The mixed message of casinos

June 18, 2012 3:08 pm

As lawmakers and residents in Massachusetts grapple with the rocky rollout of casinos there, the goal of the state’s new gambling policy remains unclear.

Are the casinos supposed to attract tourists from other states? Is the goal to keep Massachusetts residents from gambling in other states? Can the casinos spur broader economic development?

The answers are mixed because the impact of casinos is mixed. Sure, the casinos will create jobs and generate tax revenue for the state. But the casinos also create social and economic costs. Studies by Baylor University economics professor Earl Grinols have shown that casinos cost $3 for every $1 generated.

But lawmakers overlook such costs because they are blinded by the short-term revenue from gambling. As this column by Aaron Nicodemus in the Worcester Telegram details “the state is similarly confused about the benefits of casino gambling. It will lose more than it will win, just like the gamblers who cannot pull themselves away.”

Rough start for Massachusetts casinos

June 5, 2012 1:00 am

Like other states, the roll out of casinos in Massachusetts has been bumpy at best.

The casino law is being challenged in federal court. More litigation is expected surrounding Indian casinos. The gambling commission’s first high profile hire resigned after allegations of sexual abuse of a boy surfaced. And several big name Las Vegas casino operators have passed on the market of have been run out of town.

Other than that, how was the play, Mrs. Lincoln?

Roger Gros, publisher of Global Gaming Business magazine, which covers the industry, told the Boston Globe: “It’s been a pretty rocky start.” But the gambling commission chairman had a more pollyanna view. “I think it’s gone really well,’’ said Stephen Crosby, who chalked up the setbacks as part of the learning curve in launching a new industry.

But the reality is that once states get in bed with casino operators such issues often become standard operating procedure. Pennsylvania had host of problems, including corruption allegations, that lawmakers have yet to fully confront. Maryland had a hard time even attracting casino operators. Louisiana’s casino process was marred by corruption that resulted in the governor going to jail.

The problem is lawmakers are blinded by the prospect of casino money and often lose all common sense and any moral compass. Greed and the fight for control and power undermines the process and often leaves the state with an embarrassing black eye. Gambling after all is a sleazy business that strips wealth from residents and provides little in the way of economic spin off. As such, a rocky casino process comes with the territory.

As Hyman Roth said in The Godfather Part II: “This is the business we’ve chosen.”

Casino saturation?

May 24, 2012 11:38 am

The casinos in Massachusetts have yet to open and already some fear the market is becoming tapped out. Boston Globe columnist Joan Vennochi asks if casinos have become a risky bet.

Vennochi points to the increased competition plaguing the Foxwoods casino in nearby Connecticut and wonders if the market can support more casinos in Massachusetts. “Are there really enough gambling addicts, bored oldsters, and people in general who think it’s fun to watch their money melt away, to support multiple facilities?” Vennochi writes.

Las Vegas casino mogul Sheldon Adelson passed on opening a casino in Massachusetts. Fellow Vegas mogul Steve Wynn left town after residents in Foxborough made it clear that they didn’t want a casino in their town. (So much for Gov. Deval Patrick’s “jackpot.”)

Meanwhile, Foxwoods is scrambling to offer new gimmicks to lure gamblers to its Connecticut casino. One scheme includes offering cheap gas to induce gamblers to drive further and bypass their local convenience casino. Another is a wellness center, a move that drips with irony considering casinos are one of the few indoor public spaces in the country that still allow smokers.

Guess desperate times call for desperate measure.

Gambling commissioner busted for DUI

May 21, 2012 11:57 am

A gambling commissioner in Iowa was arrested for drunk driving after police observed his car swerving on the highway in De Moines.

Jeff Lamberti, a former Republican Senate Leader who is vice chairman of the state’s gambling commission, first told police he was texting while driving. Then he said he had two beers. Later he said he had four beers, then said he had six beers.

Police found a large bottle of nearly empty Jack Daniels inside a cloth bag that also contained a piece of clothing and several condoms, according to the police report. Lamberti later said he made a stupid mistake and would take responsibility for his actions.

Lamberti’s troubles with the law is just the latest controversy dogging a state gambling commissioner. In Massachusetts, the governor’s pick for the fledgling gambling commission there was accused of child sex abuse. New York’s racing association is ensared in a controversey surrounding overcharging bettors millions of dollars.

In Pennsylvania, the gambling commission has been a rotating group of insiders who cycle off the board only to go represent the casino firms they regulated. Former Gov. Ed Rendell’s first pick to head the gambling board stepped down after it was disclosed that he testified on behalf of a boxing promoter with alleged mob ties.

