EagleTribune.com, North Andover, MA

March 1, 2013

Reliance on casino revenue is risky

Senate could vote next week on proposal

By John Toole
jtoole@eagletribune.com

---- — CONCORD — A study projecting revenues from a New Hampshire casino development highlights potential state budget risks.

The New Hampshire Center for Public Policy Studies issued the report yesterday.

“Predicting revenue from license fees is difficult, and budget writers should use caution in basing a budget on such revenue,” the study concluded.

Gov. Maggie Hassan is backing a Senate bill that calls for including $80 million from casino licensing in the budget.

“There is a lot of uncertainty, short and long term from this,” the center’s executive director, Stephen Norton, told reporters.

Study authors acknowledge a casino could generate as much as $100 million from licensing, but question how soon that would happen if a local community like Salem must vote to approve and state agencies set up regulation.

“Experience in other states suggests that it could take at least two years before any tax revenues from casino operations would be available to the state,” the report said.

Senate sponsors have proposed licensing one casino, which they maintain could be approved within two years, and charging an $80 million fee they would put in the budget.

The study said what developers might pay for a license will depend on competition from Massachusetts and other factors, including required taxes once gaming starts at the casino.

Las Vegas-based Millennium Gaming Inc. has an option to buy Rockingham Park and has told legislators it is willing to pay $80 million for a license.

The company is planning a $450 million redevelopment, and is projecting 2,000 construction jobs and 1,300 gaming jobs.

Gambling problems could offset revenue

The study predicts the expense of coping with problem gamblers could offset new revenues, if a 30 percent tax on gaming is used as proposed in the Senate plan.

“Our model’s estimates of the social costs of problem gambling suggest no long-term net state benefit when the tax on casino operations is set at 30 percent or less,” the study said.

How much revenue the state would see depends on variables, including the economy, competition from other states and the size of the venue, the study said.

Given declining revenues from gaming throughout the country, the study suggests $91 million annually is realistic for a mid-sized casino with 3,000 slot machines.

But competition from a nearby casino at Suffolk Downs in Massachusetts could drive the revenue number down to $45 million, the study said.

“If policymakers wish to proceed with expanded gambling as a source of steady, long-term state revenue, they should give careful consideration not only to the rate at which casino revenues would be taxed, but also to the level of new investment required of the facility developer,” the report said.

Developer investment also will affect job creation. The study said a $100 million casino would create only 540 jobs, compared to 2,700 from a $500 million casino. In any event, some portion of the jobs would likely replace existing jobs in the community, the study concludes.

The Granite State Coalition Against Expanded Gambling has long warned about the unpredicability of gaming revenues.

“We’ve been predicting this for a year,” coalition chairman Jim Rubens said. “A destiny casino is a fairy tale.”

Rubens is critical of the regulatory approval calendar set out in the Senate legislation, Senate Bill 152, which he sees as overly ambitious.

“They have allowed no time for litigation,” Rubens said.

He said potential license suitors already in Senate testimony have signaled their concern the bill unfairly favors Millennium and Rockingham Park.

Litigation is a realistic possibility, Rubens warned, pointing to the state’s recent experience with liquor warehouse contracting.

Gaming background checks alone could take more than a year, Rubens said.

“That’s what the Massachusetts’ Legislature has found,” he said.

Proponents find good news

But Hassan found reassurance in the report.

“Today’s report reinforces that one high-end, highly regulated casino can generate a licensing fee of $80 million or more the next budget that will help New Hampshire invest in priorities that are critical for building a more innovative economic future,” Hassan said.

The governor faulted the study for overlooking potential benefits from other local and state taxes, as well as economic development opportunities emanating from a casino.

“And while the study appropriately notes the impact of social costs, it fails to recognize that with gambling already taking place in our communities and with Massachusetts moving forward with casinos, costs will be felt with or without a New Hampshire casino,” Hassan said.

Rubens defended the study for what he saw as a conservative analysis of social costs, but the report itself concedes there is no agreed upon model for simulating social costs and that can result in wide variations.

Gaming sponsors Sens. Chuck Morse, R-Salem, and Lou D’Allesandro, D-Manchester, last week pointed to the potential loss of about $50 million in state revenues if New Hampshire fails to respond to casino development in Massachusetts and gamblers take their money south of the border.

Hassan, a Democrat, said the state also risks falling behind in other ways.

“The true risk we all face is the risk of letting our economy fall behind and allowing the good jobs and growing businesses of the innovation economy to develop elsewhere,” Hassan said.

New Hampshire GOP chairman Jennifer Horn said the study underscores the irresponsible nature of Hassan’s budget plan.

“It is irresponsible and potentially very damaging to build a budget that relies on a revenue stream that does not exist and is currently illegal in the state of New Hampshire,” Horn said.

Morse took issue with some of the report’s findings.

“This report assumes no more than $51 million in net benefit to the state,” he said in a prepared statement. “However, our Lottery Commission, the professionals who know the industry best and base their estimates on similar sized casinos in three other states, have estimated a high-end casino along the Massachusetts border will net New Hampshire upward of $120 million in new revenue.”

Morse also said if New Hampshire doesn’t move forward – and quickly – the state could see $50 million in lost revenue every biennium.

“This report should serve as a signal to lawmakers that now is precisely the time to move forward with expanded gaming in order to reap the revenue benefits and establish a clientele before Massachusetts is able to get their operation off the ground,” he said.

Millennium spokesman Rich Killion said he, too, disagreed with some assumptions in the study.

“We’re confident that a casino at The Rock will be a reliable and sustainable producer of revenue and a facility that can compete with those in Massachusetts and beyond,” he said.

The Senate is expected to act as soon as next week on the gaming bill, which would then move to the House.

“That is where the fight is actually going to take place,” Rubens said. “We’d like to see the House defeat the Senate casino bill right out of the box, as soon as possible. Then the House could take a realistic approach to budget construction.”

Rubens said he does not expect either of two House-sponsored gaming proposals, which envision more than one casino, would pass the Legislature.

The New Hampshire debate comes as New Jersey and other states are moving forward with allowing online gambling. Rubens said that will affect casinos and revenues, too.

“Look at the impact of the Internet on retailers of books, office supplies and electronics,” he said. “Brick-and-mortar businesses are being whacked. Brick-and-mortar casinos are going to be whacked.”