taking the gamble

TAKING THE GAMBLE IN MASSACHUSETTS?: 

TAKING THE GAMBLE IN MASSACHUSETTS? © 2007 Dr. Clyde W. Barrow, University of Massachusetts – Dartmouth

THE U.S. CASINO INDUSTRY: 

THE U.S. CASINO INDUSTRY

NORTH AMERICAN INDUSTRIAL CLASSIFICATION SYSTEM (NAICS): 

NORTH AMERICAN INDUSTRIAL CLASSIFICATION SYSTEM (NAICS) The North American Industrial Classification System (NAICS) is the statistical classification standard underlying all establishment-based economic statistics in the US, Canada, & Mexico NAICS classifies business establishments into twenty different Sectors and assigns each business establishment in North America a six-digit classification code.

NAICS MAJOR SECTOR CODE 71: 

NAICS MAJOR SECTOR CODE 71 Sector 71. Arts, Entertainment, & Recreation: Subsector 711. Performing Arts, Spectator Sports, and Related Industries Subsector 712. Museums, Historical Sites, & Similar Institutions Subsector 713. Amusement, Gambling, & Recreation Industries Definition: The Arts, Entertainment, and Recreation Sector includes a wide range of establishments that operate facilities or provide services to meet varied cultural, entertainment, and recreational interests of their patrons.

THE U.S. CASINO INDUSTRY: 

THE U.S. CASINO INDUSTRY COMMERCIAL CASINOS -- land-based, dockside, riverboat, cruise ships 2. Racetrack casinos or “racinos” 3. INDIAN CASINOS

COMMERCIAL CASINOS: 

COMMERCIAL CASINOS In 2005, the U.S. commercial casino sector: Earned $30.29 billion in gross gaming revenue Employed 355,467 people Paid wages of $ 12.6 billion Contributed $ 4.6 billion in direct gaming taxes to states Avg. effective tax rate of 15.1% (including NV & NJ) and 25.6% (non-traditional jurisdictions) State of the States The AGA Survey of Casino Entertainment 2006, American Gaming Association

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State of the States The AGA Survey of Casino Entertainment 2006, American Gaming Association

RACETRACK CASINOS: 

RACETRACK CASINOS In 2005, the U.S. Racino sector: Earned $3.1 billion in gross gaming revenue Employed 17,122 people Contributed $ 2.0 billion in direct gaming taxes to states Avg. effective tax rate of 64.7% State of the States The AGA Survey of Casino Entertainment 2006, American Gaming Association

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State of the States The AGA Survey of Casion Entertainment 2006, American Gaming Association

NATIVE AMERICAN CASINOS (2005): 

NATIVE AMERICAN CASINOS (2005) 419 gaming facilities operated by 227 tribes Located in 30 states 22 states with some form of Class III gaming Gross gaming revenue = $22.6 Billion Total Employment = 400,000 $1.1 billion in direct payments to st/loc govts Indian Gaming Industry Report 2006-2007

SUMMARY (2005): 

SUMMARY (2005) 29 states with some type of Class III Gaming Gross gaming revenues = $55 billion Total revenues = $66 billion + 750,000 employees $7.6 billion in direct payments to state/local governments Indian Gaming Industry Report, 2006-2007; AGA, State of the States (2006)

CASINO GAMBLING IN NEW ENGLAND: 

CASINO GAMBLING IN NEW ENGLAND Casino gaming is a $3.6 billion industry in New England Casinos/racinos employ nearly 25,000 people in New England Casino gaming is one of the fastest growing components of New England’s leisure & hospitality sector: 2006-2008, the region’s casino, video lottery, and slot parlor facilities will make nearly $1.8 billion in new capital investments to expand their operations: $700 million expansion at Foxwoods Resort Casino, $740 million expansion at Mohegan Sun $220 million expansion at Lincoln Park, $20 million expansion at Newport Grand (possibly $1.4 billion), $140 million facility at Hollywood Slots existing facilities plan to add 4,500 new jobs over next 2 to 3 years CFPA, New England Casino Gaming Update, 2006

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Center for Policy Analysis; March 2006 Where do NE Casino Gamblers Originate?

CASINO GAMBLING IN CONNECTICUT: 

CASINO GAMBLING IN CONNECTICUT CFPA, New England Casino Gaming Update, 2006

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Center for Policy Analysis; March 2006 Where do Racino Gamblers Originate?

