MP Holdings LLC on Wednesday said it will not apply for the renewal of the expired licenses of its 15 gaming machines at Club 88 in Garapan.
In an interview, MP Holdings LLC consultant Gus Noble said the licenses of seven of the gaming machines expired on Wednesday, Sept. 1, while the licenses of eight others expired in August.
From 73, the number of gaming machines at Club 88 is now down to 58.
Noble noted the 15 gaming machines whose licenses have expired will no longer generate revenue.
Saipan Vegas, for its part, has 116 gaming machines and the licenses of some of them are expected to expire in the coming months.
Saipan Local Law 22-6, which the Saipan delegation unanimously passed without conducting a public hearing, was signed by Gov. Ralph DLG Torres on Aug. 2, 2021.
S.L.L. 22-6, which states that it will take effect once approved by the governor, doubled the $2,500 license fee of each machine “or [will require the payment of] 15% of the net gaming proceeds, whichever is greater.”
As a condition to lawfully operate electronic gaming devices, they must be operated only “in an enclosed area or resort premises having 100 or more rooms or with fewer than 100 rooms so long as the hotel is attached to a golf course.”
To comply with this requirement, the e-gaming operators said they also run hotels.
MP Holdings said it is actually losing money on its hotel and golf course but continues to operate them just to meet the gaming machine licensing requirements.
Moreover, the total license fees imposed on each electronic gaming machine is at least as high as 30% of the “net gaming proceeds” from the machines, the e-gaming operators said.
In their complaint for declaratory judgment and injunctive relief filed in Superior Court, the e-gaming operators said they are also paying gross revenue tax on their income.
“Based on their financial records, their applicable tax rate is 5%. That means the amount of license fees and tax they need to pay each year for their business could be up to 35% on their gross revenue.
“Plaintiff also pays $100,000 per year license fee per business, plus CNMI ordinary income tax.
“Based on an initial financial review, the doubling of the license fee will make the operations unsustainable for…Plaintiffs. The only alternative solution will be for them to close their businesses entirely.
“All of the employees working on Plaintiffs’ premises will lose their job because of [S.L.L. 22-6]. Plaintiffs have invested close to $10,000,000 and they will likely lose a substantial portion of this investment.”
The e-gaming operators said all their employees are local or U.S. workers.
Still reaching out
On Wednesday, Noble and MP Holdings employees made another attempt to reach out to the members of the Saipan delegation, saying, “We just want an opportunity to discuss a reasonable and fair amendment to Saipan Local Law 22-6.”
For his part, MP Holdings LLC and Mariana Entertainment LLC general manager Bart Jackson said: “We believe that it is important as a member of the local business community to be able to be heard by the Saipan delegation members on matters that impact our businesses.”
He added, “We have never intended any disrespect or insult to members of the Saipan delegation. We have only voiced what we sincerely believe are legitimate concerns regarding the impact of Saipan Local Law 22-6 on our ability to run our businesses and keep our 70 employees employed. We were not given an opportunity to discuss Saipan Local Law 22-6 with the Saipan delegation regarding the financial impacts prior to Aug. 2, 2021, the day that Governor Torres signed Saipan Local Law 22-6.”
Jackson said, “With respect to the closure of Club 88, we announced on Aug. 17 that we were intending to close Club 88 on Aug. 27. After some initial positive responses from the Saipan delegation, we announced on Aug. 26 that we would postpone the closure as we were hopeful that we could find a compromise solution to Saipan Local Law 22-6, and because we had recently offered a suggested amendment to the local law. Our decision to postpone the closure is in part driven by our desire to keep employing the 30 hardworking individuals at Club 88.”
Jackson said MP Holdings and Mariana Entertainment have proposed a possible amendment to Saipan Local Law 22-6.
“We want to have further dialogue with the local delegation. We reiterate [that we] remain hopeful that we can reach a compromise regarding the amount of the new license fee,” Jackson added.
Customers at Club 88 in Garapan play with its remaining gaming machines.
