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Study: Mass. competition, social costs could cancel out revenue from a N.H. casino

New Hampshire Gov. Maggie Hassan, listens to panel discussion on “education and workforce: growing school leaders and teachers” at the National Governors Association 2013 Winter Meeting in Washington, Sunday, Feb. 24, 2013. (AP Photo/Manuel Balce Ceneta)

New Hampshire Gov. Maggie Hassan, listens to panel discussion on “education and workforce: growing school leaders and teachers” at the National Governors Association 2013 Winter Meeting in Washington, Sunday, Feb. 24, 2013. (AP Photo/Manuel Balce Ceneta)

State revenue from a casino in southern New Hampshire could be canceled out by competition from Massachusetts casinos and the social costs associated with gambling, according to a new report from the New Hampshire Center for Public Policy Studies.

The study was welcomed yesterday by opponents of expanded gambling, who are gearing up for a fight at the State House over a casino proposal backed by Gov. Maggie Hassan. The Democrat is counting on $80 million from a casino license to help balance the two-year state budget for the biennium beginning July 1.

“The strategy of the gambling industry . . . is to promise the moon, this fairy tale of free money,” said Jim Rubens, chairman of the Granite State Coalition Against Expanded Gambling. “As we get closer and closer and we get independent analysis and we get closer to reality, we see the numbers are net negative. There’s no economic benefit for the state.”

But Hassan said in a statement that the center’s report “fails to recognize that with gambling already taking place in our communities and with Massachusetts moving forward with casinos, costs will be felt with or without a New Hampshire casino.”

By allowing an in-state casino, she said, New Hampshire would create jobs and gain revenue to help address those social costs, as well as fund budget priorities like public universities and mental-health services.

“The true risk we all face is the risk of letting our economy fall behind and allowing the good jobs and growing businesses of the innovation economy to develop elsewhere,” Hassan said.

‘No long-term net state benefit’

The center, a nonpartisan think tank in Concord, said in the 24-page study released yesterday that it’s difficult to predict how high a licensing fee could be commanded by a New Hampshire casino, or how quickly that revenue would materialize.

But it said licensing revenue “might come sooner” than two years, and that the southern New Hampshire market “could generate a license fee as high as $100 million,” depending on the tax rate and other factors.

One big factor is how quickly Massachusetts moves ahead with its plan to open three casinos and a slots parlor in the coming years, according to Daniel Barrick, the center’s deputy director and one of the report’s authors.

“If a license is awarded in Suffolk Downs . . . that could have a big impact on developers’ interest in putting a casino in Salem,” Barrick said.

Hassan has endorsed legislation introduced by Manchester Sen. Lou D’Allesandro, a Democrat, and co-sponsored by Salem Republican Sen. Chuck Morse. That bill would allow a single casino with an $80 million license fee, a minimum capital investment of $425 million and a 30 percent tax rate on net earnings.

The most likely scenario, according to the center, is a $300 million facility in southern New Hampshire with 3,000 slot machines. (The cost of land acquisition, infrastructure work and the license fee can be included toward the $425 million total, the report said.)

At a 30 percent tax rate, the center said that casino would generate $91 million a year for the state. But if a competing facility opened at Suffolk Downs in Massachusetts, the New Hampshire casino would generate just $45 million a year.

And the so-called “social costs” of a casino e_SEnD crime, bankruptcies, welfare and treatment costs associated with problem gambling and the like – would total about $46 million, leaving “no long-term net state benefit,” according to the report.

A larger facility or a higher tax rate would mean more revenue for the state, though. While a $300 million casino at a 30 percent tax rate would mean a net loss to the state of about $2 million a year, the report said, raising the tax rate to 40 percent would result in a net gain of $32 million a year.

“Our model suggests a facility at $300 million investment, which is based off of the legislation . . . and accounting for the impacting for a potential facility in northeastern Massachusetts and our assumptions on social costs, there’s essentially a break-even point,” Barrick said. “And our model shows that’s essentially where it is, at a 30 percent tax rate.”

Push back

Supporters of expanded gambling were quick yesterday to push back against the report and its conclusions.

Hassan said the study, in addition to omitting the social impact of the out-of-state casinos, “fails to recognize other benefits of a high-end casino in the form of local and state tax revenues and economic development opportunities.”

Morse, one of the Senate casino bill’s key sponsors, said in a statement that he “must respectfully disagree” with the report, saying the center “has significantly overestimated the social costs of gaming while underestimating the revenue benefits to the state of New Hampshire.”

He added, “If anything, this report should serve as a signal to lawmakers that now is precisely the time to move forward with expanded gaming in order to reap the revenue benefits and establish a clientele before Massachusetts is able to get their operation off the ground.”

And a spokesman for Millennium Gaming, which hopes to build a casino at Rockingham Park in Salem, said such a facility would create “a reliable and sustainable producer of revenue” for the state.

“We respect the center but disagree with the assumptions in the report,” Rich Killion wrote in an email. “Among these is the absence of the focus on the impact on New Hampshire if Massachusetts goes forward alone, which is nearly $50 million in the loss of existing state tax revenue and the continued migration of $80 million in New Hampshire citizens’ gaming money going elsewhere.”

But Rubens said, if anything, the center’s estimates of social costs from a casino are conservative.

“We’re extremely grateful, and the state should be, for the center’s work,” he said. “It shows there’s no free money. In fact, there’s no net money.”

The study was released as the Senate considers the bill sponsored by D’Allesandro and Morse, and other casino bills are pending in the House. The issue has taken on new urgency as officials look for revenue to support the next two-year state budget.

Previous casino bills have made it through the Senate, where Republicans now hold a 13-11 majority. But the House, where Democrats are in the majority, has traditionally opposed proposals for expanded gambling.

Hassan unveiled her budget proposal Feb. 14, and the House Finance Committee is working on the budget now. Rep. Mary Jane Wallner, a Concord Democrat and the panel’s chairwoman, told the New Hampshire Union Leader this week she’s asked budget writers to look for ways to come up with $80 million in savings to substitute for Hassan’s proposed casino revenue.

“I have to start to look at where we’ll go in that we haven’t got a position on gambling,” Wallner told the newspaper. “To accept revenue of $80 million would really be a mistake, especially if it didn’t show up later.”

(Ben Leubsdorf can be reached at 369-3307 or
bleubsdorf@cmonitor.com or on Twitter @BenLeubsdorf.)

Legacy Comments1

The democrats budget is so out of whack that their promised 10.2% increase in spending will sink the state before the ink is dry

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