Open Thread: The Table Gaming Referenda

1. STATE CONSTITUTIONAL APPROVAL - (APPROVAL OF AN ACT AUTHORIZING STATE-OPERATED CASINO GAMING AT TWIN RIVER IN THE TOWN OF LINCOLN) - (Section 22 of Article VI of the Constitution)

Shall an act be approved which would authorize the facility known as “Twin River” in the town of Lincoln to add state-operated casino gaming, such as table games, to the types of gambling it offers?

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2. STATE CONSTITUTIONAL APPROVAL - (APPROVAL OF AN ACT AUTHORIZING STATE-OPERATED CASINO GAMING AT NEWPORT GRAND IN THE CITY OF NEWPORT) - (Section 22 of Article VI of the Constitution)

Shall an act be approved which would authorize the facility known as “Newport Grand” in the city of Newport to add state-operated casino gaming, such as table games, to the types of gambling it offers?

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The conventional wisdom seems to be that the two table gaming referenda on this year's Rhode Island general election ballot are going to pass. A recent Taubman Center poll recorded 55+% support for both questions (with a 4.5% margin of error), and supporters of table gaming at Twin River have run one of the most visible broadcast advertising campaigns in this cycle with little visible opposition.

So is the CW correct, if so, will table gaming be good for the state of Rhode Island, and is there any insight to be had into what residents of Lincoln and Newport, who would still have to approve table gaming in local referenda to allow it to happen, think of all this?

Trillo's Flawed Government Theory

I don't relish the observation, but it seems to me that Rep. Joe Trillo (R, Warwick) is displaying an unhealthy political philosophy in his quest for a Quonset casino:

"It would have to be bigger than Foxwoods, bigger than Mohegan Sun, otherwise it's not going to work," he said. "To just go with a regional casino, it won't be able to compete."

Trillo also envisioned a scenario in which a single operator would buy and run the privately-owned Twin River and Newport Grand, and the new Quonset Point casino. Asked if he had been approached by anyone interested in making such a major investment while the Mohegan Sun struggles financially, Trillo said an emphatic no: "I have purposely stayed away from any casino operators."

It's well and good, if true, that Trillo is avoiding the corrupting influence of those whose money would be necessary to make his vision a reality, but of itself, a vision of such scope and specificity is not an appropriate basis for government action. It isn't the job of elected officials to decide what sort of business on what sort of scale for what sort of market their area ought to have and then go about developing it.

Government should stick to ensuring that the marketplace remains competitive, broadly, and that its policies are not hindering the people from pursuing activities that, within limited boundaries of order and cultural integrity, they believe will be profitable and beneficial.

Deval Patrick Signs Twin Rivers' Death Warrant

Today, Massachusetts Governor Deval Patrick signed a bill into law that will allow for up to three casinos in the Bay State. One of which that is being discussed is a full-blown destination resort casino run by an Indian tribe. The leading candidate for this casino seems to be the Wampanoags in southeastern Mass. They're looking for land in the Middleboro/Mashpee/Fall River area.

Other casinos, including one being slots-only, could go into a current horse-racing track, possibly even the Plainridge Racecourse in Plainville, not far from the Rhode Island border.

If people can just drive less than 30 minutes and get to a full-blown Vegas style casino, why wouldn't they go there, to have the full array of gaming options, including table games, instead of only having the slots available at Twin River?

So how much could be lost by Rhode Island? According to the Providence Journal's Randal Edgar, the state took in $270.4M last year. Rhode Island's annual budget is about $7 billion, approximately half of which is federally funded. So if RI revenues are about $3.5 billion, what happens when you remove about $270 million from that number?

Now, RI wants to look into allowing the slots parlors to have table games? This seems like too little, too late. Mass beat us to the punch, and that's where the money will go.

Lawsuit Against 2012 Casino Referendum: Do the Narragansett Have a Point?

The ProJo's Kathy Gregg reports. (All emphasis added.)

In a lawsuit filed in Superior Court on Wednesday, the tribe contends the law calling for the referendum is both “unconstitutional and vague.”

Why?

