ARE THE NEW ENGLAND STATES IN A

GAMBLING ARMS RACE? Presentation to the New England Fiscal Leaders Meeting

Held at Federal Reserve Bank, Boston, MA

By

© 2013 Clyde W. Barrow, Ph.D., University of Massachusetts Dartmouth

February 22, 2013

The U.S. Casino Industry

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 U.S., 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

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.

CASINOS AS ENTERTAINMENT

Casinos enjoy a high level of acceptance by the American public:

• 51% of the adult population view casino gambling as “perfectly acceptable for anyone” and another 30% viewing it as “acceptable for others,” but not for themselves.

• Only 16% of the American public views casino gaming as “not acceptable for anyone”

• 81% of the adult population agree that “casino gaming can be a fun night out”

Source: (AGA/Peter D. Hart 2012, 3).

The U.S. Casino

Industry

1. Commercial Casinos

land-based, dockside, riverboat, cruise ships

2. Racetrack casinos or “racinos”

3. Native American or “Indian” Casinos

“Fundamentally, gaming is a business.”

-- Mass. Gov. Deval Patrick, Sept. 17, 2007

“Across the world casino gambling is becoming

increasingly mundane…in every instance casinos have

been around, they’ve operated for a long time, and they

have become entirely noncontroversial in the context of

people’s lives and their communities.’’

-- Gary Loveman, CEO Caesars Entertainment, Feb. 14,

2012

Commercial Casinos & Racinos

In 2011, the U.S. commercial casino & racino sectors:

• Earned $35.6 billion in gross gaming revenue

• Employed 339,038 people

• Paid wages of $12.9 billion

• Contributed $7.93 billion in gaming taxes to states

$9.8 B GGR in

Northeast Gaming

Market

MD to WV to ME

Another $3.2B GGR

in Indian Gaming

59 Class 3 Casinos

(2013) with 5 more

authorized

STATE GAMBLING POLICY:

FROM REVENUES TO JOB CREATION

REVENUES

• 1990s – 2000s was

revenue driven reaction

to tax revolt

• Fast initial start up

• Low capital investment

• High tax rates

• Riverboats + Racinos

JOB CREATION

• Deindustrialization & the

intractable “blue-collar

recession”

• Great Recession High

Capital Investment

• Lower tax rates

• Casinos: Tables + Non-

Gaming Amenities

JOBS PER $1M GGR

State

No. of

Casinos

No. of Casino

Employees

Gross Gaming

Revenue

(billions)

Employees per

$1 million GGR

Nevada 256 175,024 $10.405 16.8

New Jersey 11 34,145 $3.565 9.6

Mississippi 30 24,707 $2.390 10.3

Colorado 37 9,589 $0.760 12.6

South Dakota 34 1,512 $0.106 14.2

Iowa 17 8,915 $1.368 6.5

Michigan 3 8,067 $1.378 5.9

Louisiana 18 16,873 $2.374 7.1

Kansas 1 303 $0.038 8.0

Missouri 12 11,071 $1.788 6.2

Indiana 13 14,144 $2.794 5.1

Illinois 9 6,892 $1.374 5.0

Delaware 3 3,245 $0.571 5.7

West Virginia 5 4,528 $0.878 5.2

Pennsylvania 10 12,664 $2.486 5.1

Total 459 331,679 $32.275 10.3

Non-Traditional 192 122,510 $18.305 6.7

State

No. of

Casinos

No. of Casino

Employees

Gross Gaming

Revenue

(billions)

Employees per

$1 million GGR

Oklahoma 2 770 $0.100 7.7

Louisiana 4 1,257 $0.369 3.4

Iowa 3 1,172 $0.455 2.6

New Mexico 5 1,423 $0.247 5.8

Florida 5 2,533 $0.329 7.7

Maine 1 385 $0.062 6.2

Maryland 1 309 $0.062 5.0

New York 8 3,465 $1.088 3.2

Rhode Island 2 1,100 $0.477 2.3

Total 31 12,414 $3.189 3.9

Source: Calculated from data in AGA, State of the

States, 2012

EFFECTIVE TAX RATES

State No. of Casinos

Gross Gaming

Revenue

(billions)

Gaming Tax

Revenue (billions)

