The New England Gaming Research Project (NEGRP), which was established in 2004, has established a national reputation for expertise in gaming with state legislatures, industry executives, and the mass media. Its mission is the to provide policymakers, the general public, and the media with independent and objective research on the economic, fiscal, social, and community impacts of gaming in the New England and Northeast regions, and especially to inform on-going debates about expanded gambling in these regions.
The NEGRP publishes an annual New England Casino Gaming Update, which has rapidly achieved national recognition among academic gaming experts, industry executives, and state and federal policymakers. It also conducts a biennial Gaming Behavior Survey, which in 2010 tabulated interview responses from 3,819 residents in Connecticut, Massachusetts, Maine, New Hampshire, and Rhode Island to determine the propensity to gamble and to identify patterns in gambling behavior among the five states’ residents.
- New England Gaming Research Project Reports
- Academic Research Organizations
- Economic and Fiscal Impacts
- Regulatory Agencies and Professional Associations
- State Government Gaming Revenues (Northeast)
About the project:
- Who funds the project?
- Why study gaming?
- What does it mean to say that gaming is an industry?
- What are economic impacts?
- Are there negative economic impacts to casino gaming?
- What are fiscal impacts?
- Are there negative fiscal impacts to casino gaming?
- What are the potential fiscal costs of casino gaming?
The New England Gaming Research Project is funded entirely by the University of Massachusetts Dartmouth, including the research expenses and salaries of all individuals who collaborate on the project's work.
There are many reasons why the principal investigators launched the New England Gaming Research Project in 2004:
First, casino gaming is a $3.0 billion industry in New England that employs approximately 19,200 people at Foxwoods Resort Casino and Mohegan Sun Casino in Connecticut, at Rhode Island’s video lottery terminal (VLT) parlors at Twin River and Newport Grand, and at Hollywood Slots in Bangor, Maine. The number of casino employees does not include the nearly 2,000 persons working at the region’s non-slot pari-mutuel facilities in Massachusetts, Maine, and New Hampshire; nor does it include the hundreds of public employees working in the region’s state lottery agencies, which generate $1.7 billion in annual revenues for New England’s six state governments (FY 2010).
Second, casinos, video lottery terminal parlors, and racinos have become an important source of revenue in New England’s state budgets. In calendar year 2010, Foxwoods and Mohegan Sun generated $346 million in revenues for the Connecticut state treasury, while Rhode Island’s VLT facilities generated $292 million – making Rhode Island’s two VLT facilities the third largest source of revenue for the Ocean State. Maine’s upscale racino generated $28 million in calendar year 2010, with the monies earmarked for the city of Bangor, the Healthy Maine initiative, scholarships to attend Maine’s state universities and community colleges, and other initiatives designed to strengthen the state’s pari-mutuel racing industry.
Third, as a result of casino gaming’s significant economic and fiscal impacts, gaming expansion has become a perennial policy debate in New England’s state legislatures. In Massachusetts, the House of Representatives had previously blocked expanded gaming legislation, despite support in the State Senate, including several efforts to bring casino or racino gaming to the Bay State in 1995 (1 casino), 1997 (2 casinos and 4 racinos), 1999 (3 casinos), 2003 (2 casinos and 4 racinos), and 2006 (4 racinos). On March 20, 2008, the Massachusetts House of Representatives rejected a proposal by Governor Deval Patrick to license three resort casinos in the Bay state, despite the fact that Massachusetts residents now regularly gamble at the casinos in Connecticut and the slot parlors in Rhode Island, and despite the fact that numerous polls by different academic and professional organizations have documented public support for expanded gaming legislation in Massachusetts. In the 2010 legislative session, the House and Senate passed a bill that would have authorized three resort casinos and two racinos, but Governor Deval Patrick refused to sign the bill, but in 2011, the Bay State’s top leaders reached agreement on a law that authorizes 3 destination resort casinos and one slot parlor in Massachusetts. This new industry is expected to generate approximately $2.0 in direct economic activity in the commonwealth.
