Monthly Archives: February 2013

Gov. Christie doubles down on gambling

February 28, 2013 6:19 pm

Fewer and fewer gamblers have been losing money in Atlantic City casinos, costing the state tens of millions of dollars in tax revenue. So how has New Jersey Gov. Chris Christie responded? By double down on gambling.

Christie signed a bill that will allow residents to gamble via the Internet. In effect, New Jersey residents will have access to a virtual casino, enabling them to gamble when and where they want via their mobile telephones, laptops and iPads. The move comes as Christie is also pushing to allow betting on sports in Atlantic City and the casinos are allowing customers to gamble without leaving their hotel room.

The upshot is this: Gov. Christie wants New Jersey residents to lose more money by gambling. In short, the state wins if residents lose more. In effect, Christie is betting against his own people. How Christie can think this is a good public policy boggles the mind.

Sadly, Christie is not alone. More and more states are pushing gambling as a way to generate tax revenues to fill budget holes. The long-term impact is a public policy built around trying to get residents to lose more money by gambling. Studies show that those that gamble the most are the often the ones who can least afford to lose: the elderly, poor, working class and minorities.

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Man threatens casino after wife loses $30k

February 27, 2013 3:51 pm

“My wife is at your casino, get her out of there or I am going to come up there with an AK-47 and [expletive] you and that place up.”

So began a telephone call from a man who said his wife had lost $30,000 at the Delaware Park Casino in Wilmington, Del., the News Journal reports. Brandon K. Buchanan, 28, of Wilmington, Del. said he was “fed up” with his wife’s gambling losses. He threatened to use a gun in order to let his wife know he was serious.

Buchanan was charged with first-degree reckless endangering, possession of a firearm during a felony, and possession of marijuana and drug paraphernalia, according to police. The incident is an extreme example of what can happen to families when gambling addiction takes hold. Studies show that divorce, suicide, crime and bankruptcy increase in the 50-mile area where a casino locates. (See a report by Baylor University economics professor Earl Grinols on the social costs of gambling here.)

Left unsaid is how casinos attract and keep problem gamblers coming back. It’s a safe bet that Delaware Park treated Buchanan’s wife like a VIP. She was likely offered free play coupons to get and keep her coming back to the casino as well as other perks. The goal is to keep gamblers coming back again and again. The industry term is known as “play to extinction.” (See video of problem gamblers here.)

This is the underside of gambling that lawmakers and casino operators don’t mention when boasting about the tax revenue that comes from casinos. But the sad reality is much of the casino tax revenue comes from problem gamblers. One study found that 60 percent of slots revenue at casinos comes from problem gamblers.

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Cuomo’s uphill casino push

February 26, 2013 2:37 pm

Two polls conducted by a casino company show most New Yorkers oppose Gov. Andrew Cuomo’s effort to change the state Constitution to legalize casinos, Crain’s reports.

The polls show support for casinos drops the more voters know where the casinos will be located. No wonder Cuomo has refused to disclose the locations for the casinos.

Cuomo has tried to win support for the casinos by saying the first three would be located in upstate New York. Some thought this was an effort to win support of voters in New York City, who will dominate the polls in November because of the looming mayor’s race. But the polls also show many voters want a casino in the city.

Crains details the crazy politics of casino issue. Note that none of the debate in Albany is focuses on the social and economic impact of casinos. Yes, casinos generate taxes and jobs, but also lead to increased crime, divorce, bankruptcy, and suicide. Those are real costs that all taxpayers pay for regardless of whether they gamble. But those public policy implications don’t seem to matter to most lawmakers.

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The growing casino glut

February 25, 2013 1:16 pm

We did a post last week detailing how casinos were not paying off as expected for many states. Now here comes more evidence that there are not enough gamblers to fill all of the casinos that have opened in recent years.

Revenues were down 9 percent at casinos in Mississippi. The amount of money the state pulled in from the casinos was the lowest it has been since 1997.

The decrease in revenue was blamed in part by increased competition from casinos in Arkansas. The weak economy was also blamed. Revenues were down almost 8 percent at a casino in Illinois. Revenues were also down at the two large Indian casinos in Connecticut. Even Las Vegas and Atlantic City recently saw a big drop in revenues.

The drop in revenues does not bode well for other states, like New York and Massachusetts, that are scrambling to get in the casino game. While those states may do well when the casinos first open, history shows the revenue numbers will eventually trail off, forcing states to do more to replace the unsustainable casino revenues. The growing casino glut is adding to the problems for many states.

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The bad bet on casinos

February 21, 2013 10:50 am

It seems like one state after has become addicted to gambling. But those bets are not paying off. A day’s worth of gambling news offers a snapshot into how misguided lawmakers have become in pushing casino gambling.

