States go all in to get a shot at gambling gold
Delaware, Ohio, and others look to challenge Pa. and Atlantic City for a share of a shrinking pot.
Pennsylvania is happily raking in a precious pile of cash from its new casinos, with hundreds of millions of dollars stolen away from a now-struggling Atlantic City.
But soon it may be Pennsylvania's pocket that is picked by a neighbor.
Ohio last month became the latest revenue-starved state to approve gaming, and thousands of Ohioans who now gamble in Pittsburgh and Erie County may instead stay home once casinos are built in 2012.
Connecticut, with tribal casinos, is fretting that its neighbor Massachusetts will approve gaming in January. Maine and New Hampshire are also exploring it. Kansas will open its first casino next week. And Delaware will have table games by spring.
"You can pretty much go anywhere," observed Jim Salvador, 45, a suburban New Yorker working a slot machine on a half-empty gaming floor at Caesars Atlantic City.
"If I get a comped room and dinner, that's all I care about."
Facing dire budget shortfalls, growing numbers of states are fighting over a shrinking pot of gaming revenue, with economic consequences that few could have imagined.
Last year, casino gambling revenue in the 12 states with commercial casinos dropped for the first time since Nevada legalized it in 1931 - from $34.1 billion in 2007 to $32.5 billion.
A bigger drop is expected this year.
Las Vegas and Atlantic City have been hit by job cuts, stalled development, shuttered casinos, bankruptcies - and tens of millions of dollars less to fund community services and housing.
Meanwhile, Pennsylvania taxpayers are enjoying property-tax relief - with more to come - thanks to new slots gambling. Even so, three of the state's nine casinos are struggling.
And as Gov. Rendell pushes legislators to legalize table games to help patch a $200 million budget hole, Pennsylvania's newest and most expensive casino, in Pittsburgh, is failing to meet revenue projections.
So is the $743 million Sands Casino Resort, which opened May 22 in Bethlehem, Pa., and which is poaching revenue from the two-year-old Mount Airy Casino resort, 40 miles away, where November revenue dropped 20 percent.
The two Philadelphia waterfront casinos, SugarHouse and Foxwoods, have scaled back their designs because of stingy lending markets. Operators of Foxwoods last week postponed presenting their plan until details of a much-debated table games bill are finally resolved in Harrisburg. Rendell hopes to get that done this month.
And now Ohio looms.
"We don't know if Ohio will have much of an impact," Rendell said last week. "Our research indicates we get some business from Ohio but not very much."
Lucy Dadayan, a senior policy analyst at the State University of New York's Rockefeller Institute of Government, said states place risky bets when they rely on gambling to shore up budgets.
Gambling revenue, she said, usually doesn't keep pace with the programs they're supposed to fund.
"In addition, as gambling is becoming more widespread geographically, states are essentially looking into the same pot of money."
Beyond the 12 states with commercial casinos, 12 others have "racinos," or slot machines and other games at racetracks; 29 have Indian casinos; and at least 42 and the District of Columbia have lotteries.
"States will see increased competition for each gambling dollar," Dadayan said, "and little revenue growth except when they create new gambling opportunities."
A look at four states that have hitched their fortunes to gambling shows the impact of proliferating gaming, especially in a tough economy.
Leaving Las Vegas
Sin City is teetering on losing its status as a world-class destination. The town, hurt by the economy and fierce competition from California Indian casinos, is heavily discounting hotel rooms and attracting lower-spending gamblers.
Gaming revenue fell for the 21st straight month in September; it tumbled from $6.85 billion in 2007 to $6.12 billion in 2008 for the 29 casinos on the Strip. It might have been worse but for a cheap dollar, which drew more foreign visitors.
Unemployment is 13 percent.
The difference is felt right from Vegas' McCarran International Airport, where laid-off casino waiter, now cabdriver, Ante Hunegn, 25, said visitors - and there are 1.4 million fewer of them - are "not tipping as much. They even argue with you about a fare."
Downtown, at Bally's casino, Lydia Datuin, 62, a booth cashier for 34 years who depends on tips, said she thought Las Vegas was recession-proof until the last year.
"When it's slow like now," said Datuin, "we get nothing."
Some, like Scott Rexroat, who was among the 13,700 laid off in Vegas this year, left for greener gaming pastures: Pennsylvania.
He's the new head of food and beverage at PhiladelphiaPark Casino & Racetrack in Bucks County.
"Las Vegas just got caught up in the 'sky's the limit' mentality - a business model of growth rates every year of 20 percent," said Rexroat, 48, who held a similar job at Santa Fe Station, a casino owned by the now-bankrupt Station Casinos Inc.
