News

The Casino Fix

Local gambling expert Robert Goodman urges Massachusetts to stay out of the luck biz.


Wednesday, October 30, 2013
Thomas Northcut | Photodisc
Pile of gambling chips, overhead view

It’s been 18 years since Hampshire College professor Robert Goodman issued his sober warnings about what the proliferation of casino gambling would do to our economy, our society and our democracy in his book, The Luck Business: The Devastating Consequences and Broken Promises of America’s Gambling Explosion.

As more and more state and local governments looked to expand legalized gambling as a “magic-bullet cure for their economic woes,” they were ignoring the very real, and likely irreversible, problems that trend would create, wrote Goodman, who’d served as director of the United States Gambling Study, an independent project funded by the Ford Foundation and the Aspen Institute.

The creation of new casinos and other gambling venues shifts discretionary spending away from local restaurants, theaters, shops and other businesses in the community, he wrote. It leads to increased problem gambling and the attendant social and legal problems, like higher rates of personal bankruptcies and crime. And it distracts both attention and capital from other, more sustainable forms of economic development. A reliance on gambling “helps to shape a society that harvests short-term profits, while accumulating a large residue of costs for the future,” Goodman wrote.

“[D]o we really want our governments so dependent on gambling that they are forced actively to promote an activity that takes disproportionately from those who can afford it least, does great damage to existing economies, and can be highly addictive?” he asked.

Goodman’s warnings—like those of many other casino skeptics—have, apparently gone unheeded, at least by policy makers. Until the late 1980s, casinos were legal in only two states, New Jersey and Nevada. Today, according to a report from the American Gaming Association, 39 states have some form of casinos, with a total of 464 land or riverboat commercial casinos, 466 tribal casinos and 49 racetrack casinos. And several more states are poised to join the fray, including Massachusetts, where the state Gaming Commission is scheduled to award three casino licenses, including one in Western Mass., next year.

The explosion in the number of casinos has provided ample evidence of the kinds of social and economic consequences that Goodman warned about in The Luck Business—consequences that can we can expect to see in Massachusetts as well, he said in an interview with the Advocate.

“It’s not rocket science. It’s not like I’m some kind of seer into the future,” Goodman said. “All we have to do is look at what’s happening in other parts of the country.”

 

Under Massachusetts’ gaming law, casino developers need the approval of their host communities for their license applications to be considered by the Gaming Commission. Next week, voters in Palmer will weigh in on Mohegan Sun’s casino proposal for their town. In July, Springfield voters approved MGM’s plan to build a casino in the South End; in September, West Springfield residents rejected Hard Rock’s proposal for a casino at the site of the Big E.

The idea of legalizing casinos in Massachusetts has been kicking around since the late 1970s. Various casino proposals continued to emerge over the years until finally, in 2011, the Legislature passed a law that authorizes three casinos and one slots parlor, with a portion of their revenue going to the state and local governments. Backers of the law argued that it was necessary to compete with the two casinos already operating in Connecticut; when Gov. Deval Patrick, who made the issue a centerpiece of his administration, first introduced a casino bill in 2007, he pointed to a report from UMass Dartmouth that found that Massachusetts residents were spending $876 million a year at the Connecticut casinos.

That’s a common scenario, Goodman said; typically, when one state legalizes casinos, its neighbors rush to do the same, arguing that it will lose potential revenue if homegrown gamblers cross state lines with their rolls of quarters. “We are approaching in many places market saturation or have already reached it,” he said.

That includes this region, which is fast becoming crowded with casinos and casino proposals. Like Connecticut, Maine and Rhode Island each now have two casinos. On Election Day, residents of New York—already home to nine racetrack-based casinos, or “racinos”—will vote on a proposal to allow up to seven casinos there. New Hampshire, with a wary eye on the impending opening of three venues in Massachusetts, also is considering legalizing casinos.

The proliferation of casinos has helped the industry, overall. According to the AGA report, casinos earned $37.3 billion in gross gaming revenue in 2012, a 4.8 percent increase from the previous year (a rise some attribute to new venues in places not typically associated with high rollers, like Kansas). That increased revenue, the report said, led to increased payments made by casino companies to their host states and municipalities: $8.6 billion total, up 8.5 percent from 2011. The AGA also reported that the gaming industry employed 332,000 people in 2012, down 0.9 percent from the previous year.

Those industry figures notwithstanding, Goodman isn’t the only expert to point to signs of market saturation. Slot revenues at Connecticut’s casinos have been flat or declining in recent years, even without competition from Massachusetts and New York. Casino revenue in Atlantic City, too, has been on the decline for years, as competing casinos have opened in Pennsylvania, Delaware and Maryland. Even that mecca of gambling, Las Vegas, has had adjust as competition has become stiffer; earlier this year, Time magazine reported that while the city has seen its tourism-based economy rebound after several shaky years, its gambling revenue is still down, as would-be players find places closer to home to gamble.

Those newer, closer casinos, Goodman said, are often very different than the high-glamour spots associated with Vegas. He uses the term “convenience gambling” to describe the kinds of casinos springing up in places like the Midwest—and, he predicted, Western Mass. “They rely on local gamblers,” he said. “No one flies in to Des Moines. And they’re not going to fly in to Springfield.”

When casinos draw from a small geographic area, Goodman continued, that area feels the economic effects more deeply. The money local people spend at casinos is money they’re not spending at local restaurants or movie theaters, or on new clothes, cars and other goods. And the effects of that spending shift, Goodman said, won’t be limited to the host town; a Western Mass. casino will affect the entire Valley, including places like Northampton, whose economy relies on local and regional visitors.

