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RI Expected to Lose $422M Revenue in 5 years to MA Gambling

Saturday, March 01, 2014

 

Rhode Island is expected to see the greatest impact from gambling in Massachusetts, with state revenues forecast to drop off $422.1 million over a five-year period beginning next year.

The first shoe to drop came this week with the Massachusetts Gaming Commission's decision to award a slots parlor license located in Plainville, Mass. — of three proposed sites, potentially the most damaging for the Ocean State.

“I think they made the right decision for a lot of reasons,” said Clyde Barrow, director of the Center for Policy Analysis at University of Massachusetts Dartmouth, where the Northeastern Gaming Research Project has followed trends in gambling since 2004.

Over that timeframe, Bay State residents generated over $1.1 billion in state tax revenue for Rhode Island. But there are going to be big losses soon — the figurative second shoe comes later this year when Massachusetts decides where to situate three casinos.

“Rhode Island should be in crisis mode,” says Leonard Lardaro, a professor of Economics at the University of Rhode Island who sees the state “headed toward a fiscal train wreck.”

And what's been the response?

“Standard operating procedure: Mañana,” Lardaro said.

Mass. slots 'intended to compete' with Twin River

Currently, over half of all combined visitors to Twin River Casino and Newport Grand Slots hail from Massachusetts according to surveys by Barrow's gaming research group. Bay Staters outnumber Rhode Islanders two to one in those facilities.

In 2012, Massachusetts gamblers spent a combined $512 million in Rhode Island on gaming, food and beverage service, and other entertainment.

Spurred by an advertising blitz and the addition of gaming tables to the former slots-only Twin River last year, that facility saw a 261-percent increase in Massachusetts traffic between 2006 and 2012.

The single, 1,250-machine slot parlor allowed under Massachusetts' 2011 law isn't sufficient to capture half of that demand, according to Barrow, but it will make a dent. “The original intent was to compete with Twin River,” he said. “The location is perfect,” positioned midway between the major metropolitan areas of Boston and Providence — a 14-mile drive north of Lincoln.

Plainville expected to be popular

The location, existing infrastructure investments and harness racetrack, and track record of the successful applicant, Penn National Gaming, all bode well for the venture, which could begin operating as early as August.

“I think you'll see a very successful slots operation,” predicts Barrow.

So who goes where? “It's entirely a question of proximity,” Barrow said. “They're going to go to whatever facility is closer.”

Twin River readies for some competition

“We knew this day was coming,” says Twin River spokesperson Patti Doyle, who said the hope and expectation was that guests continued to flock to the casino for its gaming, entertainment, and, most importantly, customer service.

“We do define ourselves as a convenience casino, and there's no beating our location,” Doyle said. “That will always be a draw.”

While Twin River now offers table games, trumping the slots-only Plainville parlor, there are casino proposals in the neighborhood in Fall River, Mass.

“We just decided we had to focus on those things we can control,” Doyle said. “What we can control is a positive guest experience at Twin River.”

Casino operators there have also focused on improving their balance sheet, after bankruptcy filings under previous ownership in 2009, and the acquisition of a second casino property out of state, in Biloxi, Miss.

Meanwhile, a current bill in the General Assembly that would allow a hotel at Twin River, sponsored by Woonsocket Rep. Robert Phillips, doesn't appear to have legs. Doyle said the casino wasn't involved in that proposal, a discussion she said that would have to start with town officials.

Those officials in Lincoln passed a resolution Tuesday opposing the bill. “Our opposition, in a nutshell, is any proposal like that should go through the local authority,” not initiated in the Legislature, said Town Administrator Joseph Almond.

Local impact in Lincoln lessened

The local impact to the town of Lincoln will be blunted by a 2007 decision to cap the amount of gaming revenue that goes toward the operational budget.

“We obviously have been very aware of what's been going on in Massachusetts,” Almond said. With slots in nearby Plainville, “we anticipate we'll see that effect sooner,” he said.

But local officials were already cognizant of fluctuations in gaming revenue, which led to its capping at $5.2 million annually for general operations (about $10 million in extra revenue has gone toward capital improvements in the meantime). “That's really an insurance policy,” Almond said, that puts the town in comparatively better shape to weather future decreasing returns.

Estimates on overall financial impact vary


Gary Sasse, director of Bryant University's Hassenfeld Institute for Public Leadership, put the revenue loss from the slots parlor at Twin River between 8 to 12 percent. “But this is only the tip of the financial storm that could hit Rhode Island,” added the GoLocal MINDSETTER™. “Once a slot parlor and casinos are operating in Massachusetts they are projected to reduce the $300-plus million the state gets from Twin River by about one-third, and could well drive Newport Grand out of business.”

Sasse said gaming revenue losses were one factor driving state deficit forecasts. “Decision-makers knew that this day was coming,” he said, “let's hope they are not understating the potential economic and fiscal impacts.”

