SCHENECTADY — The state Gaming Commission this week released a consultant’s sweeping report on New York’s gambling industry, with extensive predictions on the impact new or expanded casinos would bring.
The conclusions and recommendations line up neatly with some of the budget proposals Gov. Andrew Cuomo made last week for the casino industry, which entail the potential benefits of opening three more casinos, the potential reduction of taxes paid by existing casinos, and the implementation of digital sports betting.
“This report provides a valuable tool for the Commission and policy makers to use as discussions continue on the future of the gaming industry in New York,” said Brad Maione, spokesman for the Schenectady-based Gaming Commission. “This report should assist with making sound fiscal decisions.”
Pennsylvania-based Spectrum Gaming Group was selected to provide a market analysis in November 2019; an analysis of the impact of COVID was subsequently added to its scope.
Spectrum has provided research and professional services centered on the gaming industry since 1993, including studies or consultations in 40 states or territories and in 48 countries on six continents.
Its 345-page “Gaming Market Study: State of New York” provides extensive facts, predictions and recommendations.
Some of the points are quoted or summarized below:
- The 2013 Upstate New York Gaming Economic Development Act allowed for four resort-scale commercial casinos to be located in the upstate market, all of which have since been developed and are operational. The downstate market, specifically the New York City metro area, was considered for possible development in a second phase, after the performance of Upstate facilities was demonstrated.
- Downstate residents will spend an estimated $681 million in Connecticut, New Jersey and Pennsylvania casinos in 2025 if no new options are added downstate, or as little as $323 million if the right mix of new facilities is built in New York.
- New York should acknowledge the benefits of fast-tracking additional gains but should rely significantly on policies and licensing decisions that will provide the greatest long-term benefit. A significant challenge is to avoid applying long-term solutions to solve problems of limited duration.
- New York is home to the largest state lottery in terms of revenue. Its dependence on lottery revenue highlights the need to ensure convergence rather than competition between all the forms of gaming within its borders.
- In fiscal 2019, gross gaming revenue — GGR, the money gambled at gaming facilities — could be split roughly into sevenths New York: four parts from video lottery casinos such as Saratoga Casino Hotel, two parts from Indian-run casinos, and one part from commercial casinos such as Rivers Casino & Resort.
- New York’s casino/VLT employment has grown from about 12,000 jobs in 2015 to about 15,700 in 2020 (pre-COVID), an increase of 3,700, all but 300 of which were at the four new commercial casinos that opened upstate in late 2016 to early 2018.
- Total employment impact rose from about 25,000 to 32,600, meaning roughly one non-casino job was created for each casino job.
- Gaming contributed $2.9 billion to New York’s gross state product in 2015, rising to $4.2 billion in 2020.
- Upstate New York increased from 15 gambling venues in 2015 to 27 in 2019.
- For the upstate region, all of the methods of analysis indicate substantial over-saturation. While higher than average gaming participation and spending by the regional population appear evident, this region’s gaming properties also draw from those living in other regions as well as tourists to vacation spots such as Niagara Falls and the Finger Lakes region, increasing the GGR to seemingly over-saturated levels.
- The residents of the upstate market are well-served by the existing operators. While there may be isolated areas where a new, small casino could be successful, adding capacity or amenities to existing operations would for the most part redistribute the existing regional market GGR rather than grow the market enough to warrant the attendant capital expense.
- All of the methods of analysis indicate that there is no room for revenue growth in the upstate market.
- The addition of hotel and resort amenities at select properties could, however, allow such operators to tweak their business models. That would result in a small amount of incremental visitation from out-of-market tourists and convention/meeting business, although significant capture of these market segments has thus far proven elusive for the existing commercial casino operators.
- The potential of the New York City market and its northern suburbs could be captured with new or expanded gambling facilities.
- The potential of the market in New York City’s northern suburbs could be captured with a new VLT facility, but that would negatively impact existing facilities.
