Ohio’s $1 billion casino shortfall

March 12, 2014 9:22 am

In 2009, Ohio residents were told the four proposed casinos would generate $1.9 billion in annual tax revenue for the state. The figure helped convince slightly more than half of the state’s residents to approve a referendum legalizing casinos.

But after the first full year of operation for all four casinos, the actual revenue was $839 million, according to this report. Turns out the state’s projection was off by $1 billion. To quote Texas Gov. Rick Perry: “Oops.”

Of course, the $839 million figure does not take into account any of the social and economic costs that also come with casinos. Nor, does the figure consider the drop in spending at area businesses. After all, not only are the revenue figures well below the projection, the Ohio casinos are not generating much new spending. That’s because casinos divert spending that would have gone to buy cars, clothes, food and other goods and services in the state.

But since the casinos are taxed at a higher rate, the state pockets more tax revenue. Usually casinos experience solid growth at first, but then revenue figures level off and begin to drop. Ohio’s weak start does not bode well since the numbers came in low and are likely to keep dropping in future years. Ohio’s revenue problem underscores a broader industry concern: so many other states have legalized casinos recently the market is getting saturated. (Shocked – just shocked – that gamblers are not flocking to the casino in a former department store in downtown Cleveland.)

The casino shortfall in Ohio should serve as a cautionary tale for other states, like Florida and New Hampshire, considering whether to legalize casinos. The casino hype rarely lives up to the reality.

Mickey Mouse .vs Sheldon Adelson

February 6, 2014 11:19 am

Here is a heavyweight fight worth watching.

In the effort to legalize casinos in Florida, Las Vegas billionaire Sheldon Adelson and other casino operators have hired more than 100 lobbyists to influence lawmakers in Tallahassee. On the other side of the fight is the Walt Disney Co., which opposes casinos in the Sunshine State.

The Boston Globe reports the army of lobbyists and campaign contributions are pouring into Florida. The big spending is a sign of the high stakes in Florida. It also underscores how the gambling industry drives and influences public policy when it comes to casinos. It is not as if there is a grassroots push by residents begging their elected officials for more places to gamble.

Lobbyists for casino operators say an expansion will bring jobs and tourists and boost the economy, according to The Globe. Disney believes gambling would hurt the state and undermine the family-friendly theme it has tried to build over the years.

‘‘The massive expansion of gambling that would come from legalizing mega-casinos would be a bad bet for Florida’s taxpayers, tourism brand and existing businesses,’’ Andrea Finger, a Disney spokeswoman, told The Globe.

Here is my recent op-ed in The Tampa Bay Times on the casino issue in Florida.

Florida casinos: Wait ’til next year?

January 27, 2014 9:47 am

It turns out, election-year politics may force Florida lawmakers to delay voting on any major gambling bills until 2015, according to the Tampa Bay Times.

Gov. Rick Scott is up for re-election and apparently does not want to get bogged down in a controversial debate about gambling. Lawmakers in Tallahassee are wrestling with a bunch of thorny issues surrounding gambling, including whether to legalize slot machines at racetracks; allow major commercial casino resorts; or renew a gambling pact with an Indian tribe.

Senate Gaming Committee Chairman Garrett Richter, R-Naples, told The Times a modest bill that tightens loopholes may be all that gets passed this year, while the bigger gambling issues wait another year. “If an election year has any influence, it could influence the magnitude of what’s undertaken,” Richter told the paper.

As is often the case, lawmakers prefer to work out gambling deals in the backroom so as not to cause much public attention or media scrutiny until it is too late. (See Pennsylvania, Massachusetts and New York for recent examples of where gambling was legalized with little public debate.) Not to mention, lawmakers often prefer to use the election year to raise more money from gambling interests and then return the favors later.

Gov. Scott knows gambling is a controversial topic that does not have wide public support. So rather than risk upsetting voters, it appears he will follow the advice of Scarlet O’Hara, who famously said at the end of “Gone With The Wind”: “Tomorrow is another day.”

Casino bets are off

January 22, 2014 3:43 pm

Has the casino industry hit its peak?