The casino expert at Dartmouth, Barrow put the impact of Massachusetts gaming at about 15 percent of Twin River's net terminal income — an annual loss of $60 to $70 million. Newport Grand faces the same percentage loss.

For his part, Lardaro said he expected the impact was being understated. “(Gambling) is our number three revenue source,” he said. “If we take a hit to our number three, how are we going to make that up? ... Nobody is going to accuse Rhode Island of rapid economic growth.”

Without long-term due diligence, Lardaro said he saw only one “quick fix” on the horizon: tax revenue from legalizing recreational marijuana. “It only hurts when I laugh.”

“A storm is coming, a real hurricane is coming, and they bought an umbrella.”

 

Related Slideshow: Which New England States Make the Most on Lottery Revenue?

Prev Next

6. Vermont

FY 2012 Sales: $100.93 million

FY 2012 Transfers: $22.3 million

FY 2011 to FY 2012 Sales Increase: $5.39 million

FY 2011 to FY 2012 Percentage Increase: 5.6%

Photo: Flickr/Aaron McIntyre

Prev Next

5. Maine

FY 2012 Sales: $228.3 million

FY 2012 Transfers: $54.3 million

FY 2011 to FY 2012 Sales Increase: $11.9 million

FY 2011 to FY 2012 Percentage Increase: 5.5%

Photo: Flickr/Ted Murphy

Prev Next

4. New Hampshire

FY 2012 Sales: $254.92 million

FY 2012 Transfers: $66.8 million

FY 2011 to FY 2012 Sales Increase: $25.77 million

FY 2011 to FY 2012 Percentage Increase: 11.2%

Prev Next

3. Connecticut

FY 2012 Sales: $1.082 billion

FY 2012 Transfers: $310 million

FY 2011 to FY 2012 Sales Increase: $65.1 million

FY 2011 to FY 2012 Percentage Increase: 6.3%

Photo: Flickr/Katie & Ian

Prev Next

2. Rhode Island

FY 2012 Sales: $3.532 billion

FY 2012 Transfers: $377.7 million

FY 2011 to FY 2012 Sales Increase: $406.58 million

FY 2011 to FY 2012 Percentage Increase: 13%

Prev Next

1. Massachusetts

FY 2012 Sales: $4.741 billion

FY 2012 Transfers: $833.9 million

FY 2011 to FY 2012 Sales Increase: $313.5 million

FY 2011 to FY 2012 Percentage Increase: 7.08%

 
 

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Comments:

Too funny! What's next pot? Maybe we can make real moonshine and tax that. Boy our leaders are really forward thinkers!

Comment #1 by lupe fiasco on 2014 03 01

That $422 big ones lost in five years, will that trigger $422 million in spending cuts, or tax hikes?

Comment #2 by David Beagle on 2014 03 01

I don't understand what all of the concern is over this? The IDIOTS at the Legislature (unless Rogues Islanders wake up and kick everyone of them out of office) will just create new taxes, increase old ones, and continue to irresponsibly spend our tax dollars, especially on 'Do-Gooder' legislation.....more-so the providing of more benefits to ILLEGALS!

The problem will be that there will be no one here to pay these taxes that supply all of these undeserved perks to those I just alluded to, as they will be the only ones left in this God-Forsaken State....as the rest of us will finally move the hell out!

Comment #3 by TOM LETOURNEAU on 2014 03 01

Yes, but think of all the millions that have been lost over the last decade(s?) by our sanctimonious governors and dumb legislators who block casinos in RI. Rhode Island has been run by totally incompetent people who haven't been able to bring prosperity back - not that we ever were a powerhouse to begin with. I'm up for someone totally new with fresh ideas, analytical methods, a global network and fiscal soundness. Is there someone so talented who would want the job?

Comment #4 by Joan Overcash on 2014 03 01

Yes, but think of all the millions that have been lost over the last decade(s?) by our sanctimonious governors and dumb legislators who block casinos in RI. Rhode Island has been run by totally incompetent people who haven't been able to bring prosperity back - not that we ever were a powerhouse to begin with. I'm up for someone totally new with fresh ideas, analytical methods, a global network and fiscal soundness. Is there someone so talented who would want the job?

Comment #5 by Joan Overcash on 2014 03 01

the simple question for candidates - the state is in a hole - are you going to raise taxes or cut expenses?

the making government more efficient doesn't work.

Comment #6 by john paycheck on 2014 03 01

More and better casinos...hardly. Massachusetts will outbuild our pathetic efforts in a New York second, (Witness the warehouse in Newport with "SLOTS!" plastered on the side, REAL class) and Conecticut has already shown us what too many "destination resorts" do to each other.
So we lose 400 odd million....wasn't that ALL earmarked for education -- they told us once? ROFLMFAO.

Comment #7 by G Godot on 2014 03 01

Yet these geniuses running our state "operation" want to:

* Pay the 38 Studios bondholders needlessly
* Not turn the high maintenance cost of the HealthSource RI insurance exchange over to the federal government
* Create more debt by putting bond referendums on the ballot
* Increase the state budget to $8.5 billion
* Give drivers licenses to illegal aliens so they can more easily take jobs from RI citizens and legal residents
* Spend 40% or so of the state budget on social programs, creating a magnet for low- or no-income folks

There has never been a more urgent need to vote the status quo out.