The tribe hung its legal argument on the same requirement in the state Constitution that tripped up its first two efforts to get a Harrah’s-backed casino proposal for West Warwick on the state ballot. It says: “All lotteries shall be prohibited in the State except lotteries operated by the State,” which has been broadly interpreted to include most traditional games of chance at a casino.

The 2012 referendum for a casino, which passed the General Assembly last session as Article 25 of the budget bill (starting at Page 306) does, indeed, specify that the casino shall be at "Twin Rivers" in Lincoln.

Isn't Twin Rivers a privately owned facility on privately owned land? So how did the General Assembly address the requirement that (paraphrasing the Constitution) all lotteries shall be operated by the State?

The excerpts below from Article 25 starts on Page 307. Please note in particular the section in bold.

42-61.2-2.1. State authorized to operate casino gaming. -- (a) State -operated casino gaming shall be authorized at the facility of the licensed video lottery terminal retailer known as "Twin River" located in the town of Lincoln; provided, that the requirements of Article VI, Section 22 of the Rhode Island Constitution are met with respect to said facility at the general election next held after enactment of this section. ...

(2) Pursuant to Article VI, Section 15 of the Rhode Island Constitution and the specific powers, authorities and safeguards set forth in subsection (c) herein in connection with the operation of casino gaming, the state shall have full operational control over the specified location at which casino gaming shall be conducted

The lawsuit by the Narragansett points out that

The voters of the State of Rhode Island are being asked to vote on … the expansion of gaming without any definition of what state operation of this expansion will consist of, what specific table games are going to be operated and what entity or personnel are going to operate them.

The statute is unconstitutional because the State must have the power to make decisions about all aspects of the functioning of any state casino, and this statute either provides no standard at all or allows a private entity unconstitutional control over certain aspects of the operation of the casino.

Permit me to note here that, on a personal level, I oppose casinos, lotteries and all gambling, whoever runs them. I'll once again be voting "No" to a casino at the ballot box next year. You can close everything up and let the state suck wind for that revenue, for all I care.

However, there appears to be a major question of consistency here. How would a "state operated" casino in a privately/Narragansett owned facility on privately owned land in Charlestown or - that paragon of good and responsible government - West Warwick have differed from a "state operated" casino in a privately owned facility on privately owned land in Lincoln? Couldn't the State have just as easily had (quoting the law for the Lincoln location)

full operational control over the specified location

for a facility owned by the Narragansett tribe?

The Gamblin' Regent

The news is that Twin River is lobbying to be a full-fledged casino again (which really just means making the virtual table games real). But what caught my attention is who is helping to lead the charge: George Caruolo, Governor Chafee's nominee to be the Chair of the Board of Regents for Elementary and Secondary Education.

Caruolo, a one-time advisor to the Mashantucket Pequots, registered to lobby for the holding corporation that owns Twin River on Jan. 26. A week later, he surfaced as Governor Chafee’s choice to chair the Board of Regents for Elementary and Secondary Education.

After his lobbyist filing came to light on Monday, Chafee spokesman Michael Trainor said Caruolo, a former adviser to the tribe that owns Foxwoods casino in Connecticut, disclosed his relationship with the owners of the Lincoln slot parlor “when the governor first approached him” about chairing the board that sets education policy for the state.

“The governor sees no problem with George taking on lobbying assignments,” including this one, said Trainor...

Well, I see a problem. Are we so jaded, so anything-goes as long as its "legal" that we can't see the problem with the guy in charge of educating our kids also actively lobbying for a gambling operation? This is what happens when our political leaders keep going into the same shallow pool of insider "talent" whenever a leadership position comes up (see Hunsinger, Christine). Yeah, no cronyism here.

The Ghost of Election Day Past

According to Elizabeth Crum at National Review Online's election blog, a couple of names familiar to Rhode Island political-watchers are showing up in the Nevada Senate race, those names being "Harrah's" and "Jan Jones"...

Executives at the casino giant Harrah’s pushed company employees to vote early in an all-out effort to help the Harry Reid campaign, according to internal emails obtained by Battle ‘10.

