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.

Casino competition hits state coffers

December 27, 2012 9:37 am

As more and more states legalize casinos, the competition for gamblers is beginning to impact government coffers.

Indiana is projecting a 9 percent drop in tax revenue from casinos in the coming budget year. The decrease in revenue is attributed to new casinos opening in neighboring Ohio. Casino competition has cut into the tax revenue at other states, including Delaware, Michigan, New Jersey and Pennsylvania.

The drop in tax revenue shows that casino revenue is not a sustainable or reliable way to fund state budgets. Not to mention, the opening of local convenience casinos in state after state does not generate any new spending, a study by the Federal Reserve Bank in Boston found. “Casinos that cater to a local market generally do not bring outside money into the economy through the spending of its patrons,” the study said. ”Residents patronizing such casinos may simply substitute gambling for other goods and services.”  

Of course, once hooked on casinos or lotteries, states face pressure to find new ways to get residents to gamble once the tax revenue falters. In Delaware, gambling accounts for more than 7 percent of state budget, making it the state’s fourth biggest revenue stream. So when new casinos in Maryland and Pennsylvania began to lure away gamblers, the state enacted new gambling measures.

First it legalized a form of sports betting. Then it allowed table games including blackjack, craps and roulette. But its gambling revenues have continued to fall. In June, Gov. Jack Markell signed a law that could make Delaware the first state to offer Internet gambling. The state also reduced the tax rate on its casinos, who complained that competition was cutting into their bottom lines. To offset the loss in tax revenue, the state legalized keno machines in other bars and restaurants.

With each step, Delaware lawmakers essentially continue to bet against their residents. Rather than building a sustainable economy, the state is making a bad bet on gambling. It is an unstatinable arms race to the bottom.

New Hampshire is one state that has not fallen for the casino gimmick. An anti-casino group there has done a good job of making the case as to why casinos are a bad bet.

NJ residents: no more casinos

September 24, 2012 1:07 pm

Most New Jersey residents are opposed to allowing more casinos outside of Atlantic City, according to a new poll.

The poll found 56 percent of voters oppose casinos elsewhere in the state, while 35 percent said casinos should be located outside of Atlantic City. The poll was conducted by Fairleigh Dickinson University and comes as some lawmakers in North Jersey are pushing to allow casinos in the Meadowlands as a way to generate more tax revenue from gambling losses.

The push to add more casinos across the state is in response to the steep drop in gambling tax revenue coming out of Atlantic City, due in large part to increased competition from Pennsylvania and other area states. At the same time, New York lawmakers, led by Gov. Andrew Cuomo, want to legalize commerical casinos in the Empire State. Such a move could further cut into the number of gamblers traveling to Atlantic City – manily to lose money.

However, New Jersey Gov. Chris Christie and Democratic lawmakers in South Jersey oppose adding more casinos in other parts of the state. Instead, they want to focus efforts to lure gamblers back to Atlantic City. But so far those efforts – which include a new casino, a new marketing campaign and cuts in regulation – have yet to stop the bleeding in Atlantic City.

But at least most voters in New Jersey understand that the answer to the drop in gambling is not more gambling. Perhaps they know that 30-plus years of gambling Atlantic City has failed to revitalize that shore town. Not to mention that adding casinos in other cities is not a worthy policy when it comes to generating jobs or tax revenue.

New Jersey sued over sports betting

August 9, 2012 10:41 am

The NCAA and four professional sports leagues sued New Jersey in federal court to stop the state from allowing betting on games at its casinos and race tracks.

The suit contends that New Jersey’s effort to allow sports betting violates federal law. Sports betting is legal only in Nevada, Delaware, Oregon and Montana. The suit added: “Gambling on amateur and professional sports threatens the integrity of those sports and is fundamentally at odds with the principle … that the outcomes of collegiate and professional athletic contests must be determined … solely on the basis of honest athletic competition.”

