POLL QUESTION

How many casinos are too many?

Eric Zelz
Posted Nov. 04, 2011, at 12:57 p.m.
Last modified Nov. 04, 2011, at 7:10 p.m.

Related stories

Poll Question

Casinos in the Northeast


View Casinos in the Northeast in a larger map

Last month, Massachusetts lawmakers approved legislation allowing up to three casinos and one slots parlor in the state.

Under the Senate bill, one casino would be allowed in each of three regions: Suffolk, Middlesex, Essex, Norfolk and Worcester counties; Hampshire, Hampton, Franklin and Berkshire counties; and Bristol, Plymouth, Nantucket, Dukes and Barnstable counties.

Casinos have already been proposed for Palmer, Holyoke and Springfield.

Last week, the New Hampshire House committee approved a bill allowing up to two gaming facilities in that state.

Maine voters are not the only ones who could change the state’s gambling environment. A series of decisions pending beyond the state line could have just as serious an impact here as the referendum questions on Tuesday’s ballot.

There are two gambling referendum questions facing Maine voters on Tuesday. Question 2 would authorize slots at two harness racing facilities, commonly called racinos, in Biddeford and in Washington County. Question 3 would allow a casino — with slots and table games — in Lewiston.

In addition, Penobscot County voters are being asked to allow Hollywood Slots racino in Bangor to expand to include table games, becoming a full-fledged casino. And Maine’s first approved casino, in Oxford, is under construction, set to open early next year.

Economists say if passed, the new proposals would have an impact on each other and existing operations — just like a new shopping center would have an impact on the ones already in that area.

Gov. Paul LePage said Thursday during remarks at Colby College that if both measures pass next week, the developers will have to collaborate because Maine cannot support five gambling facilities of the scale proposed. LePage said the population is too small to support more than two or three such facilities.

But the world of gambling expansion hasn’t come to a halt across state borders as Mainers head to the polls. After debating the issue since about 1994, Massachusetts’ Legislature and governor are poised to allow three resort-style casinos in the state.

In New Hampshire, another state that has resisted casinos or slots parlors for decades, a House committee last week passed a bill allowing two casinos in the state.

Massive, resort-style casinos in northeastern Massachusetts and New Hampshire will undoubtedly draw Maine gamers, eating into the potential audience — and revenues — for casinos and racinos here, said Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts, Dartmouth, who has studied the gambling industry extensively.

Adding to the mix, a new destination casino and resort opened in Moncton, New Brunswick, in spring 2010. While about 160 miles from Calais, Maine, the casino would take part of any Canadian clientele that supporters of a Washington County racino would hope to attract.

At their heart, these proposed operations are still businesses. Is there room in Northern New England for all the gambling competition, in any state or province?

“It’s hard to tell where the saturation point is for anybody like me or you from the outside of the industry who’s not being asked to put up money,” said Arthur Wright, a professor emeritus of economics at the University of Connecticut and a longtime expert on the gambling industry.

The true litmus test will come down to a basic market test for the casino proposals in Maine and the other states, said Wright.

“The question is can you get financing. That’s the simple answer to what looks like a complex question,” said Wright.

The Maine market

In a 2008 study, University of Maine economist Todd Gabe determined that there’s a potential market for slot machine gaming in Maine of about $250 million to $280 million, annually. Gabe came at that estimate by looking at national statistics and applying them to Maine’s population and demographics.

That’s just slots, which, nationwide, make up roughly 90 percent of casino-style gambling revenues. The other 10 percent or so nationwide comes from table games.

Hollywood Slots has taken in about $60 million a year in slots revenue, said Gabe. The company projects an extra $8 million or so in revenues from table games, if it’s allowed to expand.

In a study Gabe did for proponents of the Oxford casino, Todd said he determined potential overall gaming revenues there of $126.7 million, including slots and table games.

“Take the $126.7 million in Oxford, plus $68 million if Hollywood Slots gets table games, and you’re slightly above $200 million,” said Gabe. “If you think of the pie as $250 [million] to $280 million, two pretty large pieces of pie are being consumed.”

Two things could happen, he said. The first is that any new ventures will compete amongst themselves for the $50 million to $80 million that’s still out there, but that’s unlikely, he said.

More likely, he said, is that some of the newer facilities will take revenue from the incumbent operations.

It’s also possible, he said, though unlikely, that the increased number of gambling operations will draw more people to the state and increase the overall size of the revenue pie. But there’s not really an Atlantic City or Las Vegas sort of geographic cluster of casinos to create that sort of destination in Maine. A racino approved in Biddeford would still be 150 miles from Bangor’s Hollywood Slots, for example — quite a distance to travel to visit multiple venues.