The stepped-up effort began Wednesday when a Reid staffer sent an email pleading for help to Harrah’s top lobbyist, Jan Jones. Soon after, Marybel Batjer, Harrah’s vice president of public policy and communications, distributed that plea via email to executives throughout the company...

On Friday, Western Regional President Tom Jenkin sent out a follow-up email showing a total vote count for Harrah’s properties along with the percentages of employees who had voted at each property. Attached to the email was a spreadsheet showing employee names and at which property they worked. Supervisors were asked to fill in codes explaining why their employees had not yet voted.

The Harrah’s employee who forwarded the emails asked not to be identified due to fear of reprisal. The employee said the pressure from upper management was “disturbing.”

“We were asked to talk to people individually to find out why they had not yet voted and to fill in these spreadsheets explaining why,” the employee said. “I did not feel comfortable doing that.”

Those who voted against casino referendum four years ago can pat themselves on the back for preventing a truly destructive beast from being unleashed on RI politics.

No Casino Referendum for Rhode Island. Place Your Bets on One for Mass.

You may recall where Rhode Island's had left off: the General Assembly had passed a referendum specific to Lincoln and Newport which the Gov had then vetoed, citing its excess of site specificity and its dearth of fiscal detail.

While I strongly support voter referenda, and have spoken in favor of questions being put to the citizens of Rhode Island on issues of expanding gaming, I cannot support such initiatives when critical financial information is unknown and the normal referenda process is altered without good reason. ...

Leaving the question of splits to future determination is a deeply flawed strategy because the very grant of gaming authority to a private party, before determining the financial arrangement with the state, eviscerates the negotiating power of the state.

This week, Turn to Ten brought us the latest.

House spokesman Larry Berman said Tuesday the House doesn't plan to return this summer for an override.

Meanwhile, next door, Gov Patrick's veto had rendered uncertain at best the prospect of a casino referendum for the consideration of Mass voters. However, the situation has been complicated by Congress' passage of the $26 billion Local Public Employee Appreciation Act (which President Obama signed in the fervent hope that it would dim the memory in certain minds of the attempt by his Education Secretary to raise the achievement level of the country's worst schools). Getting those funds flowing to Massachusetts will require official action by the state, thereby raising the odds that the legislature will reconvene in time to either override Patrick's veto or pass a casino bill more to his liking. This is far from a cert, however; the action may come down to the wire (i.e., the deadline to print ballots) because, until this latest development, the Senate President seemed disinclined to reconvene anytime soon. Now it remains to be seen whether election-year avarice will overcome inertia in the final sprint.

ProJo Editors: Confused on Gambling

Ian Donnis points to the ProJo editorial pushing for an override of the Governor's veto of the most recent Casino ballot question and reminds us that, not so long ago, the ProJo was decidedly anti-casino. Ian puts the change in the ProJo's stance towards gambling at around 2006 and some digging in the AR archives supports that. Back in 2006, I posted on the aforementioned ProJo switcheroo and that post had an addendum re-stating the research done by Dan Yorke, who looked at previous casino-related ProJo editorials:

"Just Say No to Casino" 1994 - Against the economics of it vs. other options.
"No Casino" November 6, 1994 - About the inherent corruption around casinos.
"Vote No in West Warwick" June 1999 - Money spent by RIers in a casino will go out of state.
"Allow Vote on Casino" - June 6, 2000 - A big casino will raise cost of public services (police, fire), hurt local businesses, hurt the quality of life and send $ out of state. But voters should decide.
"Put Casino to Vote" June 20, 2004 - Harrah's casino would hurt RI, create a net outflow of $ and potentially fuel corruption. But voters should decide.

Their most recent editorial essentially says that while there is a lot of bad stuff and serious unanswered questions with the casino ballot question they still support it. (Kind of like what they said about the recent health care reform, incidentally). But they then argue that the General Assembly should return from their break, make some fixes and override the Governor's veto for fear of losing gambling revenue to Massachusetts. Confused.

From Tax to Entitlement

Sal Capaldo, of Attleboro Falls, has an interesting idea and suggestion:

For those politicians who have walked through Foxwoods and Mohegan Sun on any weekday, they would have observed folks mindlessly sitting at slot machines waiting for a financial score that never comes.