Gov. Chris Christie shrugged off the lawsuit, saying he believes the existing law is unconstitutional. But he added the state has long way to go in the courts. “I don’t believe that the federal government has the right to decide that only certain states can have sports gambling, and it does not acknowledge that there is illegal sports gambling going on in every state in America as we speak,” Christie said.

Even if Christie wins on the legal merits, that doesn’t make state-sponsored sports betting right. The state endorsement of sports betting will only prompt more people to gamble – and lose. More addicts will also be created, leading to more social costs paid by all taxpayers regardless of whether they gamble. (Read about the costs here.) See here how sports betting and addiction is especially a problem among young males, especially on college campuses.

The increase in big money bet on games will also likely lead to more players taking dives and games getting fixed, further undermining the integrity of sports. (See list of famous scandals here.) In the end, everyone loses.

Enjoy the show but keep gambling

June 26, 2012 5:32 pm

New Jersey lawmakers want visitors to enjoy Atlantic City – just as long as they keep gambling.

The state Assembly voted 77-0 to approve a measure that would allow casino and racetrack customers to use mobile devices to gamble anywhere they want on the property. State senators are expected to vote on the bill Thursday. It would take effect once Gov. Chris Christie signed it.

Essentially casino customers could take the mobile device to gamble by the pool, at a show, dinner or back to their hotel room. Got to go to the bathroom? Take the mobile gambling device with you. At least that will provide some, ah, relief for slot machine addicts who have been known to wear adult diapers so as not to lose their lucky machine.

And that’s what this measure is really all about: Keeping gamblers, gambling in order to generate more revenue for the struggling casinos and the state. The Jersey lawmakers tried to spin it as some sort of customer-friendly service, which they can’t even bring themselves to call gambling.

“There are so many enjoyable things to do at Atlantic City’s casinos and hotels, it just makes sense to allow guests to take their games along with them,” said Assemblyman John Amodeo, R-Atlantic. Assemblyman Ruben Ramos, D-Hudson, chairman of the Assembly Regulatory Oversight and Gaming Committee, said: “If a couple or a group of friends … wants to lounge by the pool, or take in a show or dinner, those who want to take advantage of gaming attractions can now have it at their fingertips so they don’t have to miss out on any of the action.”

But the bottom line is the measure is not going to help the casinos much. (Not to mention, by reading some of these comments this is not a service average citizens want or support.) Nevada approved mobile gambling in 2009. So far, the move has only contributed $84,000 – or 0.01 percent – to the state $865.5 million in gambling tax revenue.

In other words, New Jersey lawmakers should not feel good about enabling a service that will mostly keep gambling addicts gambling.

Revel rolls snake eyes again

June 12, 2012 8:28 am

Big shock: the new $2.4 billion Revel casino in Atlantic City had another sluggish month in business, despite lots of free media coverage and an advertising blitz.

Revel’s revenue was $13.9 million in May, ranking eighth among Atlantic City’s dozen casinos. Revenues in April, its first month in business, were $13.4 million. Overall, Atlantic City’s total gambling revenue was $263 million in May, down 9.5 percent
compared with a year ago. Excluding Revel, revenue declined 14.3 percent.

The arrival of Revel is not going to fix what is ailing Atlantic City. The Jersey Shore resort is getting killed by increased competition from Pennsylvania, Delaware and other states, including Maryland, which just opened a new casino. As a result, many more elderly people who used to bus in to Atlantic City now have a local casino closer to home.

The Revel was aiming for the high-end market. But Atlantic City has always been more about low rollers, seniors playing slots and working class heroes hoping to get lucky. The Revel’s fancy amentities and nonsmoking policy don’t appeal to the blue collar crowd.

That’s why Morgan Stanley walked away from the Revel after the financial collpase. The bankers understood it was better to cut their losses. The free market had spoken. But, surprisingly, Gov. Chris Christie, supposedly a free market Republican,  came through with a $261 million taxpayer-bond bailout to help complete construction of the Revel.

The way the bailout is structured it is unlikely taxpayers will ever get repaid. Rather than bring more gamblers to Atlantic City, investors are betting the Revel will more likely take market share from the other existing casinos in Atlantic City. That will only weaken the remaining casinos, which are already struggling from the outside competition.