"It seems there was no industry plan to handle the what-ifs."
But Gordon Jaffe, better known as "Gordy the accordion player," is a happy man. Off the Strip, Battista's Italian restaurant, where a salad-to-cappuccino pasta dinner costs $20.95, is usually packed. He gets lots of tips.
The economic woes have "helped us," Jaffe said. "They all come here."
Atlantic City blues
The burgeoning competition has given this 31-year-old gambling resort little to cheer about.
Atlantic City has pared 5,800 casino workers since November 2006, when the first Pennsylvania slots parlor opened - Mohegan Sun at Pocono Downs.
Through September, the 11 Atlantic City casinos generated $3 billion, down 14.2 percent from a year earlier, according to the New Jersey Casino Control Commission.
Eight percent of the casinos' gross taxable revenue goes to the state for programs that benefit seniors and the disabled. That amount was off nearly $58 million for the first 10 months of the year compared with 2008.
The impact is hitting hard.
"It's not a pretty picture," said State Sen. James Whelan (D., Atlantic), a former Atlantic City mayor.
"It's going to mean some reduction in services," though how much is not yet clear. "People may have to adjust in terms of not being able to make their doctor's appointment if transportation is not available."
In addition, 1.25 percent of revenue goes to the Casino Reinvestment Development Authority for community housing and economic-development projects in Atlantic City and across the state. It's down by $6.3 million this year.
History was made May 26, 1978, when Resorts opened as the Shore town's first casino.
It made history again last month as the first Atlantic City casino to be taken over by a lender. It had failed to pay its mortgage for more than a year.
That same week, Donald J. Trump gave up his bid to regain control of his three bankrupt Atlantic City casinos and ceded to creditors.
Atlantic City's troubles could worsen.
Maryland, which approved slots a year ago, will open its first casino at the Ocean Downs harness track by Memorial Day with 600 slot machines. Four more casinos are planned by 2012.
And in the spring, Delaware's three racetracks with slots will offer table games.
Pennsylvania casinos could have table games soon after. And the specter of two casinos on Philly's waterfront - about 60 miles away - could spell further turmoil.
Atlantic City's uneasy fortunes rest to an increasing degree on local residents such as Charles Boyer, 77, a widower and former New York City opera singer.
Boyer, who depends on a wheelchair, is in the racing room at Caesars at least three days a week, depleting his monthly Social Security checks.
"I've been losing for 57 years," Boyer said. "It's recreation.
"I always hope that the next one is the big one so I can vacation in the Caribbean."
Massachusetts tees up
In January, Massachusetts lawmakers are expected to approve a casino/slots bill now that the governor, state House speaker, and Senate president have come on board.
The state is looking toward a mix of racetracks with slot machines and resort-destination casinos to cushion a $600 million budget shortfall and create up to 10,000 jobs.
"It is still about jobs and revenue," said Massachusetts Rep. Brian Wallace, a South Boston Democrat and gambling proponent. "It's now a question of how many rather than if we will be doing any at all.
"There's a lot of good that could happen from casinos. The people in East Boston would go to work. People in the city would go to work."
But some in Boston, which could land a casino, feel the move could upend its sense of identity and style.
Boston, like Philadelphia, is known for its colonial history, museums, universities, and sports - and "we're prudish," businessman Paul Vitelli, 62, said.
Then there's the impact on people and families who get caught up in compulsions.
"Gambling is no good for families," said Cindy Tong, 44, a hostess at the Empire Garden Restaurant in Boston's Chinatown, a hub for buses leaving hourly for Connecticut's two casinos. She said some friends had gone deep into debt to support their gambling habits.
"It breaks up families," she said.
All for it, though, is Boston bartender Justin Chaput, 29, who argues that millions of Massachusetts dollars "are being exported to Connecticut casinos already."
"Why give all that money to them?"
Besides, he said, "you can still be a great city and host casinos."
A study last year by the Greater Boston Chamber of Commerce estimated that Massachusetts residents spent $800 million a year gambling in Connecticut and Rhode Island.
Foxwoods and Mohegan Sun - Connecticut's two mega-casino resorts - are nervously watching. About a third of their clientele comes from Massachusetts.
Last month Foxwoods, which has a 30 percent equity in the planned Foxwoods casino for South Philadelphia, defaulted on a $500 million loan payment, and its credit rating was downgraded for the second time in three months as its gambling revenue plummeted.