In Ohio, lawmakers are trying to figure out why the tax revenue from casinos is far below initial projections. D’oh. Some are blaming the Internet cafes in strip centers for siphoning off gamblers from the casinos. This is a red herring. The simple answer is that the reality often fails to match the hype. The initial projections usually come from the casino interests and are not independent. Those projections almost never factor in the social and economic costs.

Meanwhile in Massachusetts, plans for casinos there continue to muddle along. Much of the public remains in the dark as casino operators jockey for support. One state lawmaker, called the plan of a developer to team up with the operator of the Foxwoods casino in Connecticut “sketchy.” It sure is considering that Foxwoods is saddled with debt and was stripped of its license in Philadelphia after it failed to come up with the financing to build a casino there. Not to mention, the former head of the Foxwoods tribe, Michael Thomas, and the current treasurer were indicted last month for allegedly stealing money from the tribe. Talk about a losing hand.

In New Hampshire, the new governor there, Maggie Hassan, is supporting a plan for one large casino to plug a state budget gap. The previous governor wisely rejected efforts to add casinos in New Hampshire. Several newspapers there have been cool to the idea of pushing gambling as a quick fix to the state’s budget woes. The Seacoast newspaper in particular understands the projected benefits never add up.

“All around the nation we find examples of casino operators over-promising and under-delivering on tax revenues,” the paper wrote in an editorial. “And we see states, addicted to gambling money, unable to resist operators’ demands for expansion when they say they need it to keep the money flowing.”

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Revel files for bankruptcy

February 20, 2013 9:09 am

The one sure bet in Atlantic City the last 10 months was that the new $2.6. billion Revel casinos was likely to go bankrupt. Well, that bad bet just came true.

There was a reason why Morgan Stanley and other private investors walked away from the half-built casino after the 2008 financial collapse. Given the state of Atlantic City’s faltering casino industry, the Wall Street investors determined it was cheaper to cut their sizable losses and walk away from the Revel.

But Gov. Christie stepped in with $300 million in taxpayer money to get the casino up and running. Can you say bailout? Flush with house money, Revel rolled the dice.

From the start, the casino failed to attract the repeat gamblers needed to keep the slot machines spinning. Atlantic City is a mostly low-rollers market, supported by working class and elderly gamblers who spend hours at the slot machines. (Think Jersey Housewives, Sopranos and lots of senior citizens buses.)

The Revel tried to be an upscale casino that doesn’t allow smoking. But there aren’t enough James Bond types in Atlantic City to support the casino. Not to mention, the increased casino competition from Pennsylvania, Delaware, Maryland and the racino in Queens, N.Y. With gasoline back near $4 a gallon, there is no need to trek to dumpy Atlantic City when there are plenty of dumpy casinos closer to home. In fact, the growing glut of casinos raises questions about the whether the region is oversaturated and can support more casinos.

Other states will likely press on with their casino expansion plans, paving the way for more competition and more casinos going under. In the end, the big losers at the Revel will be the New Jersey taxpayers that Gov. Christie put on the hook for the $300 million in state funding.

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Coming soon: online gambling

February 18, 2013 9:21 am

The current spread of casinos across many states is bad enough. Just wait until states start pushing online gambling. This is the next big wave in gambling expansion, as The New York Times details here. (Sadly, the Times story fails to point out the downsides of online gambling and only makes a glancing reference to opposition.)

Just consider that many gamblers already visit local casinos an average of three to five times a week, or more than 250 times a year. Many spend hours at the casinos. So just wait until folks can gamble whenever and wherever they want, via their iPads, laptops and mobile phones. That’s when gambling addiction will explode into the mainstream, especially among younger people and even teens.

It will aslo push gambling problems into the middle and upper classes. Those two groups largely eschew casinos, which are populated mostly by poor, elderly, working class and minority residents. But online gambling will likely attract college students and other younger gamblers who already spend hours online.

Facebook, MySpace and other online operators are already laying the foundation for online gambling. Other tech operators are also poised to jump in, backed by hedge funds and Wall Street.

Years from now when reporters and historians go back to examine what went wrong, they will find the federal government is to blame. Just before Christmas 2011, the Justice Department quietly reversed itself and released a legal opinion lifting its longstanding ban in Internet gambling. The opinion was written in September but the Justice Department waited until Christmas to release it. The move opened the door for the virtual casinos coming soon to every house and mobile phone.

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A former mayor’s $1 billion gambling problem

February 15, 2013 9:52 am

The former mayor of San Diego wagered more than $1 billion at casinos over the last decade, forcing her to liquidate her savings, sell off real estate, auction belongings, borrow from friends and take more than $2 million from a charity set up by her late husband, according to The New York Times.

Maureen O’Connor, 66, made repeated visits to casinos in Las Vegas, Atlantic City and San Diego. Her wagers totaled more than $1 billion but her actual losses were $13 million. Even still, her gambling addiction amounted to wagering an average of $300,000 a day, every day, for nine years. O’Connor’s game of choice was video poker, a highly addictive gambling game and one of the more lucrative games. 

