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Massachusetts Voters Approve New Casino Development

The trend of state politicians giving the green light to casino developers – in hopes of making a dent in their budget deficits without raising taxes – is showing no sign of slowing down.

Voters in the state of Massachusetts have decided to go along with the planned construction of three new casinos there. The ballot measure – which would have repealed the 2011 law that gave the green light to the new properties – saw 60% of mid-term election voters choose “No.”

The MGM and Wynn companies were awarded the licenses at a cost of $85 million apiece and can now definitively move forward with their plans for development of the new properties. They will be located in the townships of Springfield and Everett (a suburb of Boston), respectively.

Both projects are projected to be completed sometime in 2017. Once operational, they will each pay state tax at a rate of 25%.

A third license will be awarded in January, 2015. The bidding process had been scheduled to finish up on December 1 of this year, but was pushed back pending the result of the referendum.

Opposition to the Project Easily Overcome

The construction of the new casinos had been opposed by a coalition of community activists.

State politicians as high in the pecking order as Attorney General Martha Coakley were very strongly behind the measure. It took a judicial order from the court system being issued in June to get the measure onto the ballot and give citizens of the state the opportunity to vote up or down.

The result of the vote should come as no surprise, however. It is indicative of a slew of recent victories for the casino industry in their efforts to branch out into new markets that had up until now been largely untapped for development.

What is interesting to note about this trend, however, is that many observers question its efficacy not only for state residents but for the casinos themselves as well.

Over-saturation of the Market

In a very insightful piece done for the New York Times, Josh Barro points out that the mid-term elections saw no less than eight states vote on questions affecting the gaming industry. This included traditionally conservative states such as Kansas, South Carolina, and Tennessee.

Paradoxically, this increase in gaming offerings is coming at the same time that revenue in the casino industry is actually in decline all over the nation.

The reason for this is, of course, the potential tax revenue that gaming brings with it, but with a slight twist.

While it is certainly true that there were no casinos physically present within Massachusetts’ borders prior to now, it’s all but certain that the “market” for casino patrons was already being serviced by other states.

Barro points out that support for expanded gaming is most acute in the northeast, where the potential for states to “miss out” as citizens cross borders to spend their entertainment dollars elsewhere is high. However, in the west of the country, where distances are long and state borders far, there remains broad and consistent opposition to the expansion of gaming.

The upshot is that the claim that a new gaming market is being created in Massachusetts is dubious at best. What is happening instead is that Massachusetts is re-distributing the tax revenue from an already saturated east-coast gaming market to ensure they get a piece of the already existing pie.

As a result of this process, the revenue stream continues to be diluted across more and more suppliers. The open question is, at what point does supply so far outstrip demand that operators begin to operate in the red? If projected revenues at the new casinos were to fall short — or if contraction were to come to the industry, as is already the case in Atlantic City, NJ — Massachusetts would certainly see tax revenues fall below projections as well. This could be a problem for lawmakers, who have a tendency to take the “best case” scenario when coming up with budgets.

Conclusion

The trend of constructing new gaming properties will without a doubt create a new short-term windfall for Massachusetts, the MGM, and Wynn.

What remains to be seen, however, is whether the state can beat the trend of declining revenues in the industry and become a long-term success story.

Since it is all but certain that the creation of new gaming patrons will be minimal, the project will ultimately hinge on how competitive the new casinos will be with those that already exist in the New England market.

 

 

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Bradley Chalupski

Bradley Chalupski made his first deposit onto an online poker site in 2009 and has been paying rake and following the poker scene ever since. He received his J.D. from the Seton Hall University School of Law in 2010.

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