Latest gimmick: privatize state lotteries

April 30, 2012 11:26 am

As states continue to search for ways to fill budget holes, the latest gimmick is to privatize the lottery.

Illinois became the first state to privatize the lottery. New Jersey, Pennsylvania, Ohio, Washington and other states are all considering proposals to privatize the lottery. The push for short-term revenue gains comes with obvious risks that include opening states up to corruption and creating more problem gamblers.

State lotteries are giant cash machines. Private operators are salivating at the prospect of gaining control to those cash cows. If history is any guide, the backroom jockeying by the private companies must be watched closely. The winning bidders will likely be connected friends and big campaign givers to the governor or other powerful pols. (Those odds are much better than the odds of hitting the Power Ball.)

But even more problematic is the likely result of the sharp rise in problem gamblers that will come with private operators. Here’s why: a private operators will have an incentive to sell as many tickets as possible because that will probably be part of their compensation. As such, the private operator will be more efficient and aggressive when it comes to selling tickets. There will likely be an increase in places where tickets are sold. There will likely be an increase in lottery games to be played. And there will likely be more expensive lottery tickets sold. For example, Texas offers a $50 lottery ticket.

The result will be more people spending more money on lottery tickets. More people getting addicted to lottery tickets. And more people spending a larger percentage of their income on lottery tickets. Studies show that the most vulnerable residents spend a higher percentage of their income playing the lottery. Expanding the lottery through private operators may provide a short-term increase in revenue but will likely lead to more problems down the road.

Super Bowl preys on gambling addicts

January 26, 2012 9:20 am

For many Americans, gambling on the Super Bowl is as much a part of the day as the nachos, beer and cool commercials. A Super Bowl pool seems like harmless fun. But it is a big problem for many gambling addicts.

Calls to gambling hot lines spike around the time of the Super Bowl, according to this stories here and here. The impact on families can be destructive as this recovering addict in the local ABC News story explains.

“Gambling almost cost me everything that was important to me — my family, my marriage,” said Lee who didn’t want her full name revealed. “It was ugly, and it finally got to the point where I got into some serious trouble through theft from an employer.”

Get ready for more calls to gambling hot lines if New Jersey lawmakers move forward with a proposal to legalize sports betting in Atlantic City. The measure could open the door for sports betting in other states. No doubt many gamble already. But such a move will only make it easier for people to gamble. More is not better as this study on the gambling mentality shows. Plus it is a sucker’s bet.

An endorsement of sports betting by the government sends the message that it is ok to gamble. The marketing that will follow will only lure people to gamble who do not want to deal with a bookie. 

Instead, the government will be your bookie.

Internet gambling’s small payoff

January 17, 2012 1:49 pm

The next untapped frontier in gambling is the Internet. But as states rush get in the online game, studies show that the potential pot is not as big as expected, The New York Times reports.

The state of Iowa released a study that found legalizing online poker would generate between $3 million and $13 million a year. Supporters in California estimate it could generate between $100 million and $250 million – a small figure given the state’s $9.2 billion budget shortfall.

Of course, the revenue estimates do not factor in the social and economic costs of a further expansion of gambling. That would make the overall take even lower for states.

Some elected officials don’t care. Gov. Christie said he wants to make New Jersey the “epicenter” of the online gambling industry. In other words, Christie wants to make it easier for New Jersey residents to gamble away even more of their money. What a proud legacy that would be for Christie.

An Iowa lawmaker is even more disingenuous about his reasons for sponsoring a bill to legalize online poker. State Senator Jeff Danielson, a Democrat from the Cedar Falls area, says the bill would protect residents.

“We are not doing this to expand our state budget,” Danielson said, apparently while maintaining a straight face. “Our purpose is to make sure every Iowan who wants to play poker has a fair game, has protections, and, if they win, is able to retain those earning in a fair and safe way.”

That’s right. Jeff Danielson is looking out for gamblers in Iowa. What a true public servant and American hero.