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Northeastern Gaming Research Project

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The Northeastern 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 2012 tabulated interview responses from 3,741 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.

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About the project:


Who funds the project?

The Notheastern 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.

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Why study casino gaming?

Why study gambling?

There are many reasons why the principal investigators launched the Northeastern Gaming Research Project in 2004:

First, there are now 55 Class III casinos in the Northeastern corridor with an estimated $15.1 billion in annual total revenues. Casino gaming in the Northeast is a $15.1 billion industry in the New England and the Mid-Atlantic regions that employs approximately 80,000 people. The number of casino employees does not include the nearly 6,000 persons working at the region’s non-slot pari-mutuel facilities; nor does it include the thousands of public employees working in the region’s state lottery agencies, which generate 8 billion dollars in annual revenues for the Northeast’s state governments.

Second, casinos, video lottery terminal parlors, and racinos have become an important source of revenue in the state budgets of Northeastern states. In fiscal year 2012, casinos generated $4.1 billion in gaming tax revenues to state governments, while also paying local property taxes, lodging, sales, and meals taxes, and corporate income taxes, among others.

Third, as a result of casino gaming’s significant economic and fiscal impacts, gaming expansion has become a perennial policy debate in the Northeast’s state legislatures.  Atlantic City now has 12 resort casinos that compete directly against Mohegan Sun and Foxwoods. New Jersey Governor Chris Christie signed an Atlantic City rescue package into law on February 1, 2011 at the previously abandoned Revel Casino project and simultaneously announced a $1.15 billion loan package that allowed the project’s owners to complete Atlantic City’s twelfth casino. The Revel opened on April 2, 2012 and while the Revel mega-project recently filed for an orderly bankruptcy, the New Jersey rescue package also encourages the construction of smaller boutique casinos (with less than 600 room hotels).

Pennsylvania also has 12 full-fledged casinos with slot machines and table games, and some such as the Sands Bethlehem, have added a hotel. Pennsylvania expects to add another three casinos within the next few years., including a second casino in Philadelphia. New York now has 1,7167 video lottery terminals, an increase of 3,298 from last year (2011) and an increase of 5,598 from two years ago (2010). Much of the VLT increase is due to the opening of Resorts World New York at Aqueduct Raceway in Queens, New York. With the addition of Resorts World, the State of New York now has nine racinos, with nearly 10,000 VLTs strategically located at Empire State Raceway in Yonkers and Resorts World in Queens, which are currently the largest race track casinos in the world based on number of VLTs and gaming revenues, respectively. There are also five Class III Indian casinos operating in western and upstate New York, which generate nearly $1 billion annually in gross gaming revenues. New York has also authorized a statewide referendum that, if passed, would authorize up to four commercial casinos in the Catskills Mountains, the Albany area, and the Southern Tier region along the border with Pennsylvania.

Moreover, additional capacity has been added elsewhere in the Northeast. On November 4, 2008, Maryland voters approved a constitutional amendment to legalize slot-machine gambling in that state. The constitutional amendment allows 15,000 slot machines distributed among five locations in the state. Although initial efforts to introduce slot parlors and racinos to Maryland fell short of the legislature’s original expectations, two racinos opened in September 2010 and January 2011 that currently operate more than 2,200 slot machines. A third slot venue opened in Hanover, Maryland in 2012 with approximately 4,700 slot machines. 

Maine’s voters narrowly approved a casino for Oxford, Maine in a statewide referendum on November 2, 2010. Oxford Casino became the Pine State’s second Class III gaming venue when it opened on June 5, 2012 with 500 slot machines, 12 table games, a restaurant, and bar. The casino expanded its offering in September 2012 to include 812 slot machines and 22 table games. On March 29, 2013, it was announced that Oxford Casino was being sold to Churchill Downs for $160 million in cash. Meanwhile, on November 8, 2011, the residents of Penobscot County voted to authorize table games at the former Hollywood Slots and Raceway. On March 16, 2012, the renamed Hollywood Casino Bangor opened its first 14 table games, which was increased to 16 tables by the end of 2012.

To counter competition from Pennsylvania, and the anticipated competition from Maryland, West Virginia has completed its fifth full calendar year of table games at its four racinos. Delaware’s legislature also authorized the reintroduction of a sports betting lottery. Finally, several major expanded gaming initiatives are in various phases of approval or implementation. On November 22, 2011, Governor Deval Patrick signed a bill legalizing casinos in Massachusetts that authorizes three full-scale casinos and one slot parlor in the state. Massachusetts is moving forward with the goal of licensing a slot parlor by the end of 2013 and with licensing its first casino sometime in 2014. The Rhode Island General Assembly scheduled a November 6, 2012 statewide and local referenda to allow table games at its two gaming venues. The referendum passed in Lincoln, but failed in Newport, Rhode Island. Twin River began offering live table games on June 19, 2013.