The legal troubles of commission members and insider politics underscores how the agencies charged with regulating gambling are often part of the problem, nit part of the solution.

Massachusetts gambling commission off to a flying start

May 10, 2012 10:45 am

“And the gambling commission is hanging on by the skin of its teeth.”

- Bruce Springsteen, “Atlantic City.”

The Massachusetts gambling commission is just getting started and it is already embroiled in controversey surrounding sexual abuse allegations against the interim head of the agency, who abruptly resigned last night.

Carl Stanley McGee resigned from the gambling commission after mounting criticism about the lack of a background check. McGee was accused of assaulting a 15-year-old boy in the steam room of a Florida resort in 2007. McGee was arrested, but Florida prosecutors eventually declined to press charges. The boy’s family filed a civil lawsuit against McGee, who eventually paid to settle the case. Critics of McGee’s appointment called for the settlement details to be made public.

Beyond the sexual abuse allegations, the appointment of McGee raises troubling questions about the integrity of gambling board, which is charged with vetting casino applicants to ensure against criminal elements and political corruption that has long been associated with gambling. Yet, the gambling commission failed to perform a basic background check of McGee.

Of course, none of this should come as a surprise to those familiar with the casino licesning process in other states. That’s because the awarding of gambling licenses is often more about political connections than insuring integrity of the process or getting it right. Exhibit A: Pennsylvania.

Then-Gov. Ed Rendell’s first pick to head Pennsylvania’s gambling control board resigned amid questions in his background. Former police officer Frank Friel was accused by the Pennsylvania Crime Commission of taking money from a club owner. He denied any wrongdoing and was never charged. Friel later testified that he had earned bachelor’s and master’s degrees when in fact he never graduated.

As an employee for a private security firm, Friel testified in support of a Philadelphia boxing promoter with alleged ties to organized crime who was seeking to hold fights at a Connecticut casino. Initially, Rendell stood by Friel. But after Friel resigned, Rendell blamed the press for digging up dirt on him. Pennsylvania lawmakers failed to learn from that controversey. The state’s gaming commission went on to award casino licenses to two people with past felony convictions. Licenses were also awarded to others with political ties to Rendell and other elected state leaders.

In Massachusetts, McGee was Gov, Deval Patrick’s point man in writing the casino law and getting it passed. His insider status was probably being counted on to help grease the skids for the licensing process. Now the Patrick administration will have to find another hack to do its casino bidding. Unfortunately, there is probably a long line of willing enablers on Beacon Hill.

Voter backlash against casino

May 8, 2012 1:44 pm

Here’s some insight into why elected officials go to great lengths to keep voters from deciding whether to allow casinos: Voters in Foxboro, Mass. overwhelmingly backed a slate of casino opponents in the town selectmen’s race on Monday.

The vote was big setback to Las Vegas mogul Steve Wynn’s plan to team with New England Patroits owner Bob Kraft to bring a casino to Foxboro. “Monday’s election was the first time local voters have weighed in on a casino proposal since Massachusetts’ expanded gambling law passed last year,” The Boston Globe reported. ”The voting margins seemed to confirm academic studies that suggest casino opponents are highly motivated voters who turn out in great percentages.”

Elected officials know that most voters oppose casinos because they know the problems outweigh the benefits. That’s why in many states, lawmakers hold late-night votes and cut backroom deals when it comes to casinos. The last thing elected officials or casino operators want is a full, fair, open, honest and independent debate about the social and economic impact of casinos.

In fact, Massachusetts officials essentially crafted the casino law in secret before ramming it through the state House and Senate. The measure was influenced by casino industry lobbyists, and not the public good. A similar playbook has been followed in other states, including Pennsylvania, where lawmakers legalized gambling in a late-night vote that avoided little public debate.

Gov. Andrew Cuomo is following the same road map in New York, though voters there will have the final say. Of course, by then the casino industry will have spent millions of dollars shaping public opinion, while the state avoids an independent analysis regarding the true costs of gambling.

Lottery slush fund?

April 6, 2012 9:39 am

Just as Massachusetts enters the casino business, along comes a case accusing the former state treasurer of using lottery money to bolster his unsuccessful campaign for governor.

Timothy Cahill is accused of spending $1.5 million in lottery money on advertisements to boost his election campaign. Cahill, who pleaded not guilty, was charged with procurement fraud, violating state ethics laws, and conspiring with his campaign manager on both counts. State law bars elected officials from using public resources for political purposes.

Cahill said the ads were needed to combat the negative campaign waged against him as he ran as an independent. The Republican Governors Association launched a campaign attacking Cahill, who was seen as a spoiler. Even if innocent, Cahill’s defense is telling about the warped view elected officials have of gambling proceeds, which strip wealth from citizens and increase social ills. There’s an inherent conflict in states cashing in on gambling: the more the state makes, the poorer it leaves residents.

