Concord Monitor: A good bet? Assumptions in gambling debate are key02-07-2012 (PDF Version)
A good bet? Assumptions are key
Multiple factors in gambling debate
February 7, 2012
Lawmakers this week return to the debate over whether to allow expanded gambling in New Hampshire. The question has taken on new relevance this year since Massachusetts legalized casinos just three months ago. The question facing legislators: Now that Massachusetts has acted, what should we do?
The Center for Public Policy Studies has analyzed the potential impact of expanded gambling in New Hampshire, as well as the effect that new casinos in Massachusetts will have on our state - both in terms of lost revenue and the costs associated with pathological gamblers who live in New Hampshire.
Gambling proponents have cited our work, specifically our finding that a large casino development in Salem could yield $50 million in annual state revenue. But any argument that focuses solely on the bottom line misses the complex set of assumptions that must shape any specific gambling policy.
Among the variables that will determine how expanded gambling would affect New Hampshire:
Movement in Massachusetts. The Bay State's new gambling law allows up to three casinos in the state. How close to the New Hampshire border those facilities are built will have an enormous influence on the financial benefit we would see from our own casinos. A casino in East Boston, just 30 miles from Rockingham Park in Salem, would dig much deeper into New Hampshire's potential expanded gambling revenue than one south of Boston. In short, any potential benefit here will be limited by what happens to our south.
How big to build? The bill being voted on by legislators this week does not require casino developers to invest a minimum amount of money into their casino. But a bigger investment up front will mean greater residual economic impact and higher state revenue down the line. Requiring a minimum investment will help ensure that New Hampshire benefits as much as it can from new casinos. When building a casino, size does matter.
Location, location, location. The amended proposal in New Hampshire removed a provision that required that new casinos be at least 100 miles apart. But the closer the casinos are to one another, the more likely they are to compete for customers. And a casino built in a more rural, less industrialized region of the state (such as Coos County or the Monadnock Region) would have a bigger relative impact on that region's economy than a casino built in, say, the greater Nashua area. Should a policy that legalizes gambling account for that discrepancy?
Developments in the broader economy. Most people treat gambling like any other entertainment expense. When the economy is doing better, they gamble more. Not surprisingly, the past few years have seen big drop-offs in gambling activity. New Hampshire lottery sales are down 30 percent since 2007, and the same trend is true at major casino areas across the country. Thus, any estimate of the impact of expended gambling must at least attempt to forecast how the wider economy will fare in the next few years.
What to do with the profits? The center has developed a model to estimate the financial impacts of expanded gambling in New Hampshire, including the effects on economic development, state revenues, social costs and existing lottery sales. Under our assumptions, a large casino in southern New Hampshire would likely net about $50 million a year in state revenue, even if Massachusetts built a similarly-sized casino close to our border. The legislation now being considered would direct that money to the communities that host the casinos and social programs associated with problem gamblers, as well as offset business taxes. Is this the right balance, given the potential costs and benefits to an expansion in gambling?
While our model tries to calculate the impact of gambling on the state's economy and the residual social costs, much more difficult to measure is the potential impact that legalized casinos would have on New Hampshire's "brand," both as a tourist destination and a lure for new residents and businesses. This, too, should be a factor in the gambling debate, though one less easy to assign a dollar amount.
(Steve Norton is executive director and Daniel Barrick is deputy director of the New Hampshire Center for Public Policy Studies, an independent, nonprofit, nonpartisan organization in Concord that pursues research on public policy.)
New Hampshire Center for Public Policy Studies