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A Dicey Situation

The Casino Competition Creates an Intriguing Waiting Game

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Kevin Kousch says it all started innocuously enough.

He had ventured outside for a cigarette a few hours into the Bright Nights Ball last November at the Sheraton Springfield and encountered a couple doing the same thing. Their paths crossed a few more times that evening before the small talk they engaged in eventually gave way to something far more serious.

Kousch, owner of Formal Affair in West Springfield, a tuxedo-rental and tailoring shop, and a long-time member of the ball’s planning committee, eventually learned that the gentleman he was talking to was an executive with MGM Resorts International who had flown in from Chicago for the event.

When Kousch’s identity and track record in business — he was a long-time employee at Yale Genton — became known (he outfitted many of the men in attendance that night), preliminary discussions were commenced about how he might eventually become a supplier of tuxes for MGM’s planned casino in Springfield’s South End, and business cards were exchanged. Over the following weeks, talks escalated and focused on Kousch also operating a retail outlet in that casino featuring higher-end men’s clothing.

And by last month, the two parties had inked a memorandum of understanding, a business arrangement which, if it comes to fruition as both sides expect, could triple or quadruple the size of Kousch’s current enterprise.

Kevin Kousch

Kevin Kousch says his agreement with MGM could triple or quadruple the size of his business operation.

“I learned a long time ago to keep the expectations low,” he told BusinessWest, while admitting that he allows himself to think occasionally about how life, and business, would all change if MGM wins the license for the Western Mass. casino. “That way, when it happens, it will be really good. If you get your hopes up too soon, you could be headed for real disappointment.”

Welcome to life in what would have to be called the casino era in Western Mass. and across the state. It will be perhaps a year before casino licenses are awarded and maybe three or four years before anyone plays a hand of blackjack or pushes the buttons on a slot machine. But already, casinos are changing the picture and creating dreams, hopes, anticipation, and also some anxiety for business owners, nonprofit managers, the region’s largest newspaper, and the public at large.

At the Spirit of Springfield, for example, the casino era has certainly helped the overall bottom line, and also added more holiday lights to the landscape. When Penn National, which is proposing a casino for Springfield’s North End, partly on land owned by the Republican, decided to stage an elaborate rollout of its plans at the Paramount Theater just before Christmas, it contracted with the Spirit of Springfield and its director, Judy Matt, to pull the event together. More significantly, though, MGM donated more than $117,000 (nearly double the amount of the second-largest supporter, MassMutual) for the organization’s various events in 2012, including $10,000 for the Fourth of July fireworks and $30,000 for Bright Nights at Forest Park.

The biggest check, though, was for $60,000, which covered the cost of relighting Court Square for the holidays, something that hadn’t been done in more than a decade and didn’t seem at all likely until the casino giant exploded onto the scene in Springfield early last summer.

“I’ve wanted to light Court Square for years, but we never had the funding; they [MGM] asked for a proposal, we gave them one, and they came through with a $60,000 donation,” said Matt, noting that the intense competition to place a casino in Springfield, which started heating up as 2012 progressed, has generated opportunities and speculation in equal, and generous, amounts.

And perhaps no small-business or nonprofit entity is more in the center of this developing story than early-education provider Square One.

The agency has a potential business deal with MGM to provide early-education services for its employees, but it also received a sizeable donation from Penn National and its partner, Peter Picknelly, just days after the natural-gas blast destroyed one of its facilities last November, and is perhaps in line to receive another philanthropic gift from MGM in the near future.

Meanwhile, its former headquarters building, leveled by the tornado in June 2011, sits directly across Main Street from where MGM wants to build its $800 million complex, a bit of geography that could prompt that parcel to explode in value, but is also making it extremely difficult for Square One to proceed with any rebuilding plans in Springfield’s South End.

“There are opportunities … but there are also a lot of challenges,” Matt said, speaking slowly and choosing her words carefully. “There are a lot of moving parts with this, and we have to sort it all out.”

For this issue, BusinessWest takes a different look at the ongoing casino contest, and particularly the race emerging in Springfield — a view from the perspective of those who stand to see their fortunes change, in one way or another, when a casino eventually opens its doors in the 413 area code.

 

Food for Thought

Joe Frigo has been working in Springfield’s South End for as long as he can remember.

He’s now the third-generation president of the gourmet food market and deli that has borne the family name since 1950. Over the past several decades, he’s seen a number of plans for this neighborhood, as well as considerable hope for an ethnically rich area that has certainly seen better days.

Joe Frigo

Joe Frigo believes a casino in the South End will bring about the dramatic change — and improvement — that simply hasn’t happened over the past 30 years.

What he hasn’t seen is significant, positive change, something he believes the MGM casino can deliver, and that’s why he’s not only supporting the initiative, but planning to be a part of it. Indeed, there are plans to create a much smaller version of the William Street landmark inside the casino complex, he said, an expansion opportunity that should become a considerable revenue steam while also providing invaluable visibility for the multi-pronged Frigo’s operation, which also has a market in East Longmeadow.