“I believed then and I believe now that the decision to run those ads was the right thing to do for the lottery,’’ he said. “To act contrary to that interest and not run the ads would have put my own personal and political interest ahead of the interests of the lottery and the cities and towns that depend on it. I chose to do what I believe and what I still believe and what the lottery believed was the right thing to do.’’

More broadly, the case sheds light on the troubling intersection between the government and gambling. The joint venture between government and gambling has been shown to have a corrupting influence on lawmakers. Look for that negative influence to grow as the state moves into the casino rackets. The case has defense attorneys and other elected officials nervous.

Dismantling the case for casinos

April 3, 2012 9:01 am

One of the main reasons lawmakers use to support gambling is competition from other states. The governors in Pennsylvania, New York and Massachusetts all said that legalizing casinos would keep residents from going out of state to gamble.

To a certain extent that may be true. But the answer to gambling is not more gambling. A casino closer to home just means folks gamble more often and new problem gamblers are created. The upshot is more wealth stripped from residents.

New Hampshire’s governor and lawmakers just rejected an effort to legalize casinos there. (See earlier post here.)Casino supporters said the state needed to act now that Massachusetts has legalized casinos. But an editorial in a New Hampshire newspaper explains why that is a bogus argument. Here’s a portion of this compelling editorial in the Seacoast newspaper that cuts through the rhetoric:

“The last thing in the world New Hampshire should ever do is try to copy the corrupt, bloated and thoroughly dysfunctional government of Massachusetts, where the last three House speakers have been convicted of federal felonies, and patronage, nepotism and no-show jobs are common.

“The reason Massachusetts needs gambling is that it is addicted to spending. When the going got tough during the Great Recession, instead of belt-tightening, as we did here in New Hampshire, Massachusetts decided to feed its spending habit by prostituting itself to organized gambling operators.

“Massachusetts will soon find, as every other state that has allowed gambling out of desperation has found, this sort of political prostitution does not create a sustainable revenue stream. As the initial flow of gambling dollars slows, the gambling interests will seek more lenient laws and additional locations. Once they have more lenient laws, they’ll begin to choke off the amount of money going to the state and the state will need to take what it can get to feed its addiction.”

 Well said.

The price of poker in Massachusetts

February 21, 2012 10:26 am

Elected officials often cite public demand for gambling as a reason for legalizing casinos. In reality, lawmakers are really just responding to the will of the lobbyists. Not the will of the people.

That was the case in Massachusetts, where a small army of lobbyists helped get casinos legalized. A review by the Associated Press found the gambling industry spent $11.4 million on lobbying on Beacon Hill over the past five years. The amount of spending grew as the gambling legislation got close to passing. 

Some of the biggest spenders are now vying for a casino license, including Steve Wynn, Penn National and MGM Resorts International. That’s why they say you have to pay to play.

Tax breaks for casinos

February 6, 2012 10:45 am

The insatiable drive for tax revenue is one of the main reasons many states are turning to casinos as a way to fill government coffers. But once the casinos begin to struggle they immediately turn to lawmakers for help.

In West Virginia, the city council  in Longview just approved a one-year tax break in an effort to keep the struggling casino afloat. Once the tax revenue goes away, what is the point of having a casino if all it does is create economic and social costs?The troubles in Longview offer a window into what other towns and cities can expect as more casinos open and the competition for limited gambling dollars increases.

Consider: The two mega casinos on Indian reservations in Connecticut are scrambling to refinance crushing debt loads, and will soon face increased competition from Massachusetts and possibly New York. Several casinos in Atlantic City filed for bankruptcy in recent years and continue to struggle, in part from increased competition in Pennsylvania. Meanwhile, the Revel casino needed a state bailout in order to resume construction.

Casinos in Indiana, Mississippi and other states are also experiencing a drop in revenues, in part from the sluggish economy and increased competition. In Delaware, the governor has ditched a plan to add more casinos as the existing casinos lobby state lawmakers to reduce their tax rate. 

Meanwhile, other states like Ohio, Kentucky and Florida have or are considering legalizing commercial casinos, which will further increase competition. As the casino cancer spreads, look for more states to cut taxes and cut back on regulation – as New Jersey has done – in an effort to prop up the increasingly influential casino industry.

The Longview casino claims it has not made a profit since 2008. Meanwhile, the casino continues to strip wealth from the community. And now the government is extending the casino a tax break so it can continue to take money from residents. There is something seriously wrong with that picture. It shows why casinos are such a bad public policy that is insidious and unsustainable.