Effective Gaming

Tax Rates

Nevada 256 $10.405 $0.84 8.0%

New Jersey 11 $3.565 $0.31 8.6%

Mississippi 30 $2.390 $0.29 11.9%

Colorado 37 $0.760 $0.11 14.1%

South Dakota 34 $0.106 $0.02 16.2%

Iowa 17 $1.368 $0.31 22.3%

Michigan 3 $1.378 $0.31 22.6%

Louisiana 18 $2.374 $0.57 24.1%

Kansas 1 $0.038 $0.01 25.1%

Missouri 12 $1.788 $0.49 27.2%

Indiana 13 $2.794 $0.87 31.3%

Illinois 9 $1.374 $0.47 33.9%

Delaware 3 $0.571 $0.24 42.5%

West Virginia 5 $0.878 $0.38 43.1%

Pennsylvania 10 $2.486 $1.33 53.4%

Total 459 $32.275 $6.53 20.2%

Non-Traditional 192 $18.305 $5.385 29.4%

Source: Calculated from data in AGA, State of the

States, 2012

State No. of Racinos

Gross Gaming

Revenue

(billions)

Gaming Tax

Revenue (billions)

Effective Gaming

Tax Rates

Oklahoma 2 $0.100 $0.02 16.6%

Louisiana 4 $0.369 $0.07 18.4%

Iowa 3 $0.455 $0.11 24.1%

New Mexico 5 $0.247 $0.06 26.0%

Florida 5 $0.329 $0.14 42.8%

Maine 1 $0.062 $0.03 48.9%

Maryland 1 $0.062 $0.03 48.9%

New York 8 $1.088 $0.50 46.3%

Rhode Island 2 $0.477 $0.30 62.1%

Total 31 $3.189 $1.26 39.5%

EXPORTS TO RECAPTURE

CFPA POLLS FIND THAT „RECAPTURING‟ TAX

REVENUE IS ONE OF THE TOP TWO

RATIONALES THAT GENERAE SUPPORT FOR

EXPANDING GAMING

RECAPTURE WAS A PROMINENT LEGISLATIVE

RATIONALE IN PENNSYLVANIA &

MASSACHUSETTS GAMING EXPANSION

PLAYING A MAJOR ROLE IN NEW YORK AND

NEW HAMPSHIRE DEBATES

RURAL TO URBAN

PHILADELPHIA (SUGAR HOUSE + 1)

PITTSBURGH

RESORTS WORLD (NY)

EMPIRE RACEWAY (NY)

BANGOR, ME

SPRINGFIELD AND BOSTON, MA

INCREASE PROPENSITY TO GAMBLE BY

MOVING FACILITIES CLOSER TO PEOPLE &

INCOME

GAIN COMPETITIVE ADVANTAGE WITH

CONVENIENCE

INTEGRATED RESORT TO

URBAN INTEGRATION USE OF EXISTING ENTERTAINMENT & CONFERENCE

VENUES

COMP FREQUENT PLAYERS WITH TICKETS TO LOCAL

ENTERTAINMENT EVENTS

SMALLER HOTELS & PARTNERSHIPS WITH NEARBY

EXISTING HOTELS

PLAYER REWARDS USED AT LOCAL RETAIL OUTLETS &

RESTAURANTS

CROSS-MARKETING TO PROMOTE TOURISM &

HOSPITALITY INDUSTRY GENERALLY

LOCAL VENDOR PREFERENCE & LABOR AGREEMENTS

IS THERE SATURATION?

DEF.: “The point of a product life

cycle where the market has been

completely filled so that no more

sales for goods and services can be

taken up.”

SOURCE: Shim & Siegel, Dictionary of Economics (1995), p. 306.

THE GREAT RECESSION WAS A BUSY TIME

FOR GAMING IN THE NORTHEAST (2007-2011)

• West Virginia authorized table games at its four racetrack casinos

• Delaware authorized table games at its three racetrack casinos

• Delaware reauthorized a sports lottery

• Pennsylvania opened nine slot parlors and then added table

games

• Rhode Island authorized 24-hour gaming at its two slot parlors

• Maryland opened a racetrack casino (now two)

• New York opened 3 additional racinos, including Empire City

==================================

• Resorts World (Aqueduct) (2011)

• Revel (2012)

• Valley Forge (2012)

• Horseshoe Cleveland (2012)

• Oxford Casino (2012)