In Rhode Island, the state’s General Assembly and Governor Donald Carcieri authorized the addition of thousands more VLT’s at Twin River and Newport Grand in 2006, which resulted in the largest gaming expansion in that state’s history. Twin River and Newport Grand are currently authorized to offer up to 4,752 VLTs and 2,101 VLTs, respectively. However, a constitutional amendment that would have authorized a $1 billion Narragansett Indian Casino in West Warwick, Rhode Island was rejected by voters on November 7, 2006 by a margin of 63% to 37%. However, in response to the expanded gaming initiative in Massachusetts, key leadership in the Rhode Island General Assembly have reached an agreement that will place a constitutional referendum on the state’s November 2012 ballot that would authorize “full-fledged casinos” with table games at Twin River.
In Maine, Hollywood Slots opened in Bangor on November 4, 2005, as that state’s first upscale convenience gaming facility. In 2006, the Maine state legislature passed a bill authorizing a second racino in Washington County and another bill allowing the county’s voters to decide the issue. Both bills were successfully vetoed by the governor. However, Maine has continued to debate the question of expanded gaming. On November 6, 2007, Maine’s voters rejected Question 1, also known as the Maine Racino Initiative of 2007, in a statewide referendum by a margin of 52% to 48%. Question 1 would have authorized slot machines at a tribal commercial track under the supervision of the Maine Gambling Control Board in Washington County on the state’s southern eastern border with Canada. It would also have authorized the issuance of a high-stakes beano license to a federally recognized Indian tribe to operate games on nontribal land in Washington County, Maine. On November 4, 2008, Maine voters again rejected a statewide ballot measure that would have authorized a small resort casino in Oxford, Maine by a margin of 54% to 46%. In same the election, voters in Scarborough, Maine narrowly rejected a local proposal to authorize slot machines at that town’s racetrack, although efforts are still underway to win local approval under the state’s existing gaming legislation. However, in a statewide referendum on November 2, 2010, Maine’s voters narrowly approved a small ($160 million) resort casino for Oxford, Maine, which will become the state’s second Class III gaming venue when it opens in the spring of 2012. In the November 2012 election, Maine voters rejected proposals that would have allowed up to three additional racinos, but voters in Penobscott County approved the addition of tables games at Hollywood Slots.
Finally, in New Hampshire, the state’s General Court again took up the issue of expanded gaming during its 2009 legislative session. A bill authorizing a resort casino in Hudson, New Hampshire, and three racinos in Belmont, Salem, and Seabrook passed the Senate, but the bill was decisively rejected in the New Hampshire House of Representatives. However, during the 2012 legislative session, the New Hampshire legislature appears poised to approve a bill that would authorize from 2 to 4 casinos in the Granite state.
Yet, the study of gaming is a comparatively new field of social scientific inquiry. Nevada authorized casino gaming in 1931 and New Jersey authorized casinos in Atlantic City in 1976. However, most states did not authorize casinos, slot parlors, or racinos until the early to mid-1990s and, consequently, many policymakers are unfamiliar with the complexities and nuances of gaming-related issues, such as:
- Who gambles at destination resort casinos versus who gambles at a VLT facility slot parlor, or racino?
- What are the incomes and demographics of destination resort casino, VLT facility, racino, and slot parlor patrons.
- Why do people gamble at casinos, VLT facilities, racinos, and slot parlors as opposed to those who play scratch tickets and keno?
- How often on average patron visit a casino, VLT facility, racino, or slot parlor in a given year? How much they spend on each visit?
- How far will patrons drive to visit a gaming establishment and are there differences between those willing to visit a destination resort casino as opposed to a VLT facility, racino, or slot parlor?
- Which gaming outlets have a greater impact on job creation, economic development, tax generation, and tourism enhancement?
- Are some types of gaming outlets likely to generate higher rates of problem gambling among patrons; and-are there differences in the socioeconomic impacts that emanate from destination resort casinos, VLT facilities, racinos, and slot parlors?
