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Gaming Out the Gaming Game

November 10, 2014

Start with the big picture.  Most neighboring states and Canada have full casino gaming.  New Yorkers like to gamble and they patronize these facilities. Do they ever. They spend about $3 billion annually at out of state sites. That’s quite an outflow of money.

This has been going on for decades, but recently New York woke up and decided to get into the gaming game. Now there’s a state panel deliberating on where to locate new casinos.

Not to be smart-alecky, but when there’s a board or commission set up by our Governor, everyone snickers about its “independence.”  But this time, with this panel, it’s probably going to be different. There’s a lot of scrutiny as a result of Moreland. In addition, there were several previous bungled gaming ventures and nobody wants a repeat.  So it’s a good bet that this decision making process will be on the level.

That said, the panel faces difficult choices, made more difficult, we think, by a set of conditions forced upon it. In this regard, board members are supposed to decide on casino locations using weighted criteria: 70 percent economic activity and business development factors; 20 percent local impact and siting factors; and 10 percent workforce enhancement factors.

While these words are intelligible to us, we have no idea what it all means. A simpler and better construct would have been this: Where will the casino have the best chance of success? Isn’t this the key after all? A successful casino helps stem the outflow and creates jobs and tax revenue, while a casino that struggles doesn’t.  This “chance of success” measure is all the more important when you consider the fact that gaming isn’t a growth industry. In fact, casinos are struggling nationwide, and many are closing down.

There’s another restriction on the board. The state has been carved up into three gaming zones. It’s an artificial construct that unfortunately pits communities against each other.

The first zone is the capital region. And here it made the most sense for Saratoga to be the site.  It’s a tourist town already. It had casinos in its heyday and it has a racino now. That facility could easily become a very successful full casino without changing much in the community. But no. Local people got worked up against the project. They protested. They picketed local officials who then backed off.  Supposedly, this was all completely organic, but the illogic of it makes us wonder. (It’s ok to bet on horses, but not cards?)

With Saratoga out, Schenectady is supposed to be a front runner. The appeal here is that the downtrodden city would get an economic boost, and it would. It’s just that the Schenectady project is rather small. In fact, it’s a fraction of the size of the massive new MGM casino soon to be built in Springfield, Mass. The key question is whether people will go to Schenectady to a small facility or whether they’ll drive an hour to the bigger resort style casino in Springfield?

East Greenbush would seem to be the more logical site. It’s a bigger project that would be located near the Thruway. New Yorkers traveling to casinos in Massachusetts or Connecticut would have to drive right by it. But again local residents are worked up. Again, they are protesting and picketing.  And again, it’s all supposed to be homegrown.

There are signs, however, that some of the same people have been involved in protests in both Saratoga and East Greenbush. Some of them appear to be professional protesters who oppose gambling in principle. Others may be the agents of other gaming companies who are trying to undermine the competition.

It’s interesting to note that no one is really protesting Schenectady. That might be because a small gaming facility in a region that isn’t a tourist draw won’t be much of a real threat to other gaming interests.

In the lower Hudson, the choice between a Catskill site and an Orange County site is even clearer using our “most successful site” construct.  It’s all about demographics. An Orange casino would be vastly more successful than Catskill casino and everybody pretty much knows it.

The same is true in the mid-upstate region, where the zone stretches like a dog leg from Binghamton to Rochester. If demographics matter, there’s simply no way you’d pick a Binghamton or Tioga County casino over a Rochester-area facility.

Don’t get the wrong idea about this analysis. We’re not down on the Schenectady, Catskills and Binghamton bids. We applaud these communities in their efforts to resurrect themselves. If the criteria for making a casino location decision was greatest local benefit, then the answer is Schenectady, the Catskills and Binghamton.

It’s just that placing a casino in these communities entails a greater risk. Again, the gaming industry is not growing. It’s saturated. It’s contracting. The entire industry could be undermined by a federal decision authorizing online gaming. If that happened, it’s likely that only the coolest, hippest, most multi-dimensional destination type facility would survive, according to industry analysts.

In the end, the best thing about the whole gaming effort is that tax dollars aren’t involved. The state is simply authorizing private interests to construct the casinos in authorized locations. If they underperform or fail, it’s more of a missed opportunity than loss to the state.

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