Harrah's Entertainment Offers $5 Million and Up to 2% of Revenue in Casino Development Agreement

Strategic Insights -

Harrah's Entertainment has reached a development agreement with the town of West Warwick, Rhode Island, which includes a $5 million one-time payment and up to 2% of the revenue generated by the proposed casino, after 10 years of operation. The town will also receive a $300,000 non-refundable signing bonus, regardless of the outcome of the November 7 referendum. The agreement also guarantees a one-time payment of $1 million to cover public-safety equipment and to offset any losses in property value experienced by nearby homeowners who sell within three years of the casino's opening.

Key Takeaways:

  • The development agreement includes a one-time payment of $5 million plus up to 2% of the revenue generated by the proposed casino after 10 years of operation.
  • The town will receive a $300,000 non-refundable signing bonus, regardless of the outcome of the November 7 referendum.
  • The agreement guarantees a one-time payment of $1 million to cover public-safety equipment and to offset any losses in property value experienced by nearby homeowners who sell within three years of the casino's opening.
  • The town expects to receive about $20 million per year from the casino's property taxes and revenue payments.
  • The agreement requires Harrah's to pay for a Route 95 ramp as the only access to and from the casino site.
  • The developer must also establish site restrictions regarding buffers, sound barriers, and setbacks, and ensure that the development does not build on any land currently zoned residential.
  • Harrah's has agreed to reimburse the town half the cost for any additional police coverage, up to $187,500, and all costs up to $375,000 for five additional firefighters.
  • The company has also set aside $250,000 for fire and police equipment and allocated $500,000 to compensate nearby residents for lost property value should they sell within three years.
  • Residents will have two opportunities to react to the host agreement, with public hearings on October 17 and November 1, and the council will vote on the ordinance after the November 1 hearing.

Statistics:

  • $5 million: one-time payment to the town
  • $300,000: non-refundable signing bonus to the town
  • $1 million: one-time payment for public-safety equipment and lost property value
  • 2%: maximum revenue share from the casino
  • 10 years: time period before the revenue share increases to 2%
  • $20 million: annual revenue expected from the casino
  • 0.5%: initial revenue share from the casino
  • 1.55%: revenue share after four years
  • 2%: maximum revenue share in the 11th year
  • $250,000: fire and police equipment fund
  • $750,000: compensation fund for nearby residents
  • 3 years: time period for residents to sell their homes and be eligible for compensation
  • $187,500: maximum police coverage reimbursement
  • $375,000: maximum firefighter reimbursement

Sources:

  • "West Warwick casino deal: Harrah's pays $5 million upfront, then 2% of revenue," by Paul Davis, The Providence Journal, October 12, 2006
  • "Harrah's Adds Deal Details," by Nancy L. Prager, The Providence Journal, October 12, 2006