By JIM BARON

WOONSOCKET — With Twin River facing a deadline today to reach a new agreement with its creditors to avoid bankruptcy, General Treasurer Frank Caprio not only sees a possibility of the state taking over the facility, he thinks there is potential for a full casino there someday.

Acknowledging that there would be political difficulties gaining support from Lincoln officials and voters, Caprio told the editorial board of The Call on Wednesday that he believes “if an expansion at Twin River would be to the real financial benefit to the town of Lincoln, then maybe it has a chance.”
The gambling facility has been unpopular with the locals going back to its days as a horse racing track, and that opposition has only grown since the introduction of video slot machines caused an exponential expansion in size and the number of visitors per day.
If the state does step in to take over Twin River, Caprio said, it will have to work closely with town officials to make sure Lincoln doesn't lose property tax or tangible tax revenue it has come to depend on. Twin River is a major taxpayer in town right now, he noted, and if it became a state entity like the Community College of RI or Davies Technical School, there would be no tax due.
“You would want to treat (the town) at least the same if not better going forward, with the prospect that if the new structure worked for the town so well, they may be open to potential expansion there,” Caprio said. “Under the constitution, local voters have a big say in that, and that is an uphill battle. The state or the new owner will have to work with the town to get a certain level of comfort from the town leaders and community at large that it works financially for the town to allow an expansion. But, once again, the constitution calls for that to be voted on, so it's not something we can ram down anyone's throat.”
Twin River produces about $250 million a year in revenue the state depends upon to balance its budget. The owners of Twin River have already arranged a series of “forbearance agreements” that have kept the doors open for nine months while they try to solve their financial difficulties.
Depending on what the lenders decided to do, Caprio said, “We as a state need to stand ready, if the private market can not resolve this issue,” to step in and take control of the operation. “As a licensor and a major partner, we do not want to see a disruption in the business operation there. That would not be a positive for the state. If it goes into bankruptcy, we have to overcome the stigma, from the customer's point of view, of 'is this going to be a viable operation going forward?'”
Gov. Donald Carcieri and legislative leaders have already rejected the notion of reducing the state's 60 percent take. Twin River management requested a reduction to about 25 percent – in exchange for a $500 million upfront payment – after it missed its first loan payment last spring.
Caprio projected the cost of a state takeover of the Lincoln gambling facility at $200-$300 million, which would be financed through the issuance of bonds, similar to the way the state acquires property for state offices. He said these bonds would fall just below the most favorable credit and lending rates the state receives via general obligation bonds (those bonds approved by voters on the ballot). The treasurer explained that the state would then also take ownership of real estate and fixtures at Twin River, valued at $150-$175 million.
The RI Lottery, Caprio said, has already demonstrated a “core competence” in running the VLTs at Twin River, and its sister facility, Newport Grand. “What we don't do is we don't turn the lights on in the morning, we don't sweep the parking lots and we don't sell the hot dogs,” Caprio said. If the state were to take the place over, he said, those chores could be turned over to a management company, so the workers there would remain in the private sector and not become state employees.
The state already takes the first 60 cents of every dollar in profit the machines produce, the treasurer noted. If it were to buy the real estate where the machines are housed, and take over the operation of the facility – managing the employees and building maintenance, as well as the slot machines – it could increase that take to about 88 percent, brining in roughly an extra $100 million in revenue. After accounting for debt service and management fees, including payroll, Caprio projects that the state would see an additional $30-$50 million.
The mistake Twin River's owners made, Caprio said, is that after they purchased the property for about $500 million and sank another $200 million into renovations they expected the venue's double-digit growth in earnings to not only continue but accelerate with the additional machines that were installed as part of the renovations.
“If they gave a fair assessment, they would say they have learned that the customer who frequents Twin River is not concerned with atmosphere, they are more concerned with the games themselves because the $200 million upgrades they put in have not changed the demographics or the revenue.”
But a full casino, with blackjack, craps and roulette and poker and other “table games” might not be the answer for Twin River or Rhode Island, Caprio said.
“My personal feeling on that is that there has been a successful facility there for 18 years with the types of games that are in there,” said the Providence Democrat, who makes it clear he has an interest in becoming governor someday, perhaps soon. “If you bring in those other games, it changes the cost structure dramatically,” because they require dealers, or croupiers and other people to operate them, rather than the cheaper to run slot machines.
“The level of profitability of those types of games is not like the machines, so that's more the issue,” Caprio said. “Because it is never going to be a resort destination, you need to focus on the market that is there, convenience gaming, that's how the industry looks at it. Whoever runs that needs it to be the most user friendly and convenient gaming facility for a 30-mile radius around it.”
If there is to be full-scale gaming, Caprio said, it perhaps should be located where it will enhance existing tourist attractions.
With the $250 million in state revenue from Twin River and the $45 million take from Newport Grand, VLTs represent the third-largest revenue generator in the state. Lottery revenues from VLTs, lottery tickets, and Keno combined bring $345 million into state coffers. By comparison, the income tax generates $1.73 billion and the sales tax brings in about $845 million in revenue.