The folks filling these venues are regularly found buying cigarettes, playing Mega-bucks, standing in line at the welfare office or perhaps doing nothing productive at all. Additionally, let's not forget our senior citizens who flock to these casinos to deposit their Social Security checks. Why don't we move every senior center across the state to a central location at Foxwoods? I can see it now — vans as far as the eye can see and acres of handicapped parking spots next to a propane filling station. Now that's a vision ...

Since we are now offering government subsidies for everything from dental appointments to bus service, why don't we stop the madness and just give low-income Rhode Islanders free lottery tickets and cigarettes? Let's face it, long-term it would be cheaper than asking our state brain trust to offer up incentives to small businesses looking to expand and hire.

From government officials' perspective, such a plan might be win-win. They would claim the permanent votes of people addicted to gambling and nicotine, then when years of idleness and smoke inhalation are inevitably reflected in the health of the subsidized, politicians will have an issue on which to demagogue in order to take upon themselves the authority to further micromanage the healthcare industry — especially its financing.

The fatal flaw, however, may be the government's up-front reliance on the money that gambling and tobacco enable it to extract from working class citizens and seniors without having to vote for broad-based tax increases. Some (central) planning would have to be done to transfer that burden to the chosen minority.

Viva Rhode Island?

I've traveled all around the world, but one of the places I'd never been was Las Vegas. Until last week, that is. With the current recession, Las Vegas is offering several deals to get bodies into the casinos. With my wife and I looking for an economical getaway to celebrate our 15th wedding anniversary, Vegas seemed to fit the bill.

However, while flights and accommodations may be cheap, the prices "on the ground" ain't like the old days (at least from what I've heard). There are no $5 all-you-can-eat buffets around every corner--everything costs about the same or more as every other tourist destination elsewhere in the country and shows (even at half price) are expensive for penny-pinching Yankees like us (especially if you have no burning desire to see boomer acts like Donny and Marie or one of the 6 Cirque de Soleil shows offered at different spots). There is still plenty to do with multiple, themed casinos up and down the strip and the throwback "Fremont Street Experience" (aka "Glitter Gulch") in downtown Vegas.

But there were some annoyances. Nearly all of the casinos had people stationed at entrances trying to reel you in with "deals" that usually involve hearing a pitch about timeshares. Then there were the street hawkers, including groups of people lined up on the sidewalk trying to hand you little cards with naked pics of ladies and phone numbers for anyone looking for some "company."

These so-called pornslappers (here's a good description and a picture) didn't care if you were man, woman or together..they still stuck them in front of you. And if you looked down at the sidewalk, you'd be able to see discarded cards all over the place. Then there was the "stripper bus" where strippers were driven up and down the strip in a plexi-glass bus advertising their wares by dancing around a pole. As I've said, I've been all around the world as a merchant mariner, and Vegas' overt hawking of sex is nearly unrivaled--even when compared to the seamier sections of port cities in 3rd world countries! So, suffice to say--despite recent attempts to advertise otherwise--Vegas still ain't no place for families. That being said, it is still a neat place to see, if nothing else than to watch people and take in hedonism at its "finest"!

Justin recently offered a qualified point about preferring table games over slots. I agree. If gambling on table games is like cocaine, video slots are like crack. Seat after seat filled with people, staring vacantly at monitors and pushing buttons. There is a serious disconnect going on there. While you can lose as much or more money at a table game, at least there is actual interaction with real people.

Casinos are designed to keep you amongst the slots and tables, spending your money:

Bill Friedman has made a career of analyzing casino design and profit, and consulting on casinos internationally, including Las Vegas' Mirage. His thirteen design principles include: "1: A physically segmented casino beats an open barn" and "8: Low ceilings beat high ceilings" to create a more intimate space for the gambler and "11: Pathways emphasizing the gambling-equipment beat the yellow brick road" which discourages creating obvious passageways that lead people past the gambling areas without stopping.