Comment #8 by Art West on 2014 03 01

"Standard operating procedure: Mañana,” Lardaro said. ha ha.

They'll just raise taxes as nobody here really seems to mind.

Comment #9 by Odd Job on 2014 03 01

RI Expected to democratic,broke and dead last in everything forever!

Comment #10 by LENNY BRUCE on 2014 03 02

Gary Sasse? Gary Sasse? Dum Dum Carcieri's appointee and, prior to that, director of the Rhode Island Public Expenditure Council, a group of people who have succeeded in advocating for fiscal and economic policies that have driven RI deeper into debt and less competitive than ever. That Gary Sasse?

The Gary Sasse whose RIPEC recommended putting all of RI's gambling revenues into the Twin River and Newport Grand baskets, urging residents to vote against a world-class destination resort casino in RI that would have owned the gambling market among Northern New England and Massachusetts residents, intercepting all those patrons heading to the CT casinos. That Gary Sasse?

The Gary Sasse and other Dum Dum-like voices then saw Twin River file for bankruptcy, resulting in RI businesses losing millions, and those businesses then laying off employees. That Gary Sasse?

The Gary Sasse who, along with Dum Dum Carcieri, didn't want to trade the slot parlors' 61% tax for a 25% casino tax, simpletons that they are. Of course, with a world-class destination resort casino, it would have brought thousands and thousands of tourists to RI, spending discretionary income among RI's tourism and hospitality sectors, creating not just 3,500 jobs at the casino but an estimated 1,000 more jobs in the non-casino industry that serviced the casino.

The Gary Sasse who dismissed the value of a RI casino spending millions upon millions of dollars for goods and services among RI businesses. Now Twin River will take a massive revenue hit from Plainridge and a SEMass casino, while it is very likely that Newport Grand may well have to shut down within the next year or two. That Gary Sasse?

That Gary Sasse has anything to do with allegedly talking about practical fiscal and economic issues is a joke. That he's quoted in this story is a joke. His lack of understanding economic competitiveness in an ever-changing economy is no different that Dum Dum Carcieri's understanding of the ever-changing economy. RI elected Dum Dum Carcieri as governor, and his understanding of business and economics was rooted in the 1950's. Sasse is no different.

I feel sorry for my fellow Rhode Islanders that we have these buffoons presented as understanding economics competitiveness. They don't. And RI continues to pay the price for people like Carcieri, Sasse and RIPEC having anything to do with RI's fiscal and economic future.

Comment #11 by egbert souse' on 2014 03 02

Maybe the Gary who knew what casino expansion in Masachusetts would do to OUR pathetic efforts. Lots of "well paying" jobs for college grads at those "destination resorts" - why they'll be "cleaning up".

Comment #12 by G Godot on 2014 03 02

the Massachusetts casinos will be palaces. magnets like foxwoods and mohegean when thye first opened. minutes from Gillette, patriot place, Wrentham, 495, 95, providence, twin rivers,.....

this is going to affect every restaurant, theatre, etc and business in ri that lives off disposable spending. you will probably even see reduced lottery ticket sales!

and ri knew this was going to happen and did virtually nothing. still focused on social issues.

not sure what the libs game plan is? oh well, when providence goes bankrupt, wonder who they will blame it on?

Comment #13 by john paycheck on 2014 03 02

Gee, never saw this coming.
Good thing we have all of these geniuses in our general assembly to have planned ahead. With our future economical planning, I'm sure we're all set for this minor set back. Not a problem.

Oh well, looks like our taxes will go up again. Gotta pay for all those pensions, disability frauds, illegal aliens, and welfare recipients.

Comment #14 by pearl fanch on 2014 03 03

Seems everyone knows the state of RI has been blind to vision, planning and execution of economic expansion. So now what, do we sit here and bash the incompetent GA and missing in action Governor or do we (the voters) take action and elect people that have demonstrated economic abilities in their experiences that can be applied to RI's reinvention?
It's either start right now to build a friendly business infrastructure to attract and keep new businesses in RI or we will not be a state of RI in the next 20 years, or less.

Comment #15 by Gary Arnold on 2014 03 03

Gary, unfortunately you know the answer to your own question.
The 10 or so of us will vote to try and make a change, while the other 600,000 voters in the state will vote for the status quo.

FYI--Tesla is looking for a place to manufacture their cars, and they've narrowed it down to 4 states. Take a wild guess as to which state is NOT one of them.

Comment #16 by pearl fanch on 2014 03 03

In both scenarios, 38 Studios and RI Gambling halls, the problem is politicians and bureaucrats sticking their fingers in the soup. Let private business run itself, collect a reasonable tax.

Comment #17 by Wuggly Ump on 2014 03 04




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