Finally, UMass Dartmouth's service region is home to three of New England's federally recognized Native American tribes – the Aquinnah Wampanoag, the Narragansett Indian Tribe, and the Mashpee Wampanoags. The University's service region also hosts, or is a major feeder to, four of New England's pari-mutual facilities. Two are in southeastern Massachusetts: Plainridge Race Course, a harness racing facility in Plainville; and Raynham-Taunton Greyhound Park, a former greyhound racing facility in Raynham that still offers simulcast racing. Two other facilities are located in Rhode Island: Twin River, a former greyhound racing facility that now offers VLT gaming and simulcast racing, located in Lincoln; and Newport Grand, formerly a jai-alai fronton, that offers simulcast racing and VLT gaming.
Accordingly, any future gaming expansion in Massachusetts or Rhode Island will have significant economic, fiscal, and other impacts on the Southeastern Massachusetts region and Rhode Island as a whole, including a significant impact on Foxwoods and Mohegan Sun's revenues and the southeastern Connecticut economy.
The Center for Policy Analysis has conducted economic impact analyses of many different industries during the last fifteen years, including civilian airports, military installations, retail establishments, the marine science and technology industry, the marine economy, aquaculture, textiles and apparel, tourism, higher education, and gaming. The methodology, concepts, and technical analysis used to estimate these economic impacts are essentially the same regardless of the industry. From the perspective of economic impact analysis, casino gaming is just another industry.
Casino gaming in one form or another, including land-based casinos, floating riverboats, dockside riverboats, casino cruise boats, VLT facilities, racinos and Native American casinos, is now available in 34 states. Casinos enjoy a high level of acceptance by the American public with 56% of the adult population viewing casino entertainment as "perfectly acceptable for anyone" and another 28% viewing it as "acceptable for others," but not for themselves. Thus, only 16% of the American public view casino gaming as "not acceptable for anyone." Eighty-one percent (81%) of the adult population agrees that "casino gaming can be a fun night out." Thus, the recent expansion of casino gaming in the United States is best understood in the larger context of a robust and continuing national expansion of the leisure, amusement, and entertainment service industries generally.
As a part of the leisure, amusement, and entertainment industry, the popularity of casinos has risen during the last fifteen years and the industry has expanded to supply unmet consumer demand. For instance, the percentage of adults who gambled at least once at a casino in the last twelve months climbed from 17% in 1990 to 26% in 2009. The number of casino visitations has increased from 46 million in 1990 to 376 million in 2008. About 82% of the increase in visitations occurred in non-traditional venues (i.e., outside Las Vegas and Atlantic City). The average patron visited a casino approximately 4.8 times per year in 1996, but now visits a casino about 6 times per year.
The growing significance of casino gaming in the U.S. economy is captured conceptually by recent changes in the industrial classification system used by the United States Government to collect data and monitor trends in employment, wages, and business vitality. The United States adopted its first Standard Industrial Classification (SIC) System in 1939 and periodically revised this classification system to account for changes in the structure of the U.S. economy. Every business establishment in the United States, both public and private, was assigned one or more "SIC Codes" based on Division (e.g., manufacturing), Major Group (e.g., textile mill products), and Industry Group (e.g., spinning mills). An establishment's Division was identified by a single letter code (A-J). Its Major Group was identified by a 1- or 2-digit numeric code (01-99) and its Industry Group is identified by a 3- or 4-digit numeric code (001-9999).
The final iteration of the Standard Industrial Classification Manual was released in 1987, but the economic significance of casinos was not considered important enough to warrant the assignment of their own SIC Code. Casinos were either classified with "Hotels and Motels" (SIC 7011) or with Amusement and Recreation Services, Not Elsewhere Classified" (SIC 7999).
In 1997, the United States began phasing out the Standard Industrial Classification System, which had been designed mainly for classifying business establishments in an older industrial economy. The North American Industry Classification System (NAICS), which replaced the SIC codes, was developed jointly by the USA, Canada, and Mexico, following NAFTA, to provide new comparability in statistics about business activity across North America. However, in designing NAICS, economic and government experts for the first time constructed a conceptual framework that identified "new and emerging industries" and that captured the importance of service industries in general to the new economy.
