Bailing Out Racinos

From our friends at No Plainville Racino:

In Delaware, lawmakers are considering giving $8 million to the state's three struggling racetrack casinos.

How long until Massachusetts is bailing out its racetrack casino (especially if online gambling is made legal and if that racino is located only 15 miles away from the next closest gambling facility)?

Read more:

Does the country have too many casinos?
Pamela M. Prah, Pew/Stateline Staff Writer 11:39 a.m. EDT    June 26, 2013

States are still betting big on gambling. New York and Massachusetts are eyeing new, flashy resort-style casinos. The owner of one of the largest casinos in the country, Maryland Live! Casino, is among those vying for the final gambling license in Philadelphia and hopes to build a new $425 million casino there.

But in nearby Delaware, lawmakers are considering the unusual step of giving $8 million to the state's three struggling racetrack casinos.

Crucial questions face states after years of gambling fever. Can they still enter the gambling fray and claim a hefty chunk of revenue? Or does that region, or the country for that matter, already have too many casinos? Is the jackpot running empty?

"The Mid-Atlantic states — Maryland, Delaware, West Virginia, New Jersey, Pennsylvania and soon New York — have reached saturation," said Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts Dartmouth, meaning the amount of slots and other games available meets the demand.

Are tax rates too high?

Delaware follows only New Jersey with the biggest drop in casino tax revenue last year. Delaware saw its take from gambling drop to $217 million in 2012, a 5.5 percent decrease from $230 million the previous year, according to data from the American Gaming Association. New Jersey saw the steepest tax revenue drop last year at 8.2 percent — collecting $255 million, down from $278 million in 2011. Neighboring Pennsylvania raked in the most state tax revenue at $1.4 billion.



The way states tax casinos varies widely, and the amount is generally much higher at racetrack casinos, or racinos. Delaware's three gambling operations are racinos where operators split 40.5 percent of the total take, the state gets 43.5 percent, the horse breeders get 10 percent and vendors, 6 percent.

Democratic Gov. Jack Markell has proposed a one-time infusion of $8 million divided among the racinos to offset expected increases in vendor costs. The proposal would not affect the current way the casino revenue is split, but would create a commission to look at changing the tax structure. The Delaware General Assembly is considering the bailout in its final days in session.

Delaware state Rep. Dennis E. Williams, a Democrat, opposes the governor's proposal. "I don't think we should be bailing out these three businesses," he said. "Had they invested more at the time they had no competition they would be in much better shape now."

If approved, Delaware would not be the first state to help out the casino industry in the face of new competition. Other states have cut tax rates, such as when riverboat casinos proliferated through the middle of the country in the 1990s. And two years ago, New Jersey passed a comprehensive Atlantic City revitalization plan pushed by GOP Gov. Chris Christie that included $261 million in tax credits to the now bankrupt Revel Casino in Atlantic City.

Older casinos face stiff competition

The issue may be less about the amount of taxes Delaware collects from its casinos and more about the array of choices that gamblers now have.

"Delaware is in a difficult position because its tax structure was devised at a time when it had a single competitor, New Jersey," said David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas. "Now, Pennsylvania and Maryland have the state surrounded, so citizens have more options. "

Delaware's first race track casino opened in 1995. Pennsylvania started adding the first of its 11 casinos in 2007 while Maryland's first of three casinos opened in 2010. Last fall, Maryland voters approved expanding gambling, including a new casino in Prince George's County, which borders Washington D.C., and is 37 miles south of Baltimore.

New York, which already has nine racinos, will let voters decide in November whether to develop four resort-style casinos in upstate New York. And voters in Massachusetts just last weekend approved a proposal from casino mogul Steve Wynn that will allow the first of three Las Vegas-style casinos to be built in Everett, four miles north of Boston.

Lucy Dadayan, a senior policy analyst at the Nelson A. Rockefeller Institute of Government, said gambling in its current form has "probably reached the saturation point" — not just in the Mid-Atlantic region but the entire country.

