Expanded Gambling in NH: An update on options
Date: February 15th, 2013
This paper presents the results of an update to our model of the potential impact of expanded gambling on New Hampshire. While several assumptions in the state’s gambling debate have changed in this new legislative session, the specifics of that debate vary depending on the piece of legislation being considered. We also know that proposals can change as they move through the policy-making process. Thus, we modeled several scenarios and present the results here. Our findings include:
It is difficult to accurately predict when the state would see any new revenue from a license fee or casino operations. Experience in other states suggests that it could take at least two years before any tax revenues from casino operations would be available to the state. While up-front license fees paid by developers might come sooner, that will depend on several factors: the speed with which local communities allow expanded gambling through a referendum, and the state’s ability to set up a regulatory structure, among other factors.
There is the possibility of a significant license fee, but that amount will depend on the tax rate imposed on gambling revenues and developments in the Northern New England gambling market. Our analysis suggests that the true value of the southern New Hampshire gambling market could generate a license fee as high as $100 million. However, whether potential developers would pay such a fee depends on, among other factors, the tax rate to be imposed on gambling revenues, competition from casino activity in Massachusetts, and the potential development requirements in New Hampshire, each of which would affect developer incentives. Thus, predicting revenue from license fees is difficult, and budget writers should use caution in basing a budget on such revenue.
While expanded gambling will yield revenue to the state, our model’s estimates of the social costs of problem gambling suggest no long-term net state benefit when the tax on casino operations is set at 30 percent or less. That calculation changes as the tax rate is increased. Our model indicates that at a tax rate of 40 percent, a casino with $300 million in investment would provide an annual net benefit of roughly $32 million, while a $500 million facility would provide roughly $51 million in net benefit for the state.
The size of the investment has a significant impact on state revenues associated with expanded gambling. If policymakers wish to proceed with expanded gambling as a source of steady, long-term state revenue, they should give careful consideration not only to the rate at which casino revenues would be taxed, but also to the level of new investment required of the facility developer. This includes the question of whether that investment requirement will include license fees, real estate purchase, or other developer costs.
While expanded gambling would result in job increases, the number of long-term jobs depends on the size of the investment. Our estimates range from 540 jobs (at a $100m facility) to 2,700 jobs (at a $500m facility). Further, some portion of these jobs will likely replace other jobs. The extent of this so-called “substitution” will be driven by how many visitors to the casino come from outside the market.
Unknown impacts and factors are not estimated: Our model still does not account for a number of factors, including the potential positive or negative effects of expanded gambling on New Hampshire’s “brand” (as a tourist destination and place to do business), the potential private costs associated with pathological gambling (so-called “abused dollars”), nor the benefit to the community where the facility is located in the form of increased property tax revenue.