It’s an arrangement he firmly believes can work, because he’s seen it succeed in other cities.

“I’ve done a lot of traveling over the years, to Europe, Chicago, California, Boston, all over,” he said. “You go in these markets and casinos and see a smaller version of a well-established business that’s already in that town. You go to these establishments and see the old black-and-white photographs on the walls, and you get a feel for what’s two blocks down the road, and say, ‘where’s the original Frigo’s?’”

And beyond the benefits for his venture, he sees a chance for a real transformation of the South End.

“With 5,000 people coming into the casino on a daily basis — that’s what they’re projecting — that’s great traffic flow, and that’s what we need here in Springfield,” he went on. “What retailers need are people, and I’m a retailer.  I’ve been in the downtown for 35 years, I’ve been to all the chamber meetings, and I’ve been to all the South End community business meetings … the bottom line has always been, ‘how do we get people downtown?’ A casino answers that question.”

Roughly a mile to the north, Rudy Scherff was saying pretty much the same thing at his family’s Springfield landmark — the Student Prince restaurant, a.k.a. the Fort — about a different part of town.

Scherff has an agreement in place with Penn National to operate a small deli operation under the Student Prince name in that company’s $800 million proposal for the North End. In the  meantime, he’s leasing space in his restaurant to the casino giant for a storefront that faces Main Street.

That business arrangement provides roughly the same revenue as a deli that Scherff once operated in that space — and with much less hassle — while the broader, longer-range plan offers visibility and a potentially large and reliable source of revenue.

Rudy Scherff

Rudy Scherff says his agreement to place a Student Prince deli in the Penn National casino planed for the North End will bring new business and needed visibility to his landmark.

“It would be an effective way to get my name out, especially to people coming into the city from out of town,” he explained. “I think it would be a mutually beneficial relationship — good for us and good for Penn National.”

There are many stories like Scherff’s, Kousch’s, and Frigo’s unfolding in Springfield and across Western Mass. as the fight for a casino license reaches its next critical stage.

It’s certainly an intriguing time, one for imagining possibilities, managing expectations, taking sides (or not, as is often the case, especially with nonprofits), and taking advantage of opportunities when they arise.

And there have been many, of various sizes, to date. They range from large media buys that have helped the area’s TV stations and various publications at a time when many are still struggling from a flat economy, to the massive project rollout ceremonies, which have translated into business for caterers, florists, marketing companies, modeling agencies, valet parkers, and, yes, tuxedo providers.

Scherff noted that, while Penn National is now his tenant, people working on the ground for both casino operators eyeing Springfield have frequented the Fort for lunch, dinner, and after-work gatherings.

“We’re a bit of a sanctuary, I guess,” he said with a laugh. “We’ve had people from both sides coming in — and it’s helped.”

 

Getting Down to Business

For Peg Boxhold, long-time owner of the catering venture Elegant Affairs, the onset of the casino era has helped boost a bottom line still smarting from a decline in corporate spending that began when the economy nose-dived in mid-2008, has abated somewhat, but never fully recovered.

She handled many of the details for the massive rollout of Ameristar’s proposal for the former Westinghouse site in East Springfield last October (that company has since backed out of the competition), catered a small event hosted by MGM to mark the lighting of Court Square, had a significant role in Penn National’s event at the Paramount, and recently handled a few smaller events for that company, including a Valentine’s Day luncheon for seniors.

“Everything helps — it all adds up,” she told BusinessWest in reference to the mostly small-scale projects added to her calendar over the past year, adding that, unlike Kousch, she’s staying “apolitical” (a word she used a few times) when it comes to the ongoing competition for the Western Mass. casino license. And in the meantime, she’s still wary about what might happen when the winner of that contest opens its doors.

“It’s something I lie awake at night thinking about — is this going to help me, or is this going to hurt me?” she told BusinessWest. “I have a big responsibility to all my staff; am I going to be able to keep them busy? Is this going to take business away from me? Right now, I just don’t know.”

She remembers the high expectations for her venture and others that accompanied the opening of the new Basketball Hall of Fame roughly a decade ago, a door to opportunity she says was slammed shut by an exclusive catering agreement signed with Max’s Tavern, one of the tenants in the Hall complex.

She’s not predicting a similar turn of events with the eventual casino operator, but believes her experience with the Hall, for which she staged many events prior to its opening, is a cautionary tale about what can happen when the expectation bar is set high.

For most, though, this is a time to be optimistic, especially if your company’s (or family’s) name stands to become attached to the winning casino operation.

Scherff, for example, believes that either downtown casino proposal would benefit businesses in the central business district — perhaps not directly, with casino patrons then visiting other establishments, like the Fort, but by making downtown more attractive, viable, and safe.

“The biggest problem with my business here, and also with any full-serve restaurant, is that many people are still afraid to come downtown,” he explained. “The more feet on the street, the safer the downtown area is going to be.

