A long-awaited — and long-delayed — economic impact study on the future of gambling in New York State examined all sorts of possibilities across its 358 pages, with potential mobile sports betting drawing most of the recent headlines.
But when it came to potential threats that could prevent maximizing new casino revenues, a clear “enemy” emerged in the report. (The 30-page executive summary is here.)
“The inclusion of a Meadowlands casino is the main competitive threat to Downstate gaming,” according to the Spectrum Gaming Group report, which was initially commissioned by the New York State Gaming Commission in September 2019.
The report assumes the prospect of “one large casino” at the Meadowlands as one of its economic scenarios.
“In such an environment … it is important that the State’s new gaming policies consider how licensing, tax rates, and other regulations will impact the ability of Downstate gaming to remain competitive with a future Meadowlands casino.”
This was in sharp contrast to a potential casino in East Windsor, Conn. — north of Hartford, near the Massachusetts state line — that Spectrum found would have only a negligible impact on New York’s gaming economy.
No time to waste, report says
New York’s moratorium on licensing up to three casinos in the New York City area expires in December 2022, and there has been more talk in the statehouse in Albany of moving up the deadline than in waiting well beyond it.
That eagerness to move forward is fiscally wise, the Spectrum report suggests.
“New Jersey could be first to market with a metro-area casino,” according to the report. “Although voters soundly rejected the idea
of expanding casino gambling outside Atlantic City in 2016, it is widely believed that at some point the state will expand casino gaming
beyond the confines of that municipality.
“Owners/operators/developers associated with both the Meadowlands complex and Liberty National Golf Club in Jersey City are ongoing proponents of casinos at those locations. Being first to market would allow a casino on the New Jersey side to develop player loyalty.”
The current scenario of four upstate commercial casinos — from the Catskills on north — per a state law passed in 2013
leaves many residents of New York City and its suburbs looking elsewhere to gamble, whether in Atlantic City, Connecticut’s two tribal casinos, or several casinos in eastern Pennsylvania.
“We estimate approximately $681 million [in gross gaming revenue] from New York residents will be leaving the Downstate market in 2025 for gaming out of state (to Connecticut, New Jersey and Pennsylvania), assuming no changes to market supply. With the addition of these new Downstate casinos, we estimate the potential recapture of 34 percent to 53 percent of these expenditures.”
Six scenarios presented
Spectrum studied six scenarios for future New York casino gaming — three of them reflecting widespread public expectation that the racinos at Yonkers and Aqueduct racetracks in Westchester County and Queens, respectively, will be approved to simply add live-dealer table games to their existing slots parlors. Those scenarios are broken down by economic forecasts that count on the third license being issued in Manhattan, Brooklyn, or Queens.
Other scenarios considered were the possibility of constructing three new casinos from scratch, while leaving Yonkers and Aqueduct as is; having one new casino only and placing it in midtown Manhattan; and issuing no new licenses at all.
“In the three-casino models, the combination with Manhattan appears to repatriate the least revenues, as a more significant portion of revenues for that location would be from non-New Yorkers (and alternatives in New Jersey and Pennsylvania are more proximate to Manhattan than to Brooklyn or Queens),” the report noted.
The cost of a Meadowlands casino to New York State’s annual tax revenue is projected to be $90 million to $130 million.
A Meadowlands casino’s impact on the revenue of new or augmented properties in New York is projected to be as low as about 3% for the “Jake’s 58” slots parlor on Long Island and up to 12.5% for a Manhattan casino. The struggling Resorts World Catskills site — already having gone through a bankruptcy scare
— would see an 8% further decline in its modest revenue, the report estimated.
Another potential gambling site would be hit hard by a Meadowlands casino as well: an approved but not-yet-constructed slots parlor in Orange County.
“A Meadowlands casino would have a significant impact on the [gross gaming revenue, or GGR] that could be generated by an Orange County facility because it would be far more proximate than Orange County for patrons residing in northern New Jersey (with New Jersey otherwise accounting for potentially 33 percent to 36 percent of the Orange County GGR). … In general, we estimate the Meadowlands would have approximately a 20 percent [negative] impact on Orange County GGR potential.”
What’s at stake for New York
The report’s authors address the magnitude of what likely is brewing in New York.
“The addition of a commercial casino in the New York City area — either through issuing commercial licenses to one or both VLT facilities in the region or by approving a new property — would profoundly alter the gaming landscape in New York, and arguably throughout the nation.
“Policymakers need to ensure that whatever gets authorized in the nation’s largest metropolitan area will serve the interest of New Yorkers for decades to come. Whatever entities are granted the privilege of commercial casino licensure in that market — whether they are existing VLT operators or new entrants — must rise to the challenge of developing projects that are iconic, that are sufficiently capitalized to capture and expand multiple market segments, and that advance public policies that will serve the entire state.”
Assumptions by Spectrum included a widely discussed $500 million one-time casino licensing fee and a tax rate on slots of 40% and on table games of 10%.
Based on those scenarios, Spectrum projects total casino gross gaming revenues — assuming Aqueduct and Yonkers are two of the three players — of about $1.3 billion annually. The projection varies little regardless of which of three boroughs would receive the third license.
But the incremental gains would be less than half of that figure, since some casino dollars would replace dollars previously spent at the two racinos.
The report utilized “a 21-person team for this project, eight of whom are based in New York,” with 157 interviews conducted and visits to 23 gaming facilities in the state.
Crime and casinos
Spectrum’s analysis of longstanding fears about increased crime rates in communities with casinos concluded that many of the studies making such links have been methodologically flawed.
“The late Brendan Byrne, who was governor of New Jersey in the 1970s and was the first governor in the United States to adopt legal casinos as a tool of social policy, provided the most insightful comments as to this phenomenon,” per the report.
“Prior to casinos, Atlantic City was one of the poorest communities in the United States. After gaming in Atlantic City commenced in 1978, Byrne was asked by reporters if crime had increased in Atlantic City since casinos opened.
“Byrne responded: ‘A year ago, there was nothing worth stealing in Atlantic City.'”