Professor Norman Klein describes a successful casino floor as a "Happy Imprisonment," a mousetrap for consumers. "You have infinite choice, but seemingly no way out. Casino spaces are scripted particularly as ergonomic labyrinths. Entrances and exits remain askew. The atmosphere is immersive. Finding your way back from the bathroom can be difficult." Walls of slot machines send you towards ... more slot machines.

Believe me, they do. Harrah's has low ceilings, while places like the Bellagio and Venetian have higher. (I preferred higher ceilings because they seemed to deal with the cigarette/cigar smoke better). I'm sure similar measures to keep 'em gambling have been taken in Twin River and the Connecticut casinos. Do Rhode Islanders really want their state government involved in a revenue generating operation that relies on "mousetraps" and "labyrinths" to keep working Rhode Islanders spending their money? Although it may be too late to stop the train in RI, after fully immersing myself in the casino culture for a week, I find I'm even more opposed to the idea of a state-run casino, for both aesthetic and economic reasons, than I was before.

This is especially because the core problem of having state revenue dependent on gambling exists in Nevada, too. Casino revenue continues to go down, with gambling returns decreasing for 23 straight months. With so much else going wrong with Nevada's economy, which joined Rhode Island as one of the 10 states in deepest trouble, the state is looking now more than ever towards gambling--30% of state revenues according to a local news report I saw while out there--as a savior. But it's not coming through for them now, though there is a hope that as the economy improves and tourist traffic increases, so will gambling revenue.

That outside gambling revenue from tourists, as Froma Harrop recently explained, is what makes Vegas "work" for funding government. That isn't really the case in other places, like Rhode Island, where the gambling infrastructure is more akin to Connecticut than Nevada. In Connecticut, revenues are also going down, so the Nutmeg state casinos banded together to market against Atlantic City. But the state's take is still going down. The problem is that competition for the Northeast gambler is intense already and the importance of proximity seems to trump anything else. Rhode Island is fooling itself if it thinks it will attract from farther and wider with a bigger and better operation.

Make no mistake, I'd expect a full-fledged casino (ie; with table games) to be able to pull in more revenue. Yet, despite all the glitz and lights, one can sense that there is a seamier underbelly to any casino operation. Now, I certainly don't think that some of the "sinful" things I saw in Vegas would translate to sleepy little Lincoln or elsewhere in the state, but there can be little doubt that as a gambling operation grows there will be a commensurate increase in the problems--and the infrastructure (police, fire) required to mitigate those problems-- associated with the "casino culture."

Finally, my main concern is with gambling addiction: the sort acquired by a state government that, over the last decade--and partly fueled by increasing gambling revenue--oversaw an increase in the state budget that far outpaced inflation. Doubling down pays off when you're rolling 7's. But, as the last few years in the gambling capital of Las Vegas has shown, even high rollers eventually you crap out.

Addicted to Gambling

It would go too far to suggest that my position on casinos is evolving, but one could fairly say that my balance of the civic and the moral is shifting a bit. Maura Casey explains the following in a piece that calls on "the moral leadership of the country" to do something about the proliferation of casinos and the rapid increase in problem gambling (emphasis in original):

Slot machines have long been programmed to show "near misses" and give gamblers the impression that they came this close to winning, the better to encourage them to keep playing. The machines give back enough money in the process to make gamblers feel like winners even when they are losing. But Harrah's developed the technique of intervening when reality began to dawn on gamblers—when they lost so much the experience was becoming negative. The company tracked, in real time, customers' losing streaks and would send "luck ambassadors" to perk them up, give them a token gift—free lunch or some free credits on the machine—to reduce their perception of losing and keep them gambling longer.

In the process, Harrah's discovered that 90 percent of its profits came from 10 percent of its most avid customers, according to Binkley. This is unsurprising. Many reports suggest that addicts produce a disproportionate share of casino profits. A 1998 Nova Scotia study found that 6 percent of regular gamblers produced 96 percent of gambling revenue, and a whopping 54 percent of the revenue came from just 1 percent of problem gamblers—leading researchers to conclude that, at any one time, half the patrons in front of slot machines in Nova Scotia were problem gamblers. A 1999 study estimated that more than 42 percent of all spending at Indian-reservation casinos came from problem gamblers. A study in Australia concluded that problem gamblers were only 4.7 percent of the population yet generated 42 percent of machine revenues.