NAICS classifies business establishments in twenty different Sectors and assigns them a six-digit code. NAICS classifies all gaming establishments in Sector 71, Arts, Entertainment, and Recreation. Casinos, bingo halls, slot machine parlors and racinos, race tracks, and video gaming establishments are grouped with performing arts, spectator sports, theme parks, golf courses, and bowling centers due to the similarity of their production processes (personal service) and the similarity of their output (i.e., entertainment and amusement). For the first time, casinos and other gaming establishments have been assigned their own six-digit NAICS Codes that specifically distinguishes between Racetracks (Code 711212), Casinos (Code 713210), Other Gambling Industries (713290), and resort Casino Hotels (Code 721120) (see table below).
| 711212 |
(except Casino Hotels)
|713290 Other Gambling|
|721120 Casino Hotels|
|Comprises establishments primarily engaged in operating racetracks (cars, dogs, and horses).||Comprises establishments primarily engaged in operating gambling facilities that offer table wagering games along with other gambling activities, such as slot machines and sports betting. These establishments often provide food and beverage services. Included in this industry are floating casinos (i.e., gambling cruises, riverboat casinos).|| Comprises establishments primarily engaged in operating gambling facilities
(except casinos or casino hotels) or providing gambling services. Included in this industry are bingo, gaming terminals in places of business operated by others.
primarily engaged in providing
short-term lodging in hotel
facilities with a casino on the premises.
The casino on premises includes table
wagering games and may included other
gambling activities, such as slot machines and sports betting. These establishments generally offer a range of services and amenities, such as food and beverage services, entertainment, valet parking, swimming pools, and conference and convention facilities.
Economic impacts measure the importance of an economic activity primarily in terms of the output, employment, and personal (labor) income generated by that activity in terms of output, employment, and income:
- Output is the value of goods and services produced at the identified business establishment or construction project.
- Employment is the number of people employed at the identified business establishment or construction project, including wage and salary employees and self-employed persons.
- Personal income is the wages, benefits, and other income derived from employment that is linked geographically to the identified workplace site.
Economic impacts consist of direct impacts, indirect impacts, induced impacts, and total impacts. Direct impacts are the economic activities carried out at a business establishment or construction project and are therefore an immediate consequence of the economic activity that would not have occurred in the absence of the business establishment or construction project.
Indirect impacts derive primarily from off-site economic activities that are attributable to the identified business establishment. These economic activities occur mainly as a result of non-payroll expenditures by the business within a defined local area (i.e., town, city, county, metropolitan statistical area). Local expenditures include a range of operating expenses such as construction materials, office supplies, motor transport, horticultural services, furniture, utilities, maintenance and repairs, business machines, business services, management consulting, and so forth. Indirect impacts differ from direct impacts insofar as they originate entirely off-site, although the indirect impacts would not have occurred in the absence of the identified business establishment. Induced impacts are the multiplier effects of the direct and indirect impacts created by successive rounds of spending by employees and proprietors. Total impacts are the sum of the direct, indirect, and induced impacts.
The United States commercial casino industry consists of 445 casinos that generated nearly $29 billion in gross gaming revenues (output) in 2004. Commercial casinos directly employed 351,445 persons nationwide in 2008 and paid $13.8 billion in direct compensation (including benefits and tips) to casino employees. On average, commercial casinos generate an average of 8 jobs for every $1 million in Gross Gaming Revenue and, excluding Nevada, from 6 to 11 jobs per $1 million in Gross Gaming Revenue depending on the venue, wage levels, the ratio of full-time to part-time jobs, and the mix of gaming to non-gaming operations.
The casino gaming industry also spends more than $4 billion annually on construction, real estate, furniture, and equipment. It is no longer uncommon for individual companies to invest $100 million to $1 billion for the construction of a new facility or to spend several hundred million dollars to expand an existing facility. The casino industry’s capital expenditures directly create an additional 40,000 jobs annually in the construction and manufacturing sectors.
