In 2018, Southland Gaming sued the V.I. government saying the 2016 deal violated the government’s 2003 Video Lottery Agreement that only Southland Gaming could operate video lottery gaming in the St. Thomas-St. John District.
Sen. Kurt Vialet said there was a 2008 agreement that terminated the exclusivity of the agreement for Southland agreement.
Under the 2016 deal, VIGL had three and a half years to have both tracks “substantially completed.” But that clock did not start until all permits were in place.
VIGL, which owns the slot machine parlor at the Caravelle Hotel on St. Croix, pinned the blame for continued delays on the Southland lawsuit.
“We would have racing right now if it weren’t for this case,” said VIGL chief financial officer and managing partner, Andrew Dubuque.
According to Attorney General Denise George, Southland claimed that the “VIGL Franchise Agreement pertaining to the operation of slot machines at a ‘racino’ in the St. Thomas District, is an unconstitutional impairment of Southland’s VLT agreement with the Virgin Islands Lottery.”
However, out-of-court settlements brought about Bill No. 34-0224, which George says would “settle and dismiss” the lawsuit.
The proposed legislation, sent by Gov. Albert Bryan Jr., allows Southland Gaming to subcontract and develop the horse track on St. Thomas. Southland would commit up to $100,000 per race, but no more than $600,000 per year, to fund the race purses. Further, the organization will be able to install video lottery terminals. The government of the Virgin Islands will allow VIGL to be the promoter of the races at the track, but not operate any of the gaming machines.
According to Raymond Williams, executive director of the V.I. Lottery Commission, revenues from V.I. lottery terminals provide revenue for organizations such as the Government Employees’ Retirement System, Department of Education, and Department of Human Services.
The race track facility is anticipated to include grandstands that will hold about 2,500 seats, luxury boxes, a judges’ booth, pony barn, isolation barns, veterinarian clinic, jockey locker room and headquarters, a concession and bar, and room for up to 75 VLT machines.
Marvin L. Pickering, chairman and chief executive officer of the Virgin Islands Casino Control Commission, raised concerns about the implementation of the plan. “If this body is serious about gaming and maintaining the integrity of the gaming industry in the territory, then all efforts to ensure that there are no unregulated entities or persons involved in gaming must be the first step,” he said.
In the bill proposed by Bryan, Southland Gaming “shall be exempt from all gross receipt taxes imposed for operation of video lottery terminals at the horse track by the government of the Virgin Islands for a period of fifteen years from the period of first operation … expiring December 31, 2036.”
Williams said Southland Gaming’s gambling machines generate $8 million to $11 million annually for the V.I. Lottery. Currently, the V.I. Lottery collects 37.5 percent of the total take from Southland Gaming’s machines, which it calls Video Lottery Terminals or “VLTs.” However, if the company operates under the title of “racino,” Shaine Gaspard, chief operating officer of Southland Gaming, said that the V.I. Lottery will collect 25 percent in revenue: 12.5 percent less than what is currently being collected.
Senators expressed apprehension regarding the tax leniency, purse investment, and apparent monopoly over the operation of VLTs should the bill get approved. Some senators were also concerned about the lack of input from horsemen in the community.
“I am very cautious about giving up any type of revenues,” said Sen. Alma Francis-Heyliger.
Senate President Donna Frett-Gregory hinted at the idea of creating a gaming entity.
“This is nothing more than a glaring disparity,” said Pickering. “As the settlement agreement seemingly establishes that Southland Gaming shall have the exclusive and sole authority to operate VLT’s at the St. Thomas horse racetrack, and when this is coupled with the district court’s ruling that VLTs and slot machines are the functional equivalent of each other, these amendments have the effect of creating an unregulated entity and a semi-regulated industry in the territory. Simply stated, these amendments extend the benefits of racino gaming to Southland Gaming without being subjected to the regulatory oversight of the Commission.”
“It looks like, it reads like, and it sounds like special interest to me,” said Sen. Kenneth Gittens.
Sen. Samuel Carrion questioned Southland Gaming about suing the V.I. government, in turn preventing the upgrade of race tracks.
“What about being a good corporate citizen?” Carrion asked.
The bill was not voted on during Tuesday’s Committee of the Whole hearing and will be considered during a later legislative session.