RACINO GAMBLING IN RHODE ISLAND: 

RACINO GAMBLING IN RHODE ISLAND CFPA, New England Casino Gaming Update, 2006

RACINO GAMBLING IN MAINE: 

RACINO GAMBLING IN MAINE CFPA, New England Casino Gaming Update, 2006

CASINO GAMBLING IN NEW ENGLAND: Direct Tax Revenues: 

CASINO GAMBLING IN NEW ENGLAND: Direct Tax Revenues Casinos, VLT facilities, and racinos have become an important source of revenue in New England’s state budgets (2006): Foxwoods and Mohegan Sun generated more than $434 million in revenues to the Connecticut state treasury. Rhode Island’s VLT facilities generated more than $244 million – making its two VLT facilities the 3rd largest source of state revenue. Maine’s slot parlor generated $18 million in 2006, with monies earmarked for the city of Bangor, the “Healthy Maine” initiative, scholarships to attend Maine’s state universities and community colleges, and other initiatives to strengthen the pari-mutuel racing industry. CFPA, New England Casino Gaming Update, 2006

CASINO GAMBLING IN NEW ENGLAND:Indirect Payments by MA Residents: 

CASINO GAMBLING IN NEW ENGLAND: Indirect Payments by MA Residents Massachusetts residents indirectly paid $220.5 million in gaming taxes to CT & RI in 2006 CFPA, New England Casino Gaming Update, 2006

CASINO GAMBLING IN NEW ENGLAND:Exported Social Costs: 

CASINO GAMBLING IN NEW ENGLAND: Exported Social Costs CT & RI exported $71 million in gambling related social costs back to Massachusetts CFPA, New England Casino Gaming Update, 2006

Where Do Massachusetts Residents Gamble?: 

Where Do Massachusetts Residents Gamble? Foxwoods: 22% (976,579 persons) Mohegan Sun: 13% (567,779 persons) Lincoln Park: 3.2% (151,430 persons) Newport Grand: 1% (47,322 persons) 6.9 million visits to CT 646 K visits to RI Taking the Gamble III, Who gambles at Connecticut‘s Casinos? Center for Policy Analysis, Feb. 2007 Taking the Gamble IV, Who gambles at Rhode Island‘s Racinos?, Center for Policy Analysis, Feb. 2007

WHO GAMBLES?: 

WHO GAMBLES? Average casino slot payer is a woman age 40+, with at least some college and annual income of $25-75K, who is willing to travel 60 minutes or more for general atmosphere & physical attractiveness of facility Average table game player is a young male (under age 40) with a high income ($75K+) and a high level of educational attainment. Racino players are lower-middle to middle income ($25-75K) with mid-levels of educational attainment (HS/AD), who are interested primarily in convenience gambling (a secondary market niche for casinos).

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57% of Mass residents favor a resort casino (May 9, 2006 State House News Service/Chervinsky poll) 61% of Mass residents favor a resort casino (April 9, 2007 Boston Globe/UNH poll) Taking the Gamble I, Do Massachusetts residens want a resort casino? Center for Policy Analysis, Feb. 2007

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Taking the Gamble II, Do Massachusetts residens want slot machines at the State‘s Racetracks? Center for Policy Analysis, Feb. 2007 67% of Mass residents favor slots at the tracks (April 9, 2007 Boston Globe/UNH poll)

BENEFITS VS. COSTS: 

BENEFITS VS. COSTS Taking the Gamble I

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Taking the Gamble II

SOCIAL COSTS: Lifetime Prevalence Problem & Pathological Gamblers: 

SOCIAL COSTS: Lifetime Prevalence Problem & Pathological Gamblers Life-time Prevalence: MA = 2.6% US = 2.7% Past-Year Prevalence: Gambling = 1.3% Drug Dependent = 2.8% Alcohol Dependent = 7.2% NGISC, 1999; Taking the Gamble V

SOCIAL COSTS: Comparable Annual Costs: 

SOCIAL COSTS: Comparable Annual Costs Problem & Pathological Gambling = $6 billion ($1,382 per year per life-time for each life-time problem/pathological gambler) Internet Abuse = $54 billion Alcohol & Drug Abuse = $81 billion Smoking = $167 billion NGISC, 1999; adjusted to 2007 dollars

SOCIAL COSTS: Problem & Pathological Gamblers: 

SOCIAL COSTS: Problem & Pathological Gamblers Gambling = $170 million per year in social costs for MA 58% of social costs attributable MA pari-mutuel and lottery gambling (locally induced) 42% of social costs ($71 million) attributable to CT/RI casinos and exported back to MA NGISC, 1999