I still believe that people ought to be able to gamble, if they like, although I believe states and communities should be able to determine the shape of their society, and I oppose large gambling facilities in Rhode Island. On the other hand, I'm persuaded that regulations ought to favor table games over slot machines, and Rhode Island currently forbids the former while promoting the latter, creating an irrational predicament.

Whatever the case, I remain firmly convinced about the immorality and total lack of civic prudence for the government to take in more revenue from gambling than from any other industry within the state. It makes a junkie out of the regulator.

Gambling to be Murphy's Swan Song?

Current RI House Speaker William Murphy announced his retirement and it sounds like he'd like to get gambling done before he exits the stage (via 7 to 7):

A day after confirming his plans to leave the rostrum after next year, House Speaker William J. Murphy is saying the General Assembly needs to "revisit'' casino gambling.

He said he "would not be averse'' to putting another referendum question on the 2010 ballot, asking voters whether they would allow full-scale gambling.

"We have to look at it,'' he said.

During an interview with Buddy Cianci on WPRO-AM radio, Murphy, D-West Warwick, said he believes Rhode Island needs to pay close attention to what Massachusetts does on the gambling front, because any such move could make a huge dent in a major source of Rhode Island revenue.

He did not immediately specify whether he was talkiing about expanding the options at the state's two existing slot parlors: Twin River and Newport Grand. Murphy was a chief backer of the failed 2006 ballot proposal to allow a Harrah's-financed Narragansett Indian casino in his hometown of West Warwick.

Wonder if he has a future with a gambling interest in his plans?

This would tie in with Dan Yorke's thesis: That Murphy has been holding off on calling the House back to avoid the House having to consider legislation that could be submitted by those who want dog racing back at Twin River. If that were to occur, it would muck up the ongoing Twin River bankruptcy proceedings (change the revenue stream picture, etc.) and also ruin the expansion plans (ie; full-fledged casino), which is something Murphy doesn't want for personal and professional reasons. So, he's stalled on calling the House back to "bring around" some of the dog-racing proponents and, hopefully, until after the bankruptcy proceedings are over.

When All Else Fails, More Gambling...Until That Fails

Revenue is down $100 million from what was projected. Twin River is in serious trouble, putting another $248 million in revenue for the state at risk. Faced with this, there has been renewed interest by the legislature to ask Rhode Island voters to allow casino gambling--again. It's all too predictable. Back in July 2005 I wrote:

While gambling can be addictive for the individual, government can become just as addicted to the revenue that gambling generates. History has shown that the appetite of the RI State government increases faster than the revenue pie can be enlarged. Remember the windfall of the tobacco settlement? The future can almost be predicted. The legislature will inevitably earmark all of this new gambling revenue for necessary programs on which many citizens will come to rely. Eventually, another budget shortfall will occur and, rather than rein in government spending, another quick fix (like a Narragansett Casino) will be sought. But there are only so many magic bullets in the gambling gun. We have to deal with the root cause, too much government spending, in a realistic way or the false promise that gambling offers could end up hitting us all right in the wallet.

There are several ways to reduce government spending--pension reform, consolidation, plain old cuts--but that's not what we're hearing about. Instead--more gambling!!! Haven't our legislators been vainly looking for the pot-o-gold at the end of that false rainbow for long enough?

Suddenly, the Casino Rears its Ugly Head Again

I didn't support a full fledged casino when proposed with the facade of ownership by the Narragansett, for whom it is difficult not to have some sympathy. Why would I support it when 100% of the post-operator revenue would go to a government that, through the politically motivated actions of its elected officials, has been fiscally irresponsible for the last couple of decades?

State Sen. John J. Tassoni Jr. is proposing an amendment to the state Constitution to allow full-scale casino gambling at both Twin River and Newport Grand.

With a crucial deadline looming for Twin River to pull itself back from the brink of bankruptcy, House Speaker William. J. Murphy yesterday said state leaders are at a point where they need to consider all options, including a state buyout of the Lincoln dog track and slot parlor, to "protect'' the state's anticipated $246.8-million share of the slot revenue from there.

