Will casinos be the Bay State's saving grace?

EDITOR'S NOTE: Supporters say casinos could stabilize state revenues and provide much-needed jobs. Opponents question the optimism of the dollar and job estimates and point to the social costs of legalized gambling.

Today, in the debut of a series, "State Salvations? Promises and Realities," we measure the gambling debate at a time when the political winds appear to be shifting toward legalized gambling in Massachusetts.

First of six parts

BOSTON - There is no mystery as to why, with Massachusetts facing another multimillion-dollar budget gap, that promises of legalized gambling are enjoying fresh support in the Legislature.

Both Senate President Therese Murray and House Speaker Robert DeLeo now support resort casinos similar to Connecticut's Mohegan Sun and Foxwoods. Their positions come less than a year after the House rejected a similar proposal by Gov. Deval Patrick that he said would "result in tens of thousands of construction jobs, over 20,000 permanent jobs and billions of dollars invested in our economy."

Testimony before a legislative committee in October heard supporters, from municipal officials to race track executives, offer heady estimates on the amount of money casino gambling could produce for state coffers.

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The range from $170 million to $500 million in revenues compares to the $395 million Foxwoods and Mohegan Sun provided to Connecticut last year.

The Economic Development Committee also heard estimates that casinos could create between 1,000 and 10,000 jobs, including short-term construction jobs and longer-term employment. Gambling establishments in Rhode Island, Connecticut, Maine and New Hampshire employ 23,600 people; Foxwoods and Mohegan Sun employ the most: 11,700 and 10,300, respectively.

Casino proponents also claimed money going from Bay Staters' pockets to Connecticut casinos - an estimated $709 million in 2008 alone - would instead stay in Massachusetts.

Such promises are not confined to Massachusetts. At least two dozen states have considered expanded gambling since the recession gutted state budgets in 2008.

The promise

An analysis by the Nelson Rockefeller Institute of Government at the State University of New York found that state income from gambling increased nationwide at a steady 5 percent annual rate - from $15 billion in 1998 to $24 billion in 2008.

In 2008, Connecticut, in the midst of a recession, took in approximately $184 million in slots revenue from Foxwoods, down from about $196 million the year before, and nearly $211 million from Mohegan Sun, down from about $225 million in 2007.

Other New England states looked to gambling revenue for help. A UMass Dartmouth study found that in 2008, Rhode Island took in just under $248 million from Twin River and approximately $43 million from Newport Grand. In the same year, Maine received just under $24 million from the Hollywood Slots casino in Bangor.

Other states offer tantalizing revenue and employment numbers gained from gambling:

* Louisiana: Lake Charles' L'Auberge du Lac generated revenues of $85.8 million, a 5 percent improvement over $81.8 million from 2008.

* Michigan: Three Detroit casinos employ 8,200 people - an impressive figure in a city with 29 percent unemployment. Gaming revenue has been off only 2 percent this year, but, according to the Michigan Gaming Control Board, it still provided $122 million to the state.

* Pennsylvania: In FY08-09, the state saw $786 million in property and wage tax relief funded by slot machine gaming. Philadelphia, whose share was approximately $86 million, is expected to reduce its wage tax from 4.169 percent to 3.93 percent for residents and from 3.685 percent to 3.5 percent for nonresidents.

Such numbers have added incentive to bring gambling to Massachusetts. Added to the enticements is the proposition that Massachusetts casinos would simply keep gambling dollars in state and out of Connecticut.

A UMass Dartmouth report estimated that Massachusetts residents spent approximately $709 million gambling at Connecticut's two casinos in 2008 - down from $846.2 in 2007 and $876.2 million in 2006.

That same report estimated that, over five days in January 2009, around 30 percent of Foxwoods patrons and about 16 percent of Mohegan Sun patrons hailed from Massachusetts.

The reality

When it comes to gaming in Massachusetts, the devil in the details remains an unknown. Legislators would need to negotiate how much of "the take" they will take. The percentage of revenue that state and local governments take varies as widely as gambling itself.

In Connecticut, where the casinos are on tribal lands, the state has no taxing authority. Connecticut either "shares" 25 percent of the slot revenue at Mohegan Sun and Foxwoods or takes a flat fee of $80 million, whichever is higher. In 2008, the two casinos shared about $396 million with the state. When Gov. Patrick introduced casino legislation in 2007, he proposed that Massachusetts take 27 percent of all gross casino revenue or $100 million, whichever was greater.

But there have been warnings that Massachusetts can't expect to see such big numbers anytime soon.

The Rockefeller report warned "gambling revenue from existing operations tends to grow more slowly than state tax revenues." The recession has slowed gambling revenue growth even more.

A chastened Patrick has warned recently that casinos would not be a quick fix for the state's budget woes. And even if Beacon Hill expands gambling in the state, casinos may not open in time to ease the pain of the current financial crisis.

The cost of constructing casinos and the debt load it brings, especially in financially challenging times, could further lessen the bang of a casino's buck.

Rhode Island's Twin River spent $700 million to double the size of the complex, boosting the number of slot machines from 3,200 to 4,750. The expansion produced $248 million for Rhode Island last year, making it the state's third-largest revenue source, behind income and sales taxes.

But despite the promising start, Twin River's operators cannot meet heavy debt obligations and have defaulted on their loans, something gambling opponents say Massachusetts should consider when weighing the cost of building a casino.

Opponents point to other costs, both tangible and intangible.

Kathleen Norbut, president of United to Stop Slots in Massachusetts (USSMass), a nonprofit anti-gambling cooperative, concedes that casinos would produce temporary construction jobs. But gambling's long-term effects are another issue.

"We are going headlong into an industry that historically promotes corruption and addiction," Norbert says. She lists the costs to taxpayers of these ills, including increases in police personnel, improved infrastructure and social welfare programs. All would nibble at the revenue gains from gambling.

Norbut said the development of casinos in Massachusetts would "cannibalize local economies" and result in hundreds of millions of dollars in social costs.

Some of that theory is supported by a June 2009 report ordered by Connecticut Gov. Jodi Rell on the impact of casinos. The study estimated that Norwich, the largest municipality in the region of Connecticut's two casinos, has "casino-related costs anywhere from $1 million to $2.5 million a year, including an increase in police overtime from $85,000 in 1991 to more than $280,000 in 2008."

The report noted that "for both Foxwoods and Mohegan Sun, we assume 40 percent of the jobs come from the displacement of other area businesses."

Molly Connor and Victoria Klarfeld report for the Gazette from the Boston University Statehouse Program.