Elsewhere in the Northeast, Ohio voters passed the Four Casinos Initiative on November 3, 2009, which amended the state constitution to allow casinos in Cincinnati, Cleveland, Columbus and Toledo. Caesars Entertainment has now opened Horseshoe branded Casinos in Cleveland and Cincinnati 2012, while Penn National has opened Hollywood branded casinos in Toledo and Columbus. Two racetrack casinos were also opened in Ohio at Scioto Downs and Thistle Downs.

The growing competition in the Northeastern gaming market is restructuring the market geographically, but it is also leading to an overall increase in the size of the gaming market, new capital investment in new facilities -- $1.15 billion at Revel, $1 billion at Aqueduct, and $160 million in Oxford, Maine, at least $2.3 billion in Massachusetts, and the improvement of existing facilities (e.g., a $50 million hotel and retail complex at Sands Bethlehem). Former racetracks are being upgraded into upscale racinos with moderate-sized hotels, gourmet dining, and new entertainment options following a model pioneered in the previous decade by Dover Downs in Delaware.

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What does it mean to say that gaming is an industry?

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.

The U.S. gaming market is usually divided into six different segments consisting of charitable gaming, pari-mutuel wagering, state lotteries, commercial casinos, tribal (Indian) casinos, and internet wagering. Currently, 48 states and the District of Columbia allow charitable gaming, 40 states allow pari-mutuel wagering, 43 states and the District of Columbia have lotteries, 16 states license commercial casinos, 14 states have licensed racetrack casinos and slot parlors (“racinos”), and 28 states have Class II or Class III tribal casinos.

Nevada was the first state to legalize casino gambling in 1931 and it was not until 1976 that New Jersey became the second state to legalize casinos in Atlantic City. However, growth in the U.S. casino gaming market accelerated a decade later when the federal Indian Gaming Regulatory Act (IGRA) was passed in 1988 and states other than Nevada and New Jersey began to legalize commercial casinos and race track casinos (racinos). In 2012, there were 513 commercial casinos and racinos in the United States with 236 (46%) of those facilities located outside the traditional jurisdictions of Nevada and New Jersey. In 2012, gross gaming revenues (GGR) at commercial casinos and racinos totaled $37.3 billion. The gaming venues employed over 332,000 people, paid wages of $13.2 billion, and paid $8.6 billion in gaming taxes to state governments.

There are currently 562 federally-recognized Indian tribes.  At present, 242 of these tribes have negotiated compacts with 28 states to establish 460 Class II or Class III gaming operations. Native American Indian casinos had gross gaming revenues of $27.4 billion in 2011. There are 10 federally-recognized Indian tribes in New England, although only two of the tribes – the Mashantucket Pequot Tribe and the Mohegan Tribe -- currently operate Class III gaming facilities, which in calendar year 2012 had combined gross gaming revenues of approximately $1.8 billion. The Mashantucket Pequot’s Foxwoods Resort Casino is the largest casino in North America, while the Mohegan Tribe’s Mohegan Sun is the second largest casino in North America measured by gaming space and gaming positions. Tribal casinos employed nearly 339,000 people, paid $12.3 billion in wages, and made $1.4 billion in direct payments to state and local governments.

Commercial and tribal casinos generated another $9.5 billion in non-gaming revenues from hotels, entertainment venues, golf courses, spas, food and beverage outlets, retail shopping, and RV parks to make casino gaming a $74.3 billion industry in the United States.

In FY 2012, state lotteries generated $58.8 billion in sales and over $19.4 billion in profits for state governments. Despite the onset of the Great Recession December of 2007, thirty of forty-three state lotteries enjoyed an increase in sales during FY2008 with more than half those states enjoying a sales increase of over five percent compared to the previous fiscal year. However, in light of fundamental changes to the American economy, lotteries are under pressure to increase their contribution to state budgets. The fiscal stress confronting state governments requires a thoughtful assessment of the unique role played by state lotteries in public finance, and, moreover, in American culture. Given the relative maturity of the lottery market, in tandem with the fiscal stress on state budgets, innovative revenue streams are being contemplated by a number of states in this area, including internet lottery sales, and other forms of online gambling.

Casino gaming establishments, along with pari-mutuel facilities and state lottery agencies combined, directly employ approximately 700,000 people in the United States.

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
Racetracks
713210 Casinos
(except Casino Hotels) 
713290 Other Gambling
Industries
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.
Comprises establishments
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.

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What are the economic impacts?

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.

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Are there negative economic impacts to casino gaming?

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.

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What are fiscal impacts?

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.

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Are there negative fiscal impacts to casino gaming?

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.

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What are the potential fiscal costs of casino gaming?

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.

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