By Sean Flynn/Daily News staff

Newport Daily News online 2.10.07

NEWPORT - A state Superior Court judge ruled Friday that Rhode Island law trumps city ordinances when it comes to regulating electronic slot machines.

Judge Melanie Wilk Thunberg ruled Newport Grand has been authorized by a 2005 state contract to increase the 1,070 video slot machines now there to 2,101, in spite of a Newport ordinance that bans any additional slot machines anywhere in the city.

Thunberg said the General Assembly granted all authority to regulate gaming to the state Division of Lotteries, and the city is "powerless" when it comes to gaming regulation.

"I'm happy," said attorney Jeremiah C. Lynch III, who represented Newport Grand. "I was relatively hopeful that this would be the result."

The judge rejected the arguments of Newport Assistant City Solicitor Christopher J. Behan that while the city may not have the right to regulate slot machines, it has the right to regulate buildings and use of property.

Behan said it would be up to the City Council to decide whether Newport wants to appeal this decision.

Lynch said he expects the city to now issue a building permit to Newport Grand.

"Newport Grand has worked with the city in the past and will continue to do so as we move forward on this project," said Amy Kempe, a spokeswoman for Newport Grand.

Newport Grand filed the lawsuit in November after the city blocked its attempt to build an 11,500-square-foot addition at the back of the building, toward Malbone Road, where security offices, a cash room and additional slots would be located. Since the addition would have two stories, it would give the establishment an additional 23,000 square feet of space.

Because electronic slots are prohibited in the city, City Zoning Officer Guy Weston ruled in 2006 that Newport Grand must seek a use variance from the Zoning Board of Review if it wants to expand. A use variance is difficult to obtain.

"Newport Grand would have to show that without the addition, it would lose all beneficial use of the property," Lynch told the judge. "It would be impossible to show that."

Newport Grand then petitioned the City Council to amend the zoning ordinance to specifically allow electronic slots at the 24-acre site. The council unanimously rejected the proposed amendment.

In response, Newport Grand sued the members of the City Council and Weston.

"If the city's ordinance is permitted to stand, the city of Newport will be able to frustrate the acts of the legislature, which are intended to benefit the state and all of its citizens," according to the Newport Grand lawsuit.

Conflicting arguments

Lynch argued that the General Assembly passed an act July 12, 2005, that "mandates Newport Grand to invest in additions, renovations and improvement." He said the city is relying on the statewide Zoning Enabling Act of 1991 for its power to deny Newport Grand's planned addition.

"If the legislature had intended to authorize Newport or Lincoln (site of Lincoln Park) to regulate video lottery terminal gambling, it would have included a reference to the anticipated municipal approvals within the act," Lynch said. He said the General Assembly wants to improve and expand Newport Grand "in order to increase tax revenues from VLT gambling."

The Division of Lotteries entered into a "master contract" with Newport Grand on Nov. 23, 2005, which requires Newport Grand to invest $20 million in the facility, including building a 90-room hotel, and to nearly double the number of employees at the site.

Behan told the court that Newport Grand can build the hotel as a matter of right at the site, and can expand the number of video slot machines within the existing building.

He agreed that the Division of Lotteries has the authority to conduct and regulate video lottery gaming in the state. He said the city is not regulating gambling activity, but "what can be done to the building in which the activity occurs."

"There is no doubt that the regulation of land use and development, including the dimensions or size of structures on the land, has been expressly delegated by the General Assembly to the municipalities," Behan said.

He argued that in the master contract, the Division of Lotteries noted Newport Grand "may be delayed or unable to perform its obligations because of its failure to obtain local approvals."

"Clearly, if the division felt that it has exclusive jurisdiction over the improvements on the property to the exclusion of Newport's zoning ordinances, there would be no need for language of this type in the contract," Behen said.

He told the judge that Newport Grand failed to demonstrate that its inability to build an addition to the building would prevent the use of additional video slot machines.