“This area needs something to spur economic development,” he continued. “A casino could hurt us or help us, but right now, there isn’t a bookstore in downtown Springfield; there’s no place where a man can buy a dress shirt or buy a pair of wingtips. If people are more willing to come downtown, stores should follow. A casino can help do that.”

Frigo agreed. Like Scherff, he’s benefiting from an apparent willingness among casino developers to add some local flavor — literally and figuratively — to their planned mixes of restaurants and taverns. He first had a deal in place with Ameristar to place a Frigo’s deli inside the casino, and when that company backed out, MGM stepped forward.

Overall, he said that, while’s it’s not clear how much direct business an establishment like his can expect from a casino, he believes the city can only benefit from having thousands of people travel to it every day to visit such an establishment.

“If you get someone from out of town, Connecticut, Rhode Island, or another part of this state to come to Springfield and visit the casino, they’ll likely say, ‘wow, Springfield really was a beautiful place — the buildings were nice, the streets were clean; let’s go back.’

“We’ve been making all kinds of improvements to this city,” he went on. “Now we need someone to see them.”

 

Let There Be Lights

There were definitely more things to see in 2012 because of the philanthropic efforts of the casino players, particularly MGM, said Matt, who listed everything from the fireworks to a new/old Bright Nights display to those aforementioned lights around Court Square.

She told BusinessWest that she had discussions with all the players in the hunt for the Western Mass. casino license, but it was MGM that really stepped to the plate.

“From the onset, they asked us about the projects that we do and asked for proposals — we’ve probably produced more proposals for MGM in a year than we have for anyone else,” she explained, adding that the company signed on late last spring to help with the Spirit of Springfield Golf Classic and the Fourth of July celebration, and the commitment continued through the year, with donations for Bright Nights and the ball that preceded it, the Tower Square Parade of the Big Balloons, and Court Square.

As for 2013, MGM has already increased its pledge for the fireworks from $10,000 to $15,000, and it has donated $20,000 to become title sponsor of the World’s Largest Pancake Breakfast (Penn National also pursued sponsorship of that event, Matt noted, but MGM had right of first refusal).

The overall impact of this philanthropy has been to close the annual budget gap experienced by the Spirit of Springfield, she said, but also, and more importantly, to advance the organization’s mission to celebrate and promote Springfield. And there will likely be much more of this in the future, she went on, adding that the onset of the casino era has benefited a number of nonprofit organizations across the region, ranging from Friends of the Homeless to the Food Pantry of Western Mass.

“I think this [competition] has been good for small businesses and nonprofits,” Matt explained, citing, as one example, the large number of companies and agencies (including her own) that took part in the Penn National rollout at the Paramount. “And I believe there’s a great sense of excitement and enthusiasm about what’s to come.”

And those emotions are only exacerbated by the lengthy process to identify the winner of the Western Mass. license, she continued.

“I think people are getting impatient when it comes to what’s going to happen,” she said. “They see so much positive energy if they do get the casino that they want it sooner rather than later.”

Kagan is undoubtedly one of those with such sentiments.

In some ways, Square One is well-positioned for the arrival of casinos, she said, adding that the eventual winner of the license will need to provide early-education services to employees as part of the gaming legislation that passed 15 months ago — and the players involved are talking about 2,000 to 3,000 jobs. Meanwhile, the agency owns property on Main Street that could become a very valuable piece of real estate depending on who wins the license and what they might want to do with the parcel.

But for the time being, the prolonged casino competition in Springfield has Square One in a frustrating holding pattern. Employees and facilities displaced by the tornado are now in temporary locations, and efforts to rebuild in the South End, where the agency has had a presence for more than a century, have been backburnered until it’s known whether MGM will be transforming the landscape — and the commercial real-estate market — there.

The current strategy is to lease space in the South End on a temporary basis for the agency’s Family Square facilities, but even that has become a difficult proposition because of the many options that MGM has on properties in that neighborhood and the resulting question marks now hanging over other nearby real estate.

“This situation is definitely creating some challenges for us,” Kagan said, with some understatement in her voice. “We certainly would like to have a permanent plan in place and be able to move forward with it, but the reality is not conducive to making permanent plans.”

Anticipation Is Building

Kousch told BusinessWest that he will likely benefit from any of the four casino plans for Western Mass. — the others are Mohegan Sun’s proposal for Palmer and Hard Rock’s plans to build on the Big E grounds in West Springfield — because his operation is by far the largest formalwear shop in the region.

But his deal with MGM is obviously a significant game changer for his venture.

“This could be huge,” he said, adding that, like many in his situation or something similar, it’s time to play the “waiting game.”

There will be waiting, and hoping, and imagining possibilities. That’s life at this stage of the casino era, and for many in the business and nonprofit communities, it’s a very intriguing time, defined by both opportunities and question marks.

George O’Brien can be reached at obrien@businesswest.com


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