"The pool of gamblers is only that big and the expansion of casinos and racinos attracts only a smaller pool of new gamblers," Dadayan said.

 

— Lucy Dadayan, policy analyst

 

Other states suffering sharp declines in casino revenues are Colorado, Indiana, Missouri and New Jersey, she said. These are places that had casino operations for a long time and faced new competition in neighboring states, she said.

New casinos in Kansas, for example, are siphoning revenues from Colorado, Indiana and Missouri.

As Stateline has reported, Kansas saw a six-fold increase in gambling tax revenue between 2011 and 2012. The 605 percent increase in casino tax revenue in Kansas was due in part to the opening of the Hollywood Casino at the Kansas Speedway, and because last year was the first full year of operations for the Kansas Star Casino in Mulvane.

Will online gambling help?

Delaware and New Jersey may have older casinos but these two states could have an advantage. They along with Nevada are the only states that have approved online gambling. Estimates vary on the amount of revenue Internet wagers could generate for casinos and states. The American Gaming Association estimates that 1,700 offshore sites accept online bets, with the annual market estimated at $4 billion to $6 billion.

Delaware is scheduled to offer online gambling by Sept. 30. Nevada is already offering online poker.
New Jersey is still working on regulations, but online gambling could be operating by the end of the year. In all three states, players have to be within the state borders to make their wagers.

But online gambling is not necessarily a silver bullet for Delaware or its casinos. "We accomplish nothing if we basically shift today's brick and mortar customers to online," Tom Cook, Delaware's secretary of finance, said. "We need a different set of patrons," he said, notably a younger generation.

But those three states will have to act fast to cash in on any advantage of being first. Another 10 states are considering online gambling. "It's just a matter of time," Cook said.

Stateline is a nonpartisan, nonprofit news service of the Pew Charitable Trusts that provides daily reporting and analysis on trends in state policy.

http://www.usatoday.com/story/news/nation/2013/06/26/stateline-gambling/2459685/

At casinos, compulsive gambling is the whole idea

Posted on September 16, 2011

 

The appalling decision by state leadership to build three casinos and a slot parlor in Massachusetts is a disaster-in-the-making on many levels. Studies have shown that proximity to casinos correlates with increases in crime, divorce, even the suicide rate.

And here’s another. Though compulsive gamblers may make up a small proportion of the population (between 1 percent and 5 percent, depending on which study you look at), casinos are utterly dependent on those folks coming in and blowing the grocery money. Michael Jonas of CommonWealth Magazine writes:

Just how much of the revenue casinos bring in is from the losses of those with gambling problems? One of the most thorough studies of this issue was done in 2004 in Ontario, where researchers had a sample of residents maintain diaries logging their gambling expenditures. The study, prepared for the government-supported Ontario Problem Gambling Research Centre, estimated that 35 percent of Ontario casino revenues were derived from moderate to severe problem gamblers. Such gamblers accounted for 30 percent of revenue from casino table games and a whopping 62 percent of revenue from slot machines.

Jonas also quotes Gov. Deval Patrick as saying, once again, that the legislation now hurtling through the Legislature will include money for treating compulsive gamblers. But there’s no logic to Patrick’s position. Within the casino industry, compulsive gambling is not a bug — it’s a feature, vital to its business model.

What’s taking place on Beacon Hill right now will live in infamy. Patrick’s legacy as governor will be his leading role in foisting this miserable enterprise upon the public.

Also: Harvey Silverglate writes in the Boston Phoenix about his angst over being a libertarian who opposes casinos and slots. As he notes, there’s nothing libertarian about what will take place in Massachusetts: this will be a government-run operation from the start.

If you really want to gamble, maybe we can start taking bets on which ex-legislator will be hired as the $150,000-a-year executive director of the Massachusetts Gambling — uh, Gaming Commission.

http://dankennedy.net/2011/09/16/at-casinos-compulsive-gambling-is-the-whole-idea/comment-page-1/