| Last Tuesday, Leominster voted overwhelmingly in favor of a proposal from Cordish Cos. to site a 1,250 slot and electronic gaming machine casino in the city near the intersection of I-190 and Route 117. Voter turnout was a robust 32 percent, a total of 8,541, breaking down 5,235 in favor versus 3,206 against. The vote followed a door-to-door campaign in Leominster’s blue-collar neighborhoods the previous week by the billionaire chair of Cordish, who pressed the point that the company has committed to paying Leominster $4 million a year in property taxes through its $200 million slots-only parlor.
It’s competing for the slots license with Plainville and Raynham, both in the South Coast region, which have already won their referendum votes. Other players are competing to build resort casinos around the state, with the Massachusetts Gaming Commission set to approve resort casinos in each of three regions in the state – Western, Eastern, and South Coast, awarding licenses in April 2014.
Fierce Competition
Three competitors are seeking casino licenses for the Eastern region, with the contending spots being Suffolk Downs, Everett, and Milford. In the Western region, Palmer is vying with Springfield, whose Sept. 16 vote approved a proposal by MGM for a resort casino in the city’s south side, accessible by Interstate 91. Ultimately, the Massachusetts Gaming Commission will approve three casinos and one slots parlor. The next application deadlines are looming: Monday, Sept. 30 for Raynham and Plainville and Friday, Oct. 4 for Leominster. Missing that deadline will result in a 40-day extension to reach an agreement.
Now the big question is: How much competition is too much, to bring in the property tax revenues and other amenities that developers are projecting for their respective projects? We don’t lack for competition already on the ground. Connecticut has two resort casinos, as does Maine. And Rhode Island has one.
An investigative report published in the Sept. 19 of The Boston Globe examined the revenue projections for a proposed 4,000- to 5,000-slot machine casino targeted for a Caesars casino at Suffolk Downs. The developers promised a $1 billion per year mark gambling revenue profit-sharing proceeds. But to reach that number, they’d have to rack in between $400 and $500 in slot revenue from every machine every day to meet that $1 billion target, the Globe reported. Comparing its performance to that of the Aqueduct casino (at the site of the former thoroughbred race track) in New York City, run by Resorts World, stats for Aqueduct averaged about $382 per day on approximately 5,000 slot machines, in a market area more than four times the size of Boston, the Globe reported.
Clyde Barrow, director of the Center for Policy Analysis at UMass-Dartmouth, has been quoted in the the Press of Atlantic City saying Massachusetts and New York are areas for potential growth, but that the more casinos come on line, the competition will lead to more casino bankruptcies, and that the number of casinos in the Northeast has more than doubled in the past six years, since the beginning of the recession. Existing casinos are doubling down on amenities to draw away from the competition.
The pattern playing out across the Northeast is this: Casinos that were once market leaders in a wide region have lost revenue as competitors opened in neighboring states. Atlantic City was the first and worst sufferer, as Pennsylvania opened many casinos and plans yet one more, to open in Philadelphia. However, Pennsylvania is feeling the pressure from newer casinos opening in Ohio and Maryland. New York state is reported to plan to offer as many as four new resort-style casinos.
A study by the Pew Charitable Trusts reveals that while Pennsylvania has realized a $1 billion increase in gambling tax revenue in fiscal 2010 and 2011, the results have fallen short of the $1 billion in property tax relief from legal slots projected in 2004. In 2011, the shortfall was more than $200 million, Pew reported in 2012 in its daily newsletter Stateline. A Stateline analysis of 13 states that had legalized gambling by then found that in the preceding 10 years, more than two-thirds of them failed to live up to initial promises of their developers or the industry as a whole.
Interestingly, some of the respondents to the Pew report cited the recession as a culprit, in direct contrast to what Barrow told the Press of Atlantic City about the expansion of the number of casinos between 2007 and 2013. But, again, expansion of the number of casinos does not necessarily equal commensurate expansion in the revenues they generate.
States’ and towns’ desire to attract casinos as employers and taxpaying entities, as well as keeping their local gamblers close to home, are both logical economic goals, particularly for locales with lower-than-average median incomes, shrinking job bases and infrastructure needs. But they’d be well advised to be realistic about the house’s chances of winning.
Email: coneill@thewarrengroup.com