- The Long Island market is underserved with regard to gaming but limited in potential expansion.
- The upstate market is saturated, as noted.
- Two dozen scenarios were analyzed, all of them involving new casinos in and/or near New York City. They resulted in projected 2025 GGR decreases of up to 44% at Resorts World Catskills in Monticello and 38% at Jake’s 58 on Long Island. Well to the north, the scenarios resulted in projected declines of up to 13% for Rivers Casino in Schenectady and up to 8% for Saratoga Casino Hotel, thanks to a ripple effect up the Hudson Valley. For all upstate gambling facilities — Indian, commercial and VLT — GGR was projected to drop up to 6%.
- It is important to maintain realistic expectations. Host communities — and even host states — do not necessarily share proportionally in garnering either the benefits or costs of gaming.
- Spectrum reviewed academic literature with data-based studies and found that most of the negative social impacts of gambling are those attributable to gambling addiction.
- With the expansion of legal gambling options in New York, exposure to gambling increases, and a short-term increase in gambling disorder may result. Types of effects that may increase include crime, drunken-driving fatalities, and bankruptcy.
- However, such increases are likely to be short-lived, as residents adapt to the expansion of gaming options. Over the longer term, the prevalence rate of gambling disorder in New York is likely to remain stable.
- Concrete conclusions are hard to make, as correlation does not prove causality. There is no indication at this point that the opening of Rivers caused an increase in bankruptcy filings in Schenectady County, for example, but there are very few years of data to analyze.
- The crime rate is much higher in Schenectady County than in Saratoga County, in another example. But it also was much higher than Saratoga County’s rate in 2016, the year before Rivers opened.
- Finally, data show no increase in local alcohol-related traffic arrests or vehicle crashes after Rivers opened, nor after Resorts World Catskills or Del Lago opened.
- New York is one of the few states that imposes various tax rates on various facilities, and this has created questions about equity and fairness. New York, however, is a highly diverse state in every sense — one statewide rate is simply not a reasonable option in the face of such economic and demographic diversity.
- The most effective means of ensuring that future tax policy considerations and changes are based on economic principles is to suggest that operators can petition the state for relief.
- Petitions would be examined individually, based on the totality of circumstances. The licensee would have to specify in detail the reasons for requesting the tax adjustment and provide all necessary supporting documentation. In all cases, the burden would rest upon the licensee to demonstrate that granting the relief requested is in furtherance of a legitimate public interest, which could include the ability to remain in operation.
- The licensee would be required to demonstrate that the reason for the requested relief is due to external causes beyond the licensee’s control, and is not predicated on unsuccessful decisions undertaken by management that adversely impacted operational performance.
- Spectrum estimates that combined retail and digital sports wagering across the entire state of New York would generate $816 million to $1.14 billion in annual GGR.
- Various scenarios for expanded private-sector sports wagering taxed at a 10% rate would yield $72 to $99 million in annual tax revenue from mobile betting on sports.
- (Cuomo has proposed that the state government control mobile sports betting, much as it runs the lottery, and keep most of the revenue for itself with only a commission going to the private-sector contractor that does the actual work. This model appears not to be considered in the report.)
- The gaming industry is resilient. While once thought recession-proof, that has proven not to be the case. However, people enjoy gambling, socializing and entertainment. Spending on entertainment and other non-essentials declines in recessions, but it gradually returns as consumers gain confidence in their economic situation.
- Nationwide, roughly 1,000 casinos closed their doors in the spring of 2020 because of the COVID pandemic. Most had reopened at least partly by October 2020.
- The impact on gambling revenue in Southeast Asia after the 2003 SARS pandemic and in the United States after the Great Recession was significant and sustained, with steady but slow recovery over the next few years.
- GGR has plunged in New York and will slowly recover to pre-COVID levels. It was $3.82 billion in fiscal year 2020 and is projected to be $3.25 billion in fiscal 2023.