LOCAL FISCAL IMPACTS: INFRASTRUCTURE & OPERATIONS: 

LOCAL FISCAL IMPACTS: INFRASTRUCTURE & OPERATIONS Negotiate Development Impact Agreements Highway, road, signal, and ramp improvements Water & Sewer capacity (supply, delivery, & treatment) Storm water drainage Police & Fire protection (capital equipment & water pressure) Landscaping, curbs, & sidewalks Property Taxes Percent of Gross Gaming Revenues

7 MYTHS OF CASINO GAMING: 

7 MYTHS OF CASINO GAMING

Myth 1 CASINOS PREY ON THE POOR & UNEDUCATED : 

Myth 1 CASINOS PREY ON THE POOR & UNEDUCATED Myth 2 CASINOS CANNIBALIZE LOCAL HOSPITALITY BUSINESSES Myth 4 COSTS OF REGULATION & ADMINISTRATION WILL BE PROHIBITIVE Myth 3 LAW ENFORCEMENT COSTS WILL SKYROCKET

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Myth 5 MASSACHUSETTS CANNOT RECAPTURE GAMBLING REVENUES OR COMPETE WITH FOXWOODS Myth 6 CASINOS WILL DEVASTATE THE STATE LOTTERY Myth 7 CASINO REVENUES ARE VOLATILE & UNRELIABLE

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CASINOS PREY ON THE POOR & UNEDUCATED We believe that gaming will greatly compoud the problems of those who can least afford it....we believe that the gambling industry depends on vulnerable people being sucked into the illusion that they can get rich quickly. -- quote in New Bedford Standard-Times, Feb. 18, 2007 Myth 1

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Taking the Gamble III

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Taking the Gamble III

CASINOS CANNIBALIZE LOCAL HOSPITALITY BUSINESSES: 

CASINOS CANNIBALIZE LOCAL HOSPITALITY BUSINESSES Atlantic City had 311 bars, restaurants and taverns in 1977. Today there are fewer than 50 outside the casino complexes. -- quote from Sunday Standard-Times, New Bedford, MA, February 11, 2007 Myth 2

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Fact In the sixteen years after legalization of casino gaming in Atlantic City, New Jersey: The number of eating and drinking places rose from 415 in 1978 to 569 in 1994 -- an increase of 37%. The number of employees rose significantly from 4,439 in 1978 to 6,624 in 1994 -- an increase of over 50%. F&B related payroll skyrocket almost two and a half times, rising from $28 million in 1978 to over $73 million in 1994. -- G. Fenich, K. Hashimoto: The Effect of Casinos on Local Restaurant Business, Gaming Law Review

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Comparable population – 50% more off-site F&B establishments and 30% more off-site F&B employment in Atlantic City, NJ than in Plymouth, MA U.S. Census Bureau, 2002 Economic Census OFF-SITE FOOD & BEVERAGE

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In five different counties spread across the U.S., from mountains to beachfront to the industrial northeast, from small rural towns to large urban areas, the legalization and subsequent development of casino gaming did not drive all the restaurateurs out of business. Casinos did not cause the predicted drop in the number of businesses, nor the drop in people employed, nor the drop in payroll. In fact, they have just the opposite effect. When casinos are developed, all aspects of local food and beverage business increase: the number of establishments increases, the number of people employed increases, and payroll increases at a greater rate than the first two. -- G. Fenich, K. Hashimoto: The Effect of Casinos on Local Restaurant Business, Gaming Law Review OFF-SITE FOOD & BEVERAGE

LAW ENFORCEMENT COSTS WILL SKYROCKET: 

LAW ENFORCEMENT COSTS WILL SKYROCKET Myth 3 In 1997, it was claimed that the public-safety related costs of a casino would be $48 million per year. In 2006, it was asserted that the public-safety related costs of a casino would be almost $100 million per year. (The FY 2007 budget for the Massachusetts Attorney General‘s office is $38.6 million. The claim is that one or two casinos and slots at the 4 racetracks would necessitate a doubling or tripling of the AG‘s budget for gaming related law enforcement).