In addition, there are currently 562 federally recognized Indian tribes and of this number 230 operate 425 Class II or Class III gaming establishments as defined by the Indian Gaming Regulatory Act (IGRA). There are 249 Tribal-State gaming compacts governing these operations. In 2008, Indian casinos generated an additional $26.8 billion in Gross Gaming Revenues (output) and employed approximately 354,000 people nationwide. About 25% of the employees working at Indian casinos are tribal members, while 75% are non-Indian.
The most frequently cited negative impact of casino gaming is pathological gambling or gambling addiction. Some critics of casino gaming claim that gambling addiction results in increased crime (e.g., credit card and check fraud, theft, embezzlement), personal bankruptcy, and increased health care costs necessary to treat gambling addiction. A comprehensive economic impact analysis – or benefits-cost analysis – will, in principle, incorporate a measure of the economic costs generated by any new business establishment. However, it is particularly difficult, both conceptually and technically, to estimate the economic 'costs' of gambling for purposes of incorporating them into a benefits-cost equation.
First, there is an unresolved philosophical question about the extent to which gambling addiction should be viewed as an 'individual' loss or behavioral problem, rather than a 'social' cost that should be compensated by society. There is also a great deal of controversy in the medical and psychological communities as to whether gambling is a physical addiction rooted in brain chemistry or a behavioral problem. It is also not clear whether problem gambling is 'caused' by the mere proximity of casinos or whether problem gambling is the effect of other underlying causes such as depression.
Second, even if a comprehensive analysis attempts to estimate the economic costs of problem gambling in terms of revenues lost to businesses due to bankruptcy and embezzlement, the cost of gambling addiction treatment, and loses to other individuals due to fraud (e.g., credit card theft), there are still numerous technical difficulties that have not been solved by economists, survey researchers, and public health analysts. For example, there is no current agreement on how many individuals who gamble will eventually become lifetime pathological gamblers or gambling addicts, although such estimates can range from 0.8% to 5% of the adult population exposed to gambling, depending on how one defines the problem and depending on what methodology is used to arrive at an estimate. In addition, there are widely differing estimates as to the average cost to society per problem gambler. Thus, any effort to incorporate these costs into a benefits-cost analysis is likely to encounter criticism from both anti-gaming and pro-gaming constituencies regardless of the number that is actually used in the analysis.
Third, some public policy analysts question whether problem gambling should even be viewed in economic terms. Indeed, it is widely agreed among public policy analysts that a significant limitation of benefits-cost analysis is its inability to surmount the incommensurability of values. Can one actually assign a price or dollar cost to social values, environmental values, or perceptions about the quality of life? Is a benefits-cost analysis the appropriate way to incorporate such values into public policy discussions and the decision-making process? It may be more appropriate to view economic and fiscal impacts as simply one set of considerations to be taken into account by policymakers in assessing the overall impact of any major economic development project, including casinos. For this reason, some government agencies now require separate economic, social, traffic, and environmental impact analyses for major economic development projects regardless of the industry.
Substitution effects are also frequently identified as a negative economic impact of the gaming industry. The substitution argument asserts that any dollar spent at a casino must come at the expense of other local businesses. In discussions of casino gaming throughout the country critics often claim that casinos merely divert hundreds of millions of dollars in consumer spending from existing local businesses. The alleged substitution effect of casino spending is often the basis for assertions that casinos 'cannibalize' other local businesses, particularly small establishments in the retail, entertainment, and restaurant business.
The substitution argument starts with the assumption that local, state, or regional economies are a zero sum game in which no business can expand or grow except at the expense of other businesses. If this was inherently true, it would be hard to explain how a McDonald's can continue to increase sales when a Wendy's opens across the street. In fact, amusement, recreation, leisure, and entertainment businesses are among the fastest growing sectors of the United States economy today. The growth of this industry, including casino entertainment, is made possible by increases in population and disposable personal income and, consequently, these sectors can continue to grow—as can others—without displacing existing spending so long as disposable personal income continues to increase from year to year or if it attracts new income from outside the region.
