Cash-hungry states add casinos, lure same gamblers
Posted: Wednesday, August 18, 2010 8:02 pm
ATLANTIC CITY, N.J. (AP) — Cash-starved states are increasingly being drawn to the lure of easy money in casinos — a bet that could ultimately hurt taxpayers if the supply of slot machines, poker tables and racetracks outpaces customers’ demand.
The race to open new casinos is most frenzied in the Northeast, which has 41 casinos and 20 more planned.
Atlantic City, N.J., which for decades held a gambling monopoly outside Nevada, was already reeling from a beatdown inflicted by neighboring competitors. Now New York, which has casinos run by Indian tribes, just approved slot machines for its Aqueduct racetrack. Pennsylvania has added table games like poker and blackjack to its nine slot-machine casinos — and five new casinos are planned.
Massachusetts lawmakers approved plans July 31 for the state’s first gambling halls, threatening two tribal casinos in Connecticut and two racetrack casinos in Rhode Island.
Maine’s voters decide a casino issue in November; Ohio just approved casinos; Maryland opens its first — along the busy Interstate 95 corridor — this fall; and Delaware’s three racetrack casinos started offering table games this summer.
The consequences of saturation could be debilitating: Companies are investing billions of dollars chasing ever-smaller slices of the gambling pie while governments are banking on additional tax revenue from new casinos and gamblers’ winnings to help run operations and ward off tax hikes.
States talk openly of poaching gamblers from their neighboring states and view keeping their own residents’ money within state borders as something akin to a religious duty.
“Government wants free money, and the casino industry for years has represented and provided free money to them,” said Tom Carver, executive director of New Jersey’s Casino Reinvestment Development Authority. “The attraction is, ‘Our citizens are going to a casino somewhere else and spending money that should stay within our borders, so we need our own casinos.’ But people are running out of disposable income.”
On the other side of the table, industry executives and some analysts say the Northeast’s dense population makes it fertile ground for more casinos, with little risk of saturation.
The average gambler spends $108 at a casino visit — an amount roughly unchanged over 30 years, an American Gaming Association survey found. States tax gambling revenue at rates ranging from 6.75 percent in Nevada to 55 percent in Pennsylvania.
Relying too much on casinos can be risky. In 2006, New Jersey’s 11 casinos forked over more than a half-billion dollars in state taxes. Last year, that dropped to $312 million and the state expects a further drop this year to about $275 million.
In Pennsylvania, an hour’s drive from Atlantic City, casinos logged their best-ever month in July for gross slots revenue — $211.1 million, of which $116 million is state taxes. And that take doesn’t reflect new table game revenues, yet unreported.
It’s believed those table games that began play in July boosted the record month for slots, a spokesman for the Pennsylvania Gaming Control Board said.
Adding table games “really was a goal of the governor to keep the gambling dollars in the commonwealth,” said Doug Harbach. Most of Pennsylvania’s gamblers, he said, “had been pretty regular players in New Jersey, West Virginia, Delaware and New York.”
Ron Reynolds, 68, a retired salesman and video poker fan from Philadelphia, used to go to Atlantic City two or three times a month. But since the PARX casino opened in Bensalem, Pa., just a minutes from his home, he visits a couple of times a week.
“I’ll go through 50 or 60 dollars,” each time, he said. Atlantic City sees him just once a month now, and he stays two nights in a free room.
“I go to Atlantic City, I’ll go through a couple hundred dollars a night.”
His luck in either state is the same. “In most cases, I do lose it.”
In the face of competition, N.J. Gov. Chris Christie declared last month that “Atlantic City is dying” and proposed a state takeover of services in Atlantic City’s long-blighted casino district. Its revenues, after hitting a high of $5.2 billion in 2006, fell to $3.9 billion by the end of last year and nearly 9,000 casino workers lost their jobs.
“We should just count our blessings that we enjoyed the market share we did for as long as we did,” said Atlantic City Mayor Lorenzo Langford, a former casino dealer.
The fortunes of Las Vegas, the country’s premier gambling destination, aren’t much better. It had a record 39.2 million visitors in 2007, dropping to 37.5 million last year. Nevada’s gambling revenues were $810.5 million in April, 5.7 percent less than in April 2009. Taxes on those winnings were $39.7 million in May — a 23.4 percent drop compared with May 2009.
National figures show revenue at commercial casinos has fallen from a high of $34.13 billion in 2006 to $30.74 billion last year. The industry shed nearly 29,000 jobs, or 8.1 percent, with total casino employment now at 328,377.
Tribal casinos brought in $26.2 billion in 2009, according to the National Indian Gaming Association, a figure that has held steady for three years. There are more than 900 casinos in the country, about evenly split between commercial and tribal venues.
Rhode Island’s latest tax haul — $287.9 million from racetrack slots casinos — could take an estimated $130 million hit if Massachusetts approves casinos. Gov. Don Carcieri has vetoed a proposed referendum seeking to upgrade those to competitive, full-fledged casinos.
Some estimate the casinos in Massachusetts would generate $1.4 billion to $2 billion a year in state revenue.
They could also bleed gambling revenues from Connecticut’s two tribal casinos, Foxwoods and Mohegan Sun, which together paid the state $350.3 million in taxes last year.
Massachusetts casinos could cost Connecticut 30 percent of its gambling revenues, said Lawrence Klatzkin, an analyst with Chapdelaine Credit Partners.
“Mohegan Sun and Foxwoods — they built those casinos with the idea there wouldn’t be any other casinos for a long time in the Northeast, which for years made good sense,” he said. “Unfortunately, circumstances change.”
Published in The Messenger 8.18.10