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New Jersey‘s Gaming Enforcement Division $40,345,112  NJ Attorney General Division of Gaming Enforcement is responsible for gaming enforcement for 12 resort casinos with 42,623 total gaming positions (2005) -- If MA authorizes 2,000 slots at each racetrack and 2 resort casinos, it would create a maximum of 12,600 gaming positions. -- Why would MA need two to three times more funding than NJ for gaming enforcement to oversee less than 1/3 as many gaming positions? Fact NJ Casino Control Commission, Annual Report, 2005

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Local Crime Enforcement: Foxwoods & Mohegan Fact CT State Police, Uniform Crime Report

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Local Crime Enforcement: Foxwoods & Mohegan Crime Rate Index (crimes per 100,000 pop.) 2004 Connecticut 2,973.8 Plymouth, MA 1,700.0 (2000) Orlando, FL 10,842.0 (2002) Ledyard 714.8 Montville 718.0 Fact CT, FL, MA State Police, Uniform Crime Reports

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ADMINISTRATIVE COSTS WILL BE PROHIBITIVE Myth 4 It would take $80 million to $90 million a year just to run a gaming commission. -- quote from Sunday Standard-Times, New Bedford, MA, February 11, 2007 Gambling is not going to solve our revenues in the state. It could cost the state $80 million to put in place new regulatory systems. This is an incredible bureaucracy that would have to be built. -- quote from State House News Service, 3-12-07

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$27,984,414  NJ Casino Control Commission (324 employees) to regulate, license, & administer policies for 12 casinos & 38,000 casino employees -- Why would MA need 3 to 4 times more funding than NJ to administer & license ½ the number of facilities and 1/3 as many employees? Fact NJ Casino Control Commission, Annual Report, 2005

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$27,984,414  Government Gaming Control (324 employees) (NJCCC) $40,345,112  Public Safety & Criminal Justice (NJ Attorney General Div. of Gaming Enforcement) $68,329,526 Total Enforcement & Admin $68,329,526 = 1.4% of New Jersey‘s Gross Gaming Revenues Enforcement + Adm = Avgs. 0.4% to 1.4% of GGR in the 13 states with commercial casinos ($17.5M - $20M for MA) Fact NJ Casino Control Commission, Annualreport, 2005

MA CANNOT RECAPTURE (PA & UPGRADES TO A.C.): 

MA CANNOT RECAPTURE (PA & UPGRADES TO A.C.) ...it is my feeling that the Commonwealth will not recapture much of this (Connecticut casino) money...“ ...Upon my arrival to the casino (Joliet, Illinois), I took a look at the cars in the parking lot...I found the lot about one-half full and could find only a few out of state cars.“ -- Commonwealth of Massachusetts Committee on Government Regulation, Report on Gaming Prosposals 1997 Myth 5

PENNSYLVANIA: 

PENNSYLVANIA -- Within 2 months of Pennsylvania opening its first two racinos (Nov. 2006), Atlantic City slot revenues began to decline. Observers attribute it to PA‘s ability to recapture its own Philadelphia gambling market. -- Foxwoods‘ & Mohegan‘s 2007 Mid-Atlantic traffic has dropped by 50% from 2004 primarily due to upgrades at AC and the introduction of slots in PA & NY (racinos/casinos). Fact

CASINO WILL DEVASTATE THE STATE LOTTERY: 

CASINO WILL DEVASTATE THE STATE LOTTERY Myth 6 It makes no sense to jeopardize the state lottery. -- Commonwealth of Massachusetts, Committee on Government Regulation, Report of Gaming Proposals 1997

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Fact -- “Much of the current debate over gaming policy is dominated by discussion of the potential fiscal impact of casinos on traditional lottery products...lottery proponents often argue against casino legalization on the grounds that this newly introduced form of gambling will cannabilize lottery profits.” -- “...this study finds that, based upon an evaluation of recent performance, lotteries and casinos can fiscally coexist in the long-term...states that have introduced casino gaming have been able to sustain a stable level of lottery profitability...the data reveals a pattern of flattening lottery-generated revenue, not a significant decline, that is more than offset by the additional tax receipts derived from commercial casino activity.” Dr. Jeffrey Dense, “State Lotteries, Commercial Casinos, and Public Finance,” Gaming Law Review, Vol. 11, No. 1 (2007).

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Fact Massachusetts& Connecticut Lottery Commissions

CASINO REVENUES ARE VOLATILE & UNRELIABLE: 

CASINO REVENUES ARE VOLATILE & UNRELIABLE Myth 7 “I don’t think we should have reliance on gaming revenues to balance our budget.” -- quoted in Boston Herald, February 16, 2007, p. 26.

CASINO REVENUES ARE VOLATILE & UNRELIABLE: 

CASINO REVENUES ARE VOLATILE & UNRELIABLE Fact

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http://www.umassd.edu/cfpa/