Friends were shocked by O’Connor’s gambling addiction. She didn’t drink and as mayor was described by a reporter as a “goodie two shoes.” O’Connor blamed her addiction on depression from the loss of her husband and later a brain tumor. Her addiction fits a pattern known as “grief gambling.” Indeed, many slots addicts tend to be widows.

O’Connor’s story underscores the addictive hold gambling can have on individuals. It also underscores how little casinos do to try to stop addicts. It is virtually impossible to imagine the casinos were not aware O’Connor was spending an average of $300,000 a day for nine years. In fact, casinos target problem gamblers. The casinos likely teated O’Connor like a VIP, offering her a variety of incentives, including free rooms and meals, to keep coming back and to stay for hours on end.

Indeed, casinos make a large percentage of their profits from repeat and problem gamblers. One study found as much as 62 percent of a casino’s slot machine revenue comes from problem gamblers. Studies also show that the closer a casino is to someone’s home the more at risk they are of developing a gambling problem. That’s what makes the spread of convenience casinos in many states and small towns all the more troubling.

Most elected officials and casino supporters ignore or deny the fact that a casino’s business model is essentially built on problem gamblers. Then again most elected officials and casino operators don’t gamble. They know it is a sucker’s game. But now the former mayor of San Diego has been ensnared in the predatory gambling venture that is being enabled and pushed by many other mayors and governors.

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As casinos pitch, a boy drowns

February 14, 2013 10:51 am

The front page of The Philadelphia Inquirer yesterday contained two unintenional but related stories. The first story breathlessly detailed how Steve Wynn and five other developers pitched the Pennsylvania gambling control board on plans to build a glitzy new casino in Philadelphia. The adjacent story detailed how a 7-year-old boy drowned in a dirty swimming pool in June while the owner of an illegal daycare spent the day gambling at the SugarHouse Casino in Philadelphia.

SugarHouse is known as one of the casinos where gamblers often leave their kids locked in the car in the parking lot, while they gamble. Now, the tragic death of boy underscores how casinos really are a public health hazard. Many of the gamblers at SugarHouse and other area casinos visit an average of three to five times a week. The casinos not only depend on but cater to repeat and problem gamblers. That is essentially the business model that sustains local convenience casinos like SugarHouse. (As anyone who has visited SugarHouse can see, Wynn’s pitch of tourists flocking to his proposed casino in the same gritty Fishtown neighborhood in Philadelphia is more fantasy than reality.)

So why would the state and city want to add another casino in Philadelphia when it sees the destruction caused by gambling? Easy, money talks. For the most part, casino operators and lawmakers downplay or ignore the social and economic costs that come from casinos. That’s because elected officials are willfully blinded by the tax revenue from casinos. Supporters also claim the casinos result in economic development, but that is not the case

Yes, the gamblers are responsible for their actions. But the sad truth is the casinos are less about fun and entertainment. The casinos actively lure gamblers to the casino with free shuttle service, free gambling vouchers, reward points and free drinks. Some offer free hotel rooms and easy credit to keep tapped out gamblers losing money. The majority of customers are poor, working class, elderly and minority, but everyone pays. The slot machines are designed to keep everyone gambling as long as possible. The industry term is “play to extinction.”

The first duty of elected officials is to protect citizens, not enable businesses that leave residents poorer and lead to the death of innocent children. But you won’t hear about that in any of the pitches for the next glitzy casino in Philadelphia.

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Cuomo’s shifting casino policy

February 12, 2013 9:35 am

First it was seven casinos and a giant convention center next to a racetrack in Queens. Then it was a phased in plan starting with three casinos located in upstate New York to help struggling regions. Make that four casinos upstate. Now, it’s casinos wherever lawmakers want.

When it comes to shaping New York’s gambling policy, Gov. Andrew Cuomo appears to be playing roulette. Spin the wheel and see what umber comes up. Initially, Cuomo said the state was already in the gambling business but he planned to do it right. It turns out that Cuomo’s version of what is right is more like a game of three card monte.

In just one year Cuomo’s casino vision has changed four times. Five if you count that he never even mentioned adding casinos when he ran for governor. It is likley Cuomo’s casino plan will keep changing as competing gambling interests flood Albany with campaign contributions and lobby lawmakers in secret. It is all part of the mad scramble by casino operators to get a slice of New York’s gambling pie.

The process is often ugly and has no rhyme or reason. Money and power trump common sense. Thoughtful study and analysis are no where to be found. Same goes for the social and economic costs of the state pushing more gambling as a way to fund the government. When it comes to changing the Constitution to legalize casinos in New York, Cuomo and fellow Albany lawmakers are playing a backroom game of craps.

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