Newport gambling ballot measure sparks debate

Many dispute whether changes would bring state, local governments substantial profit

Contributing Writer
Tuesday, September 23, 2014

Rhode Islanders will vote this November on whether to allow the Newport Grand casino to open table games, a proposition that can only pass if a majority of Newport residents also vote in favor of it. The state’s voters will also vote to amend the Rhode Island Constitution to require that a vote be cast before a casino may be moved from its current location.

Former Providence mayor and real estate developer Joseph Paolino Jr. P’06 P’17 said he plans to invest $40 million into the casino if the measures on the ballot pass. His investment would go to renovating the casino into a larger facility that would include a banquet hall, health spa and spaces for concerts and shows.

“We want to make it into an entertainment center that has gaming as a component,” Paolino said.

A study conducted by Edward Mazze, professor of marketing and supply chain management at the University of Rhode Island, and commissioned by Paolino Properties, found that the Newport Grand revamp would stabilize casino employment and create 400 new jobs at the facility.  There have been severe layoffs at the casino in response to nearly $35 million in lost revenue over the past 10 years, Paolino said.

The study also estimates that the state and city governments would gain $2.2 million of revenue from property and income taxes as a result of the proposed changes.

Paul Dion, the Chief of the Office of Revenue Analysis for Rhode Island, said that while the Office of Revenue has not yet quantified the economic impact the project could have — the office is currently updating a 2012 gaming study and will release a comprehensive report by the end of October — he saw some flaws in Mazze’s work. For example, the study assumes that all construction workers will be Rhode Island residents and pay Rhode Island income taxes, when in fact many construction projects employ Massachusetts residents, Dion said.

“The gaming market itself has changed in those last couple years” since the last study was released, Dion said. There have also been concerns about the viability of the “fairly saturated market” given the closings of casinos in Atlantic City, New Jersey and the openings of Massachusetts casinos.“I think, as an economist, that’s an open question as to what’s going to happen,” Dion said.

Massachusetts plans to award the last of three new casino licenses this fall, and these new casinos could pose competition to Rhode Island’s facilities, which currently account for the state’s third-largest source of revenue.

Gene McKenna, President of Citizens Concerned About Casino Gambling, cites the relatively poor impact these $40 million would have on the community, especially when it could be invested elsewhere, like in an “innovation hub” — a cluster of entrepreneurs and artists generating jobs in a community. The Newport Innovation Hub plan would be a far better choice to improve the city and state economies, McKenna said. This development plan is designed to provide better mobility in the city, increase employment opportunities and support the “social, economic and environmental well-being” of Newport, according to the city’s website.

McKenna also cited “Gambling in America: Costs and Benefits,” a book by Baylor University Professor of Economics Earl Grinols, to add that the economic impact of casinos is actually a net negative with a three dollar social cost for every one dollar of revenue.

“Already Rhode Island and the local communities get more revenue per capita from gambling than any other state in the union,” McKenna said. “How much is enough? It doesn’t really seem like it’s paying off for our state in the economy so far.”

Newport Councilor At-Large Jeanne Napolitano supports the measures, saying that Newport is a destination and that this enhanced facility could be another part of that equation.

If the measures pass, Newport will gain increased property taxes from the casino and income tax from the newly employed workers, while the casino can continue to function without an additional detriment to moral or public health, Napolitano said. If the measures fail, Napolitano said the city will likely have to find revenue elsewhere, though not necessarily from taxes.

“I believe that people have a right to choose what they want for the future. It’s not whether I want it or don’t want it, and whatever happens, Newport needs to move forward,” Napolitano said.

The presentation of the measures themselves is disputed as well, with a lawsuit filed last week alleging that the format of the question is unconstitutional. As approved by the Rhode Island Secretary of State’s office, the measure to add table games to Newport Grand will appear only on the state ballot, as opposed to both state and city ballots, and will be highlighted for those registered to vote in Newport.

The ballot design “will dilute their vote and unlawfully tilt the election in favor of approval,” according to the plaintiffs’ claim, the Providence Journal reported.

The measure to add table games to Newport Grand was on the ballot in 2012. Though the measure passed statewide, it failed to garner enough votes from Newport voters to go into effect.

Napolitano said the location amendment would prevent the casino from displacing downtown businesses and would help keep potential job opportunities for people in the neighborhood near Newport Grand.