Gambling revenues are down in a number of states, raising questions as to whether the market has become saturated. It also raises questions for states like Florida that are considering legalizing casinos: Are they too late to the gambling game?

Before making a big bet on casinos, policy makers should take a look at Indiana, Ohio, Pennsylvania and Louisiana to name just a few states where casinos revenues are falling.

In Detroit, casino revenues dropped 4.7 percent last year in part because of increased competition from Ohio. The drop in revenue leaves even less money to fund operations in the bankrupt city.

In Indiana, casino tax revenues plunged 15 percent over the past six months. Overall, revenues in Indiana hit an eight-year low. In Ohio, casino-tax revenue dropped for the second-straight quarter leaving some to wonder if gambling has already peaked in a state where the casinos just opened two years ago. In Wisconsin, the drop in casino revenue there prompted some to say the market is saturated.

In Pennsylvania, casino revenues dropped 1.4 percent in 2013, marking the first drop since gambling play began in 2006. In Louisiana, casino revenues were down 4.4 percent in December, including a 16 percent drop in New Orleans. In Connecticut, revenues from two Indian casinos dropped 15 percent and 8 percent respectively in December. Officials there expect gambling revenues to keep dropping as competition increases, leaving the state scrambling for new sources of revenue.

In Delaware, casinos revenues dropped 5.5 percent in one year, thanks to increased competition mainly from Maryland. The Delaware casinos pushed for lower taxes but got a bailout instead from Gov. Jack Markell. The falling revenues prompted Governing Magazine to wonder if casinos are still a safe bet. Likewise, USA Today recently asked if the country has too many casinos.

Then of course there is Atlantic City, where gambling revenues are down 45 percent since 2006. Last year, revenues dipped below $3 billion for the first time in 22 years. The slide in Atlantic City shows no signs of slowing down. One casino recently closed and the fancy new Revel casino filed for bankruptcy less than a year after opening.

Analysts say the opening of each new casino in some markets essentially cannibalizes business from each other. “It’s close to the saturation point,” Alex Burnazhny, director in Fitch Rating’s Gaming, Lodging & Leisure group, told Bloomberg News. “It’s almost a zero-sum game whenever a new casino opens.”

Clyde W. Barrow, director of the Center for Policy Analysis at the University of Massachusetts, Dartmouth, told the Press of Atlantic City the saturation will only intensify once casinos in New York and Massachusetts open. “I believe the level of competition will continue to escalate, because at this point, table games and slots are just like a commodity — like copper and aluminum,” he said.

In Illinois, Clark County Commissioner John Detrick said the casino funds are an unreliable source of funding..”We’re glad to get it,” he said. “But casino money is an unknown and can go down.”

However, not all of the news is bad for the casino industry. The CEOs at two nonprofit casinos in Iowa were each paid more than $650,000 last year, the Des Moines Register reported. Revenues at the casino in Dubuque are down 20 percent in the past five fiscal years, but the CEO’s pay increased 38 percent, the paper reported.

Just goes to show the house wins even when it loses.

Genting’s shifting casino plan in Florida

January 20, 2014 9:03 am

Remember when casino giant Genting claimed it was going to build an elaborate multi-billion dollar resort in Miami? Now, it turns out the Malaysian-based operator will settle for a bare-bones slots barn.

Talk about showing your cards. It seems Genting will say and do whatever it takes to bring more gambling to Florida. That is really what the casino debate is all about.

Recall in 2012 how Florida lawmakers rejected Genting’s effort to build a destination casino resort in Miami. That came after Genting hired an army of influential lobbyists and spent more than $1 million pushing to legalize casinos in the Sunshine State.

Now, Genting has shifted gears and is pushing a plan to team up with a racetrack operator to build a slots-only facility in South Florida. So much for the glamorous tourist resort. Genting is now targeting local and repeat slots gamblers.

The new plan will add nothing to the economy and do little to attract tourists. Instead, Genting wants to just bleed the local gamblers with a giant slots barn.

The Florida plan sounds a lot like the Genting slots barn at the Aqueduct racetrack in Queens, New York. That facility rakes in nearly $2 million a day and is one of the most profitable gambling halls in the country. The Queens facility does not attract tourists and instead caters to mostly local gamblers.