==================================

• $3.4 B in capital investment

HOW MANY CASINOS IS TOO

MANY? State No. of Casinos

No. of Casino

Employees Gross Gaming Revenue

(billions) Employees per $1 million

GGR

South Dakota 35 1,647 $0.101 16.3

Nevada 256 174,381 $10.700 16.3

Colorado 40 9,263 $0.750 12.3

Mississippi 30 23,721 $2.240 10.6

New Jersey 11 32,823 $3.320 9.9

Louisiana 18 17,207 $2.370 7.3

Iowa 18 9,384 $1.368 6.9

Kansas 2 303 $0.048 6.3

Maine 1 364 $0.059 6.1

Missouri 12 10,435 $1.810 5.8

Illinois 10 7,911 $1.480 5.3

Indiana 13 14,079 $2.720 5.2

Michigan 3 7,303 $1.420 5.1

Delaware 3 2,730 $0.552 4.9

West Virginia 5 4,475 $0.959 4.7

Pennsylvania 10 13,050 $3.020 4.3

Total 467 329,076 $32.918 10.0

Non-Traditional 200 121,872 $18.898 6.4

Source: AGA, State of the States, 2012.

Sources: Meister, Indian Gaming Industry Report, 2012; AGA, 2012 Survey of Casino Entertainment (Innovation Group);

U.S. Census 2010.

Note: Includes 529 slots at Oxford Casino (ME) + 400 additional slots in Phase II Oxford expansion (Fall 2012).

893

537

388

309

256 227 227

225 224 202

171 119 107

57

-

100

200

300

400

500

600

700

800

900

1,000

Adults (aged 21+) Per Slot Machine By Select States/Markets: Pre-Expansion Massachusetts

HOW MANY SLOT MACHINES ARE ENOUGH?

Sources: Meister, Indian Gaming Industry Report, 2012; AGA, 2012 Survey of Casino Entertainment (Innovation Group); U.S. Census

2010; Center for Policy Analysis.

Note: Estimate assumes 2,850 slot reduction in CT & RI due to recapture + 5,000 slots in Region A, 2,500 slots in Region B, 2,500 slots in

Region C, and 1,250 slots at slot parlor + 1,929 slots in Maine.

893

377

483

388

309 256

227 227 225 224

202 171

119 107

57

-

100

200

300

400

500

600

700

800

900

1,000

Adults (aged 21+) Per Slot Machine By Select States/Markets: Post-Expansion Massachusetts

MASSACHUSETTS

IS WHERE THE

PEOPLE ARE!

MASSACHUSETTS

IS WHERE THE

MONEY IS!

State DPI (2011) % New England

PDI NE Wager Wager/PDI

(2011)

RI $

41,478,215,000 6.5% $

397,677,799 0.96%

CT $

171,847,111,000 26.8% $

871,069,321 0.51%

MA $ 304,577,893,000 47.5%

755,919,190 0.25%

ME $

45,591,683,000 7.1% $

84,337,395 0.18%

NH $

54,669,172,000 8.5% $

54,600,074 0.10%

VT $

23,709,048,000 3.7% $

10,315,661 0.04%

*U.S. $ 11,700,000,000,000 $ 62,200,000,000 0.53%

New England $

641,873,122,000 100.0% $

2,495,262,980 0.39%

Sources: Bureau of Economic Analysis; CFPA, New England Casino Gaming Update, 2012.

PERSONAL DISPOSABLE INCOME &

PROPENSITY TO GAMBLE

DEMAND FOR CASINO GAMING IN NEW ENGLAND U.S. Wager 0.00532

NE Market (GGR) $

3,412,351,127 Potential Avg.

Wager

Maine $

110,000,000 Includes Oxford

Connecticut $

1,663,656,201 Minus NY

Rhode Island $

513,000,000

Unmet Demand $

1,125,694,926

MA Recapture (.60) $ 454,000,000

N. NE States ReC (.750) $ 112,000,000

CT/RI/NY Capture $ 153,000,000 Distance + Non-Smoking

Mass Demand $ 1,844,694,926

Tourism Factor (.10) $ 184,469,493 250,000

Visitations

Total Mass Demand $ 2,029,164,419

GGR NGR TR

Return to Avg.

Propensity $ 2,680,083,609 $

616,419,230 $

3,296,502,839

Center for Policy Analysis

University of Massachusetts Dartmouth

285 Old Westport Road

North Dartmouth, MA. 02747-2300

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