Less Stable than Expected and Morally Bankrupt

Well, it appears that the house doesn't always win:

The Mohegan Sun casino is slashing the salaries of its nearly 10,000 employees, after seeing slot revenues drop last year for the first time since it opened 13 years ago.

In a statement, the casino said top executives will lose 10 percent of their wages; middle management will give up 7.5 percent of income and hourly employees will see their paychecks shrink by 4 percent.

Bonuses will also be eliminated, as well as contributions to employee retirement accounts, one of the benefits Mohegan Sun has cited in boasting of its "reputation as one of the premier employers in the region."

What's worse, in my opinion, is the light that the following shines on the general motivation to invest in gambling, namely the stability of the revenue stream:

The combination of falling home values, rising unemployment and turmoil on Wall Street have helped disprove the conventional wisdom that gamblers will keep gambling even in times of economic troubles.

In recent months, Mohegan Sun has seen fewer visitors, and its more loyal customers are making shorter visits, wagering less money and cutting back on their eating and drinking. "The market and the economy have been deteriorating, and it's made us take steps to offset that," Mohegan Sun’s chief executive officer, Mitchell Etess, said in an interview yesterday. "Everyone always thought casinos would be more resistant to economic recessions. We're beyond a recession here."

In other words, one of the attractions of the business is the expectation that people will continue gambling their money away even when they can least afford it. Does that sound like the sort of enterprise on which our government ought to be heavily reliant?

Protecting the State's Gambling Investment

ChasWalker has a good post up at RI Future, adding some color to the new procedures implemented by the state for protecting the nightly haul from Twin River, in the event of the casino operator suddenly declaring bankruptcy.

Based on ChasWalker's parameters and using special pre-cognitive predictive software just installed on my computer, I've run a simulation that visualizes what the last day at Twin River could look like, if Twin River goes bankrupt after part of the equity in the state's lottery system has been given to the employee pension fund, meaning that there are three parties with a direct and major stake in all winnings.

To see the results, click here.

Gambling Revenue Counteroffer?

Robert Walsh's controversial proposal to permanently dedicate a portion of Rhode Island's gambling system to the state pension fund makes the lede of the Katherine Gregg/Paul Grimaldi article in today's Projo even more eye-catching than it would normally be…

The owners of Twin River are offering the state upward of $500 million up front in return for slicing by more than half the percentage of money the state gets from the slot parlor.

The offer is part of Twin River’s plan to solve its own “dire” financial crisis. Twin River has missed loan payments to its bank and is in danger of falling into bankruptcy. “The situation is dire. We are standing on the edge of a precipice,” Twin River spokeswoman Patti Doyle said yesterday.

But based on the raw numbers presented in the article, it's difficult to see the Twin River proposal as a good deal for the state…

Meeting with House Speaker William J. Murphy earlier this week, the Twin River delegation offered the $500 million if the state would reduce its cut of the slot revenue from 61.45 percent to 25 percent....

The state anticipates $261.4 million from Twin River alone in the fiscal year beginning July 1, and that does not include any of the additional money that newly approved 24-hour gambling on weekends and holidays is expected to generate.

Let's see, 25 is roughly 40% of 61-and-change. That means the state would collect, again in rough terms, about $104 million per year under the new rate, approximately $155-$160 million less than it collects now, meaning that after just 3 1/4 years (500-divided-by-155) the state ends up with less money than it otherwise would have taken in.

Trading a reduction in revenue in-perpetuity for a short-term boost that evaporates after three years doesn't seem like sound fiscal policy to me, unless you believe for some reason that gambling is on the verge of dying here in Rhode Island, which I don't think anyone is forecasting.

Later on in the article, Gregg and Grimaldi ask the first question that I know occurred to me -- and I suspect occurred to others -- immediately upon viewing the headline…

Asked how Twin River’s owners could afford to offer the state a $500-million upfront payment when they can’t afford to pay off their outstanding loans, Doyle said: “If we are able to reduce our tax rate overall, the lending community will look more favorably on our relationship with the state” and presumably be “willing to advance the upfront payment.”