New York Times columnist Michael Powell captured the scene in Queens when he described Genting’s Resorts World as resembling an “airport departure lounge mated with a pinball machine.” The Times’ Clyde Haberman also interviewed gamblers at the Genting slots hall and found not many were there for fun or looked anything like James Bond. Expect the same scene in Florida if Genting gets its way.

Genting was behind the effort to legalize casinos in New York. Genting’s influence was on display in New York. As a candidate for governor, Andrew Cuomo never even discussed casinos. But less than a year into his term he began pushing the idea – thanks to some help and money from Genting.

Now that casinos are legalized in New York, Genting is showing its true colors. After touting how casinos will bring jobs to New York, Genting recently announced nearly 200 layoffs. Likewise, Genting’s initial Florida plan was going to create lots of jobs, but those plans have been scaled back as well.

In Florida, Genting is poised to do whatever it takes to bring more gambling into the state.

Casinos: The Not So Wonderful Life

December 23, 2013 11:23 am

Lawmakers continue to push to legalize casinos, but many towns are starting to turn against the gambling halls. Many view casinos like landfills and nuclear power plants: not something they want in their backyard.

Milford, Mass. – a town Time Magazine likened to the fictional version of Bedford Falls from “It’s a Wonderful Life” – recently voted down plans for a $1 billion casino. Many understand casinos are more Pottersville than viable economic development.

“It didn’t take long to be convinced that this was not good for a small town,” Steve Trettel, co-chair of the group Casino-Free Milford, told Time. “If you want to get right down to the root of it, that’s really it.”

Milford is not alone. New or expanded gambling halls have been voted down in Oregon, Rhode Island and Maine. Disney and other business interests are leading an effort to block casinos from coming to Florida.

Even Gov. Deval Patrick – who led the effort to legalize casinos in Massachusetts – said he would vote against a casino if it were ever proposed for the Berkshires town where he has a second home. If gambling is such a good policy than why doesn’t Patrick want a casino near his home? Gov. Patrick also filed suit to block a native-American tribe from opening a casino on upscale Martha’s Vineyard.

What a hypocrite.

Ohio casinos a harbinger for Florida

December 17, 2013 6:47 am

Gambling supporters who expect big bucks from casinos in Florida may want to take a look at Ohio.

The casinos in Ohio have failed to deliver on the more than $1 billion in projected annual tax revenue. Often gambling revenues drop off after several years of steady increases. But the Ohio casinos have disappointed from day one. (See this story in the Columbus Dispatch.)

One of the problems is the gambling market is getting saturated. Many states already have casinos, so there is little need for gamblers to travel elsewhere. Since Florida already has lots of gambling options, any increase in spending by residents is expected to be marginal. And that’s using the best-case figures from a study by Spectrum Gaming, a pro-casino group hired by the state. It is also worth noting that Spectrum did the study for Ohio that has proven to be way off. When it comes to gambling studies, supporters often over promise and under deliver.

Considering the added tax revenue is the main reason lawmakers argue for casinos, it is hard to make the case that more casinos in Florida is a good idea – as this blog post makes clear. If the state is just going to get more social and economic costs and marginal financial benefit than why bother? Other states have found that gambling is not a cure for budget woes.

Taking on casino creep

December 12, 2013 9:43 am

The casino industry used the economic downturn to push its way into a number of states where lawmakers are desperate to generate new tax revenue and create jobs despite the long-term costs of gambling. Now, there are signs that taxpayers are pushing back against the casino creep.

In Massachusetts, residents have collected enough signatures to call for a vote to repeal the 2011 casino law. This clears a major hurdle in the effort to stop the spread of casinos in Massachusetts, but repeal supporters still have to convince the state’s highest court to overturn an earlier ruling by Attorney General Martha Coakley that the proposed question is unconstitutional.

Scott Harshbarger, the state’s former attorney general, is helping to lead the fight. More amazing, the three lawmakers who drove the casino effort – Gov. Deval Patrick, House Speaker Robert DeLeo and Senate President Therese Murray – have each said they do not want a casino in their respective hometowns. What does that say about the industry?