There are also social costs, he said. Goodman is part of the Council on Casinos, an independent group of scholars who recently released a report, called “Why Casinos Matter,” that pulled together casino-related research from the health and social science fields. Among its findings: that living closer to a casino increases a person’s chances of developing a gambling problem; that problem gambling has broad negative effects on families and communities; and that working in a casino is linked to poor health. The report also cited research suggesting that while a new casino might initially boost the local economy, “the stimulus fades over time, as the presence of a casino drives out established local businesses and attracts other gambling-linked businesses, such as payday lenders, pawn shops, auto title lenders, and check cashing stores.”

Pro-casino lawmakers often talk of the necessity of being competitive with casinos in neighboring states—of “fighting fire with fire,” Goodman noted. But, he added, “What happens when you fight fire with fire is you get a bigger fire.”

 

When state lawmakers passed the casino legislation in 2011, Goodman said, “They looked at it as a static situation.” Massachusetts was losing gambling revenue to Connecticut, they reasoned, so it needed to build its own casinos to recapture that money.

But, Goodman said, they failed to take into account many other factors, including the shrinking pot of revenue that will be available for Massachusetts as other nearby states open their own casinos and the Connecticut casinos offer more appealing deals to keep their customers. “This is not a static situation,” he said. “This is a very dynamic situation.”

In the summer of 2012, at a meeting of the Mass. Gaming Commission, Goodman urged the body to slow down its casino-licensing process to allow time for more study. He warned that the state was relying on incomplete data and projections generated by the gaming industry and was failing to take into account fully the broad economic and social effects casinos could have.

The commissioners’ response, as Goodman put it? “Thanks, but our job isn’t to decide whether it’s a good idea; it’s to make this happen.” Indeed, the Gaming Commission’s charge isn’t to evaluate the pros and cons of casinos or decide whether expanded gaming is a good idea for the state—it’s to, in the words of its mission statement, “create a fair, transparent, and participatory process for implementing the expanded gaming law.”

Meanwhile, Goodman added, lawmakers failed to serve a watchdog role. State legislators who once opposed casinos “caved” to pressure from Statehouse leadership, he said. State Rep. Ellen Story (D-Amherst) a one-time casino opponent who voted for the bill, put it this way at the time: “My sense is that there may well be consequences for people voting against this bill, particularly people in [House Speaker Robert DeLeo’s] inner circle.”

On the local level, officials in communities targeted as possible casino sites have served as cheerleaders for the industry, urging voters to support the plans—and, in some cases, intimating grave repercussions if they didn’t. In Springfield, Mayor Domenic Sarno, just weeks before the MGM vote, balanced his city’s budget using casino revenue and warned that without it, layoffs and cuts in services would be necessary. (“Could you imagine a business owner going to a bank for a loan based on projected revenues—revenues that would only come if a ballot question passes?” Goodman asked.)

 

Of course, many in Springfield are counting on a casino to provide the elusive key to reviving the city’s struggling economy. MGM promises that its casino will create 2,000 construction jobs and 3,000 permanent jobs, with 90 percent going to residents of the region; will generate at least $25 million in annual payments to the city, in addition to $15 million in one-time, upfront payments; and will support the city’s larger economy, by, for example, contracting with local vendors for goods and services—all very attractive propositions in a post-industrial city with high unemployment and poverty rates, and no doubt a large part of why city voters approved the project last summer. Mohegan Sun is promising annual payments of $15.2 million to Palmer, plus tens of millions more for infrastructure improvements, and says the casino would employ about 3,150 people.

It’s no accident that a community like Springfield would be targeted by casino developers, Goodman noted: “Where did these casino companies go to locate? They didn’t go to Amherst. They didn’t go to Lincoln.”

Instead, he said, across the country, casino developers set their sights on poor cities with seemingly few other economic prospects, from Springfield to East St. Louis to Detroit: “Community after community—just find the place that’s most depressed, and they welcome you with open arms.”

But Massachusetts, Goodman continued, would be wise to consider what casinos have (or have not) done for other struggling communities. Detroit now has three casinos, but, as the city’s recent decision to file for bankruptcy would suggest, “[they] did not turn the economy of Detroit around.”

In other places, Goodman said, governments have granted or are considering public bailouts of gaming operations that were once looked to as economic engines. This summer, Delaware gave $8 million to the state’s three racetrack casinos, which had seen their revenue drop in recent years after casinos opened in neighboring states. Indiana lawmakers have considered a taxpayer bailout of that state’s Indian casinos, which began cutting jobs as revenue declined.

In 2011, New Jersey approved a $261 million tax reimbursement deal for the then half-completed Revel casino, whose developers did not have the money to finish building it. State officials justified the deal by pointing to the thousands of jobs and billions in tax revenue the massive casino complex would generate. The casino opened in April of 2012 and filed for Chapter 11 bankruptcy 10 months later. It’s since been through a restructuring that eliminated $1.2 billion of its $1.5 billion debt, according to the Associated Press, which earlier this month reported that the casino, like others in Atlantic City, is still seeing declining revenue.

In each case, Goodman said, lawmakers had initially embraced casinos for their promised jobs and revenue—only to later find themselves justifying government breaks and bailouts to shore up struggling casinos and stem the loss of those jobs and that revenue. “That’s Massachusetts five, six years down the road,” he predicted.•

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