From Tunica To Tioga Downs: Will Casinos Learn From Past Mistakes?

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There’s a big difference between failing and failing to meet expectations. Upstate New York and its budding commercial casino industry better hope that difference remains clear for years to come.

The state’s three new commercial casinos have failed to meet revenue projections in their first year. The consequences are less money for:

  • Education
  • Property tax relief
  • Host municipalities and counties
  • Non-host counties in the region

The consequences of outright failure would be catastrophic for local governments already dependent on the tax dollars they collect from these new casinos. Not to mention the future of the local economy as a whole.

The Tioga Downs Racino in Nichols, NY was converted into a full-service casino in December 2016. It was the first of four new commercial casino operations approved by the state to open. Operators expected to pull in just over $100 million in revenue in the casino’s first year of operations. Tioga Downs pulled in approximately $70 million in gross gaming revenue in 2017, about $30 million short of expectations.

Del Lago Resort & Casino in Tyre, NY opened in February 2017. Year one revenues were projected to reach $263 million. Del Lago pulled in a little over $110 million in gross gaming revenue in its first nine months of operations. It now looks like del Lago will end its first year with close to $150 million in total gaming revenue, at least $110 million less than planned.

Finally, Rivers Casino & Resort in Schenectady, NY also opened in February. Through its first nine months, Rivers earned a little over $103 million in gross gaming revenues. It appears it will end its first year with somewhere in the neighborhood of $140 million in gaming revenue. That’s more than $80 million short of the $222 million in first year revenues operators originally predicted.

Upstate New York casinos fall $220 million short

The $1.2 billion Resorts World Catskills, Upstate New York’s fourth new commercial casino property open on Feb. 8. Just as the first three new commercial casinos are officially announcing they combined to fall $220 million short of revenue expectations.

Of course, failing to meet revenue expectations is not exactly failing. State and local governments are certainly thankful for that.

Through the first nine months del Lago and Rivers were open, all three new casino operations combined to generate more than $66 million for education and property tax relief. Host municipalities and counties got more than $4 million each. Plus, non-host counties in the region pulled in another $6.5-million plus.

Even though it was lower than expected, for many of these municipalities and counties, this money represents a good percentage of their budget. They will quickly come to depend on it and therein lies the problem.

If this newfound revenue source dries up, if the casinos fail, will all these local governments depending on them fail too?

Gambling and education

And what about all that money earmarked for education? New York state’s schools are quickly becoming even more dependent on gambling money to survive. What would they do if that well went dry?

In November 2017, Resorts World Casino in Queens reported it had generated more than $2 billion for New York’s lottery education fund since opening its doors at the Aqueduct Raceway in 2011. Apparently the money was used to hire 37,000 new teachers in New York City, supply more than 27 million textbooks to students across the state, and fund as many as 142 million student field trips to places like the Bronx Zoo.

If the public suddenly loses it’s taste for gambling in New York state, the education system will have to do without all that.

In Upstate New York, and all over the state, those depending on tax dollars from gambling need to be aware the money might not always be there. They also need to be smart with it while it is.

The truth about Tunica

Tunica County, Mississippi was among the poorest in the country in the 1980s. Unemployment rates were through the roof, and the percentage of people living below the poverty line was astronomical. Casinos built in the 1990s were supposed to save it.

For a while it looked like they did. Everybody who wanted a job in a casino got one. The county pulled in hundreds of millions of dollars in tax revenue.

But instead of investing that money in skills training and programs to lift people out of poverty in a sustainable way, the county built a riverfront wedding hall, an Olympic-size indoor swimming pool and a PGA golf course. From 1993 to 2015, Tunica County pulled in over $750 million in gambling tax revenue. They used only 2.5 percent of it on social programs to help the poor.

Tunica’s gambling industry boomed during that time. As many as 11 casinos suddenly sprouted up. It became the country’s third-largest gambling destination behind Las Vegas, Nevada and Atlantic City, New Jersey. Then the bottom dropped out.

A global economic crisis had Americans gambling less, even though the number of casinos across the country was increasing exponentially.

Increased competition crushed Tunica. Then flooding in 2011 left a number of its casinos with major damage. People stopped traveling to Mississippi to gamble. Casinos closed or scaled down operations. Thousands of jobs and millions in tax dollars were suddenly gone.

The lesson to be learned

After more than two decades of gambling in Tunica, the county was right back where it started. Except now there’s a great place to get married, go swimming and play golf, none of which most of its residents can afford to do.

The county became dependent on tax dollars from casinos. It also failed to invest that money in ways that could have lifted its residents up out of poverty. When the well went dry, Tunica was left looking worse off than it was before the casinos came to save it.

There’s obviously a big difference between Upstate New York and Tunica, Mississippi. However, if New York fails to heed the warnings about casino tax dollar dependence that Tunica can provide, that difference will get smaller everyday.

The new commercial casinos in Upstate New York failing to meet revenue expectations does not mean the local casino industry is failing. However, the state needs make sure its prepared if it ever does.

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Martin Derbyshire

About

Martin Derbyshire has more than ten years of experience reporting on the poker, online gambling, and land-based casino industries for a variety of publications including Bluff Magazine, PokerNews, and PokerListings. He has traveled extensively, attending tournaments and interviewing major players in the gambling world.

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