At the very least, the grassroots effort has placed casinos among the top issues in the race for governor in Massachusetts. Several candidates have said they are opposed to casinos. Meanwhile, casino opponents are gearing up for another fight to stop the spread of casinos in New Hampshire. Check out Casino Free New Hampshire’s 30 reasons to oppose casinos.

A group in Florida, that is funded in part by Disney, is continuing to fight the effort to legalize commercial casinos in the Sunshine state. Polls show residents are evenly divided on the issue. Former state lawmaker Paula Dockery provides an overview of the political landscape in Florida here.

Fahrenkopf’s casino spin: “Mostly False”

November 13, 2013 9:25 am

The gambling industry’s longtime lobbyist and mouthpiece Frank Fahrenkopf was paid millions of dollars annually ($4.6 million in 2011 alone) to spin tales about the wonders of ”gaming.”

In June, Fahrenkopf stepped down from his post as chief executive for the American Gaming Association, the influential lobbying organization (read: money). But he has not stopped spreading inaccurate information about the benefits of gambling.

Only this time PolitiFact Florida, the Pulitzer-winning fact-checking organization, called Fahrenkopf for his truth-stretching. See here: It began after Fahrenkopf wrote an op-ed for the Miami Herald last month claiming that many of the visitors that travel to casino resorts do not gamble.

“The majority of people travelling to these destination resorts are not going for the primary purpose of gambling,” he wrote. “They are visiting to dine at five-star restaurants, watch incredible live shows or participate in business meetings or conventions. Every year, thousands of people flock to these resorts to watch golf tournaments or tennis matches and never set foot in a casino.”

Yo, Frank, if that is the case why not just build the resort and not the casino?

PolitiFact dug into Fahrenkopf’s claim and found that it was “mostly false.” That was putting it nicely.

Fahrenkopf based his claim on a 2012 study by the Las Vegas Convention and Visitors Authority that found 47 percent of all visitors said their primary reason for visiting Las Vegas was vacation or pleasure. Eight percent said they came primarily to gamble. But PolitiFact said the survey questions were open-ended and only asked the “primary” reason for the visit. For example, the survey did not ask if people would have come if the casinos did not exist.

Also, Las Vegas is a different animal from other casino markets in the country, which cater mainly to locals who primarily go to gamble. Indeed, a 2013 study by Fahrenkopf’s own organization, AGA, found that 53 percent of people who frequent casinos across the country always or almost always, gamble.

There is no evidence that Florida casinos would attract mainly tourists – and not gamblers. In fact, residents, not tourists, account for 93 percent of the $2.4 billion in estimated revenue collected by existing casinos in Florida, according to a recent report commissioned by the state Legislature.

Casinos coming to Florida?

April 29, 2013 9:15 am

Florida lawmakers are following the classic playbook to build the case for more casinos in the Sunshine State.

First use taxpayers’ money to conduct a study about gambling. Make sure study touts benefits of gambling while playing down or ignoring the social and economic costs. Use that study to support votes to allow more casinos.

Call it the Casino Confirmation Bias. The Legislature recently agreed to spend nearly $400,000 to “comprehensively examine” gambling issues. The Legislature then hired Spectrum Gaming Group to conduct the study. Spectrum specializes in promoting gambling and casinos.

As Scott Maxwell writes in the Orlando Sentinel: “Gee, I wonder what it will find.”

Maxwell says that hiring Spectrum to study gambling is like “contracting Anheuser-Busch to do a study on whether drinking beer is OK.”

Of course, the casino lobbyists are the main drivers behind more gambling in Florida. Efforts to bring Las Vegas-style casinos to Florida failed last year but they remain undeterred.

As Maxwell writes: Before he was elected, Gov. Rick Scott “promised the Baptists that he would fight gambling. Yet right after he was elected, Scott jetted off to Vegas to meet with casino magnate Sheldon Adelson, who wants to build casinos in Florida — and who later cut a $250,000 check to Scott’s campaign. And now, according to the Sunshine State News, Adelson’s lobbyists are telling legislators they should start giving casinos tax breaks and incentives.”

The casinos aren’t even legal and already the lobbyists are working on tax breaks. That should give some indication as to what Spectrum Gaming’s study will find.