Casinos’ impact on state still up for debate

Each of 3 new facilities — by huge margin — miss year-one tax target
Rivers Casino & Resort in Schenectady is pictured in February 2017.
Rivers Casino & Resort in Schenectady is pictured in February 2017.

SCHENECTADY — The first non-Indian casinos in New York state have provided a small but steady stream of tax revenue in their first year of operation.

Schenectady’s casino opened a year ago this coming Thursday, and the state’s newest casino will open its doors for the first time Thursday. In the interceding 365 days, billions of dollars have been gambled, won, lost, paid to various governments and retained by casino owners and investors.

Gov. Andrew Cuomo and other state leaders pushed for limited legalization of casinos as a way to recapture money that New Yorkers were traveling to other states to gamble. Skeptics countered that increasing the number of casinos would saturate the casino market and weaken the individual casino operators. Critics said gambling is fundamentally bad for society, and more gambling would be worse.

[Rivers Casino raking in cash, but where’s tax cut?]

New York voters approved the expanded gambling options in November 2013.

In December 2016, the state’s first full-service non-Indian casino opened, near Elmira. The second opened in January 2017, near Seneca Falls. In February, Schenectady’s casino opened.

State data show that total gambling revenue from harness race track casinos, or racinos — they were in operation before the new casinos came online — held steady from 2016 to 2017, despite the new competition.

State data also show a major jump in sales tax revenue in the three counties that host the new casinos: Seneca, Schenectady and Tioga counties showed sales tax increases of 8.41, 7.66 and 7.53 percent for 2017. Only four other counties in the state saw greater increases, and two of those were skewed upward by large accounting adjustments.

The state Comptroller’s Office said Friday it did not have enough data to attribute the sales tax revenue growth to the new casinos specifically, but the office indicated it might undertake a study in the future.

Gaming Commission spokesman Brad Maione said the state views the casino era as a success: 4,425 permanent jobs (including those at the fourth casino, when it opens next week); 600 additional jobs in Monticello as the newest casino expands; thousands of temporary construction jobs; $2 billion in private investment to build the four casinos; and more than $100 million in gambling taxes paid.

[Schenectady, two others awarded casino licenses]

The people visiting the new casinos had been traveling to neighboring states or Canada to gamble but are now spending their money here, Maione said.

Responding to a report by Moody’s Investors Service that said some new casinos in the Northeast are simply stealing revenue from others, Maione noted that the Moody’s report also found a more-than 30 percent increase in gambling revenue statewide.

State Comptroller Thomas DiNapoli was more measured in his assessment of the casino effect. In a statement emailed to The Daily Gazette on Friday, he said: “The new casinos may have some near-term positive impacts, including creating some new jobs. However, those gains can be expected to be offset by losses elsewhere, as people spend money in new casinos rather than in existing gambling venues or on other consumer purchases. The impact of the new casinos on New York’s economy remains to be determined.”

The numbers

New York casinos and racinos saw a lot of money pass through their doors in gambling revenue:

  • Total money gambled at the 11 racinos for the calendar year 2017 was $38.06 billion, up from $37.71 billion in calendar year 2016.
  • Net profit for the 11 racinos was $2.015 billion in 2017, up from $2.012 billion in 2016.
  • Money paid to the state by the 11 racinos was $917.38 million in 2017, down from $918.04 million in 2016.
  • Rivers Casino & Resort paid $41.63 million in taxes on $128.23 million in profit from $982.21 million gambled in 2017.
  • Del Lago Resort & Casino paid $40.5 million in taxes on $95.49 million from $1.35 billion gambled in 2017.
  • Tioga Downs Casino paid $22.9 million in taxes on $69.2 million in profit from $826.64 million gambled in 2017.

Each of the three casinos — by a huge margin — missed the year-one tax target they set in the proposals they submitted to the state Gaming Commission three years ago. Rivers estimated it would generate gaming taxes of $69 million to $86 million in its first year; Del Lago $59 million to $74.6 million; and Tioga Downs $31 million to $40.7 million. The state keeps 80 percent of that tax revenue and gives 20 percent to the local governments and school districts.

The new casinos’ impact on two other forms of gambling in New York state — horse racing and lotteries — is harder to gauge because full-year 2017 tabulations are not available. Here’s how they played out in recent years:

  • State Lottery revenue increased in eight of the last 10 fiscal years, rising from $7.54 billion in 2007-08 to $9.68 billion in 2016-2017; about a third of that goes to education aid.
  • On-track betting on horse racing — both thoroughbred and harness — totaled $829.14 million in 2016, down from $841.45 million in 2011. The annual total bet alternately increased and decreased in those five years, peaking at $884.35 million in 2015.
  • Off-track betting, by contrast, has been on a steady losing streak. It dropped from $740.78 million in 2011 to $558.26 million in 2016, with not a single year-over-year increase in that period.
  • Charitable gambling — bell jar, bingo, raffles and Las Vegas nights held to benefit causes rather than to turn profits — has fluctuated more widely. It totaled $232.74 million statewide in 2016. In the preceding five years, it ranged from as low as $219.27 million (2012) and as high as $267.99 million (2011). The 2017 totals are not yet available.

The new casinos’ impact on established casinos operated by Indian nations is harder to gauge, as the latter operations are not required to report their financial results. The state has less oversight of the Indian casinos and does not tax them.

The closest Indian casino to Schenectady — Turning Stone, west of Utica — did not respond to a request for comment for this story.

While the statewide numbers that are available for 2017 are generally positive as a whole, some individual facilities are doing better than others. In its Jan. 22 report, Moody’s warned of a larger trend within the Northeast of new facilities cannibalizing existing facilities, subtracting revenue from them rather than creating new revenue.

An excellent example is the closest competitor to Rivers Casino & Resort: The Saratoga Casino Hotel, a racino at the harness racing track in Saratoga Springs.

Dollars gambled at Saratoga Casino Hotel dropped from $2.43 billion in 2016 to $2.07 billion in 2017. Its profit on that money dropped from $167.19 million to $137.44 million.

The Saratoga Springs gambling facility opened in 2004. Its revenue and profit grew rapidly but leveled off around 2011, turning a steady profit in the $156 million to $163 million range each year from 2011 to 2015.

The management of the racino had been fearing such an impact from Rivers and took steps before the Schenectady operation opened (such as a name change and the construction of a hotel) to lessen the impact.

The promise

In its 2014 license application, Rush Street Gaming offered the following predictions for the casino it wanted to build in Schenectady:

  • Projected capital investment $300.1 million.
  • Projected 877 full-time and 193 part-time jobs.
  • Projected opening within 23 months of getting license.
  • Projected host community tax revenues: $5-$5.5 million in year one and $5.6-$6.0 million in year five.
  • Projected direct, indirect and induced economic impact in 2018 of $303.6 million to state and $229.8 million to county.
  • Projected 80,000 tourist visitors per year.
  • Projected recapture rate of gaming revenues from New York residents at out-of-state gaming facilities is approximately $9,726,707.

Asked specifically about each of these projections as Rivers nears its one-year anniversary, the casino declined comment.

Rivers has previously indicated in had invested more than $300 million and hired more than 1,100 people. It also beat construction deadline with months to spare. State data indicate that it missed its year one host community benefit projections.

Categories: Business, News, Schenectady County


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