"Massachusetts will obviously have a significant, negative impact on Connecticut," said gambling consultant Joe Weinert of the Spectrum Gaming Group L.L.C. of Linwood, N.J.
Weinert said legalizing casinos in Massachusetts could encourage New Hampshire, which is exploring the idea.
Pennsylvania on a high
On Dec. 18, Bensalem's PhillyPark will open a $250 million expansion with 40 percent more slot machines - and 150 more workers.
Among them is Scott Rexroat, the former Santa Fe Station employee, who moved to Bryn Mawr with his wife and children to become the racino's food manager.
Pennsylvania "is the Vegas of 20 years ago," Rexroat said. "It's the infancy of the new direction of casinos. The customer no longer has to travel to the casino. . . . It's come to them."
Pennsylvania, with nine casinos open and five more planned, including the two in Philadelphia and one in Valley Forge, is still on a roll.
In 2005, Rendell "predicted $1 billion a year in property-tax relief from 14 operating casinos, and we are going to be close to that figure with just nine operating," said Gregory C. Fajt, chairman of the Pennsylvania Gaming Control Board.
Even though a few casinos are struggling, overall revenue grows with each casino opening. Slots revenue increased nearly 27 percent in November from a year ago.
Fajt said the nine casinos were on a pace to gross at least $1.9 billion this year, up from $1.6 billion in 2008, when there were seven casinos.
The state gets a 55 percent cut of the revenue. The money goes toward reducing property taxes, supporting the horse-racing industry, and funding economic-development projects and fire companies, among other things.
Randall Becker, 49, who owns a Lancaster lawn-care business, is delighted gambling has arrived here.
"Whether you lose or win, you're winning money for the state instead of them raising taxes all the time," he said while playing slots at Hollywood Casino in Grantville, Pa. "If it goes to help reduce school taxes, that's a good thing."
But saturation is setting in.
Standard & Poor's downgraded the credit rating for Rivers Casino, which opened to fanfare Aug. 9 on Pittsburgh's North Shore, from B to B-minus in September for underperforming.
Rivers is owned by Chicago developer Neil Bluhm, who is also majority investor in Philadelphia's proposed SugarHouse casino. The Pittsburgh property competes with two West Virginia casinos and the two-year-old Meadows Racetrack & Casino, about 29 miles away, which is having troubles of its own.
In October, Meadows laid off 100 workers, citing declining revenue because of Rivers.
Western Pennsylvania will soon face another threat from casinos in Ohio's four largest cities: Columbus, Cleveland, Cincinnati, and Toledo.
After four failed attempts by voters in the last 20 years, Ohio, with an unemployment rate of 10 percent, last month became the 13th state to allow commercial casinos.
Casino operators lobbied hard. Once focused on high-roller venues like Las Vegas, Atlantic City, and Macao, companies are trying to get toeholds in regional markets.
Penn National Gaming Inc., which owns the Hollywood Casino brand and contemplated venues in Atlantic City and Las Vegas, spent nearly $17 million lobbying Ohioans. It will have two casinos there.
The company, based in Wyomissing, Pa., saw Ohio gambling as inevitable, "given it's surrounded by gaming in almost every neighboring state," spokesman Eric Schippers said.
Some believe Ohio voters may have been swayed by the campaign of TV, radio, and billboard ads promising 34,000 jobs and billions of dollars in revenue.
"It's pretty obvious that the voters bought in to the fact that the economy is in the tank and the casinos are going to create jobs," said Robert Walgate, vice president of the nonprofit Ohio Roundtable, which worked to defeat casinos in all five campaigns.
"We're in this economic downturn, yet [casino interests] believe in Ohio the way to prop it up is to have people lose billions of dollars."
Walgate, 32, knows from experience. The former gambling addict said he stole money from relatives and racked up more than $60,000 in credit-card debt from 1996 to 2000 to gamble at a West Virginia racetrack.
"The gambling industry targets the people who can least afford it," he said.
Last weekend the bus lobby at Rivers in Pittsburgh was teeming with Ohio seniors waiting to board their bus home. Several were in wheelchairs. Some, like Narvolene Arnold, 75, who is legally blind, used a cane.
"Everyone wants something close to them," she said. "It gives you something to do. I don't want to sit around the house."
Rivers' chief operating officer, Ed Fasulo, said 10 percent of patrons, including 60 percent of those who come by bus, are from Ohio.
Among them is Cindi Condol, 50, who works for the County Clerk's Office in Cleveland. She hopes she'll one day be able to gamble on her lunch hour.
"This will give Ohio a piece of the pie."