Gambling parlors draw from a population that’s within a two- to three-hour drive, said Gabe. Maine also benefits from tourists who come to the state to visit and choose to gamble, as well.

Developments in other states will also eat into the Maine market. “It will, around the edges — the question is, is it going to be a major impact?” said Gabe.

A Mass. change around the region

Massachusetts, said Barrow, is what has catalyzed much of the gambling activity in the region, going back to the first Indian casinos in Connecticut that went up in the 1990s — Foxwoods and Mohegan Sun.

Massachusetts has 45 percent of New England’s population and 50 percent of its disposable income. It provides the market for the Connecticut casinos. And for years, policymakers have debated the expansion of gambling in Massachusetts, to keep that disposable income and tax dollars in the state rather than shipping them to Connecticut.

Maine faced a similar argument in the fight to open Hollywood Slots and subsequent casinos.

Politicians and public opinion were historically against casinos in Massachusetts, said Barrow. But the idea now is being seen as a job creator — and one aimed at lower-educated residents instead of those who work in the state’s financial, technical and professional services sectors.

The casino bill was passed by the Massachusetts House and Senate and is now in a conference committee. There are no major issues dividing the House, Senate or the governor, said Barrow. It’s expected the bill will be out in the next few weeks, and Gov. Deval Patrick has said he will sign it.

Public opinion polls show 2-1 support for expanding gambling, Barrow said.

The plan would call for licensing three casinos in three regions of the state, and one slots parlor. One of the casinos would be in northeastern Massachusetts, said Barrow, and a popular proposal puts a $1.3 billion resort casino at Suffolk Downs in East Boston.

“A large resort casino in northeastern Massachusetts is going to have a big draw in southern Maine,” said Barrow. “It’ll have some impact on them.”

Mainers are still making more than 100,000 trips a year to the Connecticut casinos, said Barrow, spending $40 million to $50 million a year there. They would likely instead drive a shorter distance to Boston for the luxury experience. And it would be hard for a smaller resort racino or casino in Maine to compete with a $1.3 billion operation, said Barrow.

And New Hampshire, said Barrow, has “responded in absolute panic to what’s going on in Massachusetts.

“Their whole economy is about pillaging Massachusetts,” he noted.

A study last year suggested that if New Hampshire does nothing while Massachusetts allows casinos, the amount of money flowing south from New Hampshire would triple.

So, just as Massachusetts is seeking to stem the flow of money to Connecticut, New Hampshire wants to do the same thing — keep dollars in their own state rather than seeing them go south.

Over the years, the New Hampshire Senate has favored gambling expansion, while the House opposed it. A proposal was voted down in the Legislature two years ago by a 3-1 margin, Barrow said.

In the wake of Massachusetts’ actions, the New Hampshire Legislature has considered a new bill that would authorize two resort casinos. It passed the House Ways and Means committee with a 14-7 vote, said Barrow, the first time a New Hampshire House committee has ever favorably reported out a casino bill.

“There’s clearly been a turnaround in New Hampshire in the thinking,” said Barrow.

The first casino almost certainly would sit on the Massachusetts border, said Barrow, at Rockingham Park in Salem, N.H. The proposal is for a $450 million development, with 5,000 slot machines and table games.

That, noted Barrow, would be a huge luxury facility even closer to Maine than the $1.3 billion proposal for East Boston.

Barrow said he has not run an economic analysis on what casinos in Massachusetts and New Hampshire will do to their Maine counterparts. But all signs point to an impact, he said.

There are really two types of gamblers, he said. Convenience gamblers, who want to travel a half-hour to hit the slots or play some table games; and the more affluent casino gamblers, who want the luxury of dining, shows, ambiance and overnight visits. It’s the latter that spend a lot of money, and those are the ones who will go to the Massachusetts and New Hampshire casinos, he said.

Another factor is that the effective tax rate on the casinos in Massachusetts is 25 percent, he said, compared to 49 percent in Maine.

“What that means is the Massachusetts facilities can sustain that investment level, offer higher payouts to players, more rewards and comps,” said Barrow. “The Maine facilities — those closest to Massachusetts — will have a hard time sustaining themselves.”

Barrow also spoke to the Moncton resort casino, and the potential impact it would have on any Washington County racino.

“There’ll be some impact in terms of eroding Washington County’s capacity to draw Canadian tourists to the area,” said Barrow. “It’s essentially going to draw the majority of a Canadian population within an hour to an hour and a half.”

UMaine’s Gabe said one effect of the likely increase in regional gambling facilities may be that they have to work harder to please their customers.

“I guess facilities are going to have to compete harder to get business,” said Gabe.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business