Casinos in neighboring Mass. could hurt state revenue

Gaming revenue estimated to fall 30 to 38 percent, exacerbated by Nov. 4 vote on Newport table games

Contributing Writer
Thursday, November 13, 2014

Gaming tax revenues are the state’s third-largest source of revenue, but more casinos in Massachusetts are expected to decrease state revenue.

Gaming revenues for casinos in the state will drop between 30 and 38 percent in the next five years, mostly due to increased competition from Massachusetts, according to a new study published Nov. 5 by the Rhode Island Department of Revenue. The study found that this decrease will significantly hurt the state budget and affect the local economy.

In the next five years, at least three casinos and a slots parlor will open in Massachusetts. The Massachusetts Gaming Commission divided the state into three regions and plans to issue a license in each for new gambling facilities. Two of the three available licenses have already been awarded to Wynn MA, LLC in Region A — which covers eastern Massachusetts —  and MGM Springfield in Region B, which is western Massachusetts. The license for Region C, covering southeastern Massachusetts — the region with the most potential impact on Rhode Island gaming — will be awarded in August 2015, according to the website of the Massachusetts Gaming Commission.

Three locations in Region C — Taunton, New Bedford and Fall River — are competing for that license. New Bedford represents the best scenario in terms of Rhode Island’s revenues, said Paul Dion, chief of the Office of Revenue Analysis for Rhode Island. But even in that situation, Rhode Island still stands to lose about 30 percent of its gaming revenue by the opening of the Region C casino in 2019.

“Keep in mind, when I say the best scenario, we’re still losing money,” Dion said.

Another factor hurting the industry’s profits came this election day, when voters in Newport rejected Question 1, a ballot measure that would have added table games to the Newport Grand casino. Though Newport Grand represents only approximately 10 percent of state revenues, with the Twin River Casino in Lincoln contributing most of the rest, Question 1 had the potential to increase both Newport Grand’s share and the total amount of state revenue.

Developers on the Newport Grand project had planned to invest $40 million into the casino, adding table games as well as converting the facility into an entertainment center, but have not yet decided how to proceed after their most recent defeat, said former Providence mayor and real estate developer Joseph Paolino P’06 P’17. A partial investment in the casino will be discussed when development partners meet in the next month, he added.

A similar measure to Question 1 that aimed to add table games was also rejected in 2012 by Newport voters.

Opponents of Question 1 have cheered its defeat but are wary of thinking the matter closed. The developers “will always come back and try to find another way,” said Elizabeth Taver, campaign coordinator for Citizens Concerned About Casino Gambling. “No does not mean no to them.”

Table games at Newport Grand would have “definitely improved the ability of Newport Grand in particular to compete” with out-of-state facilities, Dion said.

The study goes further, saying, “In the absence of table games and/or a considerable capital infusion, it seems likely that Newport Grand will not survive when a casino is eventually built in Region C of Massachusetts.”

Paolino said expanding Newport Grand would have brought 350 new jobs to the facility, as well as added 400 temporary construction jobs and retained the 187 employees already working at the facility.

“The revenue drop-off probably would have been less given the presence of games at the Newport entertainment center. It would’ve been less, but it wouldn’t have been eliminated by any means,” Dion said.

Either way, the state needs to find new sources of revenue or cut spending or some combination of both in the next few years, Dion said. Gaming tax revenues, mainly from Twin River and Newport Grand, as well as lottery ticket sales, represent the third-largest source of revenue for the state, behind personal income taxes and sales/use taxes. The state budget office has predicted a deficit of $172 million in fiscal year 2016, a number that Governor-elect Gina Raimondo is constitutionally required to balance by the spring.

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