However, the argument that casinos cannibalize (or substitute for) existing local businesses is ultimately an empirical question that can only be answered by objective empirical research. While empirical research should be informed by sound economic theory, and the results should be explainable by theory, speculative conjecture cannot substitute for rigorous empirical research. The New England Gaming Research Project plans to conduct such studies and thereby inform the gaming debates in New England with facts, rather than anecdotes, assertions, or speculation.
A fiscal impact analysis compares the revenues and expenses resulting from new development for the purpose of determining how state and municipal finances are affected by that development. A fiscal impact analysis is essentially a specialized form of benefit-cost analysis designed to examine whether new commercial or industrial development generates a net fiscal benefit or a net fiscal cost to a unit of government.
There are many different models for predicting fiscal impacts, but the two most common approaches are average costing and marginal costing. Average costs are simply per-unit costs, whether the unit is a person (resident or employee), a household, or some other measure (e.g., square footage of facility). In fiscal impact analysis, the number of units (often people) is multiplied by the average cost per unit for a particular service and added to the existing public budget. This is probably the most common method for estimating fiscal impacts. Marginal cost analysis uses an analysis of the current capacity and infrastructure of a community to discover whether certain types of new development will rely on existing capacities or will push certain services over a threshold that will require new and expensive capital investments, such as water and sewer lines, expanded water and sewer treatment capacity, new streets, sidewalks, and traffic signals, or additional school buildings, fire protection, or police protection.
The positive fiscal impacts of casinos are the revenues they generate for government by paying special taxes on gaming revenues, the payment of licensing fees by the casino and casino employees, property taxes, personal income tax payments by casino employees, and indirect tax payments stimulated by non-gaming casino operations, such as room occupancy, meals, and retail sales taxes, as well as the potential social savings from lower welfare and unemployment insurance rolls.
Every jurisdiction that allows casino gaming levies a special gaming tax, although different jurisdictions have chosen to levy this tax, or to negotiate compacts with Native American tribes, in many different ways. Gaming taxes can be flat or graduated, levied on gross gaming revenues, adjusted gross gaming revenues, or net gaming revenues and they can be levied on gross gaming revenues or just on slot machine revenues. Commercial casinos also pay local property taxes, although Native American casinos are generally exempt from property and excise taxes, which has raised the issue of compensation for the local communities that bear the fiscal costs of hosting these facilities. It is also raises the question of how gaming tax revenues are divided between state government and local governments.
In 2004, commercial casinos paid more than $4.7 billion in state gaming taxes and this figure does not include the additional revenues generated by casino boats, card rooms, slot machine parlors, video lottery terminals, and through state compacts with Native American casinos. It also does not include state income taxes paid by casino employees or excise taxes generated by the casinos’ non-gaming operations.
There are certainly fiscal costs to a large gaming establishment, but these are generally the same types of costs that would be incurred with any large scale economic development such as a regional mall, an amusement park, a large factory, a sports stadium, or a major tourist attraction. There are few fiscal costs that are peculiar to casinos and racinos. Whether these costs constitute a negative fiscal impact depends entirely on the magnitude of these costs compared to the amount of revenue generated by the gaming facility for a particular unit of government. If these costs are less than the revenue generated, then even after incurring these costs, there is still a positive fiscal impact. If these costs are more than the revenue generated, only then can one say there is a negative fiscal impact.
