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 sixdigit 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 Fundamentally, gaming is a business. -- Mass. Gov. Deval Patrick, Sept. 17, 2007 1. Commercial Casinos 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 land-based, dockside, riverboat, cruise ships 2. Racetrack casinos or racinos 3. Native American or Indian Casinos
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 Casino (2013) with 5 mor authorized
STATE GAMBLING POLICY: FROM REVENUES TO JOB CREATION REVENUES JOB CREATION 1990s 2000s was revenue driven reaction to tax revolt Fast initial start up Low capital investment High tax rates Deindustrialization & the intractable blue-collar recession Great Recession High Capital Investment Lower tax rates Riverboats + Racinos 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 Effective Gaming Revenue (billions) 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% State No. of Racinos Gross Gaming Revenue (billions) Gaming Tax Effective Gaming Revenue (billions) 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% Source: Calculated from data in AGA, State of the States, 2012
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.
HOW MANY SLOT MACHINES ARE ENOUGH? 1,000 Adults (aged 21+) Per Slot Machine By Select States/Markets: Pre-Expansion Massachusetts 900 893 800 700 600 500 537 400 388 309 300 200 100 256 227 227 225 224 202 171 119 107 57 - 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).
1,000 Adults (aged 21+) Per Slot Machine By Select States/Markets: Post-Expansion Massachusetts 900 893 800 700 600 500 483 400 377 388 300 200 309 256 227 227 225 224 202 171 119 107 100 57 - 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.
MASSACHUSETTS IS WHERE THE PEOPLE ARE!
MASSACHUSETTS IS WHERE THE MONEY IS!
PERSONAL DISPOSABLE INCOME & PROPENSITY TO GAMBLE State DPI (2011) RI CT % New England PDI 41,478,215,000 6.5% 171,847,111,000 26.8% NE Wager Wager/PDI (2011) 397,677,799 0.96% 871,069,321 0.51% MA 304,577,893,000 47.5% 755,919,190 0.25% ME NH VT 45,591,683,000 7.1% 54,669,172,000 8.5% 23,709,048,000 3.7% 84,337,395 0.18% 54,600,074 0.10% 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% Sources: Bureau of Economic Analysis; CFPA, New England Casino Gaming Update, 2012. 2,495,262,980 0.39%
DEMAND FOR CASINO GAMING IN NEW ENGLAND U.S. Wager 0.00532 Potential Avg. NE Market (GGR) 3,412,351,127 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
http://www.umassd.edu/seppce/centers/cfpa/ Center for Policy Analysis University of Massachusetts Dartmouth 285 Old Westport Road North Dartmouth, MA. 02747-2300