Crime is often identified as a fiscal cost of the gaming industry. When analyzing this issue, however, it is important to distinguish between the volume of crime (total number of crimes) and the crime rate (crimes per 100,000 people). Any large scale development that attracts hundreds of thousands to millions of visitors per year to a local jurisdiction will probably generate an increase in the volume of crimes in that jurisdiction, which would not have occurred in the absence of that facility. The crowds attracted to a large facility of any type will become targets of crime and some will be perpetrators of crimes. This pattern is observed at regional malls, amusement parks, tourist attractions, sports stadiums, and any site that attracts large numbers of visitors. Thus, the volume of crime will likely increase in any community that hosts a large scale economic development project that attracts new visitors. However, on a per capita basis (crimes per 100,000 visitors), this does not mean that the crime rate will increase or that casinos necessarily produce crime rates higher than other types of large facilities. Nevertheless, even if the crime rate does not increase, an increase in the volume of crime will generate additional demand for law enforcement, particularly for small local police departments that must now process an increased number of cases. This is one factor that should be considered in assessing or evaluating the local fiscal impacts of the gaming industry.
There are other crime-related factors to be considered beyond the mere number of crimes when assessing the potential or actual fiscal impacts of the gambling industry:
- Does the crime generated by a casino require increased law enforcement off-site, such as traffic enforcement, burglary, and robbery (which will increase the demand on a local police department) or does the majority of casino-related crime occur on-site, such as check and credit card fraud or pick pocketing? On site crime can be mitigated by in-house security, which means the major costs of such crimes are borne by the gaming facility, rather than local government -- both in terms of potential lost revenue and security enforcement.
- Is casino-related crime violent in nature, such as murder, rape, armed robbery, and assault and battery or is it non-violent crime, such as larceny, speeding, and DUI? The latter crimes are typical of any major attraction that draws large numbers of visitors to a location, particularly in the amusement, entertainment, and recreation industry.
There are other potential fiscal costs of casinos related to the increased demand on local public services that are generated by large crowds:
- Any major attraction that draws large numbers of visitors will generate an increased traffic flow from employees and visitors. Depending on the traffic volume and the capacity of existing infrastructure, the fiscal costs of a new gaming facility may include road widening, more frequent road maintenance, new street lights, exit ramps, landscaping, and sidewalks.
- Gaming facilities, as with any large development, may also place increased demands on other public infrastructure, such as water and sewer treatment capacity, water and sewer lines, public health enforcement, etc.
- Such facilities will also generate increased demand for emergency medical response and fire protection.
Another identified fiscal cost of gaming enterprises is gaming regulation and enforcement. Once again, this is not a cost peculiar to the gaming industry, since virtually all industries and business establishments in the United States are subject to some type of federal, state, and local regulation. However, gaming is one of the most tightly regulated industries in the United States. These regulations include licensing the establishment and its employees, financial reporting oversight, and the enforcement of gaming laws, etc. The adoption, monitoring, and enforcement of these regulations, as well as the promulgation of licensing requirements generate costs that are borne primarily by state governments (e.g., gaming or lottery commissions and state police), although some costs are borne by local governments (e.g., liquor licensing, victuals licenses, public health regulations, etc.).
Gambling addiction treatment is also identified as a fiscal cost peculiar to the gaming industry, although addictive behavior is associated with other legal industries (e.g., tobacco, alcohol, internet, video games, shopping). Some states earmark a portion of gaming taxes to support responsible gambling education and to fund gambling addiction treatment, which means these costs are not borne by the general treasury, but covered by the gaming industry. To minimize these costs, many casinos are directly implementing in-house policies and employee training to identify problem gamblers.
In evaluating the size of fiscal costs compared to fiscal benefits, it is important to note that local and state economic development officials have many tools besides taxes for adjusting the benefits-cost ratio. Economic developers long ago identified mechanisms for compensating communities that host major economic development projects. Local governments can shift some costs to the state (e.g., infrastructure improvements), which receives the largest share of gaming revenues. Some costs can be shifted to the business establishment itself in the form of impact fees that pay for capital improvements (e.g., water and sewer lines, expanded sewage treatment capacity, road and highway improvements). Capital donations by the business establishment (e.g., a new fire truck, police cruisers, etc.) may eliminate certain costs to local governments particularly.
Thus, it is important to recognize that whether the fiscal costs of any business development become a negative fiscal impact depends entirely on whether the revenues collected are sufficient to fully compensate a state and its local communities for the additional capital and operating costs of that facility.