Do you buy this answer? Or do you perhaps take a more cynical view, that this is an attempt to head-off the recent proposal made by Mr. Walsh and protect the full value of a lucrative revenue stream?

If you don't take the cynical view, does the Walsh proposal still make sense, if Twin Rivers is going bankrupt? Or do you take a doubly-cynical view that this is a ploy by Twin Rivers to make them seem less fiscally sound than they may actually be, reducing any potential enthusiasm on Smith Hill for the Walsh plan? Or is that just too many layers of cynicism heaped upon one another?

UPDATE:

If commenter "ChuckR" doesn't mind, I'm going to mark him down in the "cynical but accurate" column...

If it was a good deal for the state, it wouldn't have been offered.

Patrick Kennedy, National Casino Advocate

Gambling lobbyists appear to have found a reliable go-to guy in the U.S. Congress -- Rhode Island Congressman Patrick Kennedy. The Port Huron Times Herald has the details (h/t RISC)…

A bill that would pave the way for a casino in Port Huron picked up a third sponsor last week when a Rhode Island congressman endorsed it.

Rep. Patrick Kennedy, a Democrat, has signed on as a co-sponsor of H.R. 2176, which calls for federal approval of a 2002 land swap between the state of Michigan and the Bay Mills Indian Community of the Upper Peninsula.

The bill was introduced May 3 by Rep. Bart Stupak, D-Menominee, and co-sponsored by Rep. Candice Miller, R-Harrison Township. It was referred to the House Committee on Natural Resources, where it has languished for six months.

"In approving this settlement, Congress can do right by the Bay Mills tribe and recognize what the people of Michigan already know: That the settlement is both fair and in the best interests of all parties involved," Kennedy said in a statement issued Friday.

The tribe gave up its long-standing claim to 110 acres of property at Charlotte Beach, a community on the St. Marys River, in exchange for a reservation on the 15-acre Thomas Edison Inn property in Port Huron.

The agreement has been bitterly opposed by Detroit Mayor Kwame Kilpatrick, who contends it could take business from the three casinos in his city. It also is opposed by most of Michigan's other Indian tribes, particularly the Saginaw Chippewas.

How long do you think it will be before Congressman Kennedy is helping to push a casino on Rhode Island over local objections?

Circumventing Inconvenient Laws to Build a Casino

The destination casino lives. The Rhode Island Statewide Coalition has put out a detailed set of presentations on the latest machinations in the casino drive, including information on a Federal Appeals Court ruling that potentially clears the way for the construction and operation of an Indian Casino in Charlestown that would be immune from state and local laws...

The 4-2 decision of the Second Circuit Court of Appeals on July 20, 2007, in the case of Carcieri vs. Kempthorne, would permit the Narragansett Indian Tribe (NIT) to transfer lands it owns into “Trust” status. (The NIT owns land in both Charlestown and Westerly which may become “trust lands.”) The "Trust Lands strategy" circumvents the provisions of the "Settlement Act“, the agreement the Tribe previously reached with Rhode Island and Charlestown

If the decision stands, the NIT may be entitled to utilize the new “Trust Lands” in accordance with decisions of the federal government alone, without any obligation to observe local and state laws. No state gaming regulations, no zoning laws, no planning restrictions, no local sanitation, environment or other restrictions would apply to the “trust lands”. Although NIT leaders claim that they will only build housing on the new “trust lands”, once the transfer is done, their governance passes entirely to the NIT. The tribe will be able to do whatever it wishes on those lands. In other States, Casinos have quickly risen where housing originally was promised.

(Note: All emphasis in the above excerpt reproduced as in the original).

The question in Carcieri v. Kempthorne (Dirk Kempthorne is the U.S. Secretary of the Interior) centers on whether the particular history of Narragansett Indian Tribe and the State of Rhode Island allow new Rhode Island lands to be removed from state/local jurisdiction via Federal bureaucratic decree. Here's the district circuit court's short-take on the relevant history…

In 1880, the State acquired the majority of the [Narragansett Tribe's] lands. In 1934, the Tribe organized as a state-chartered corporation. In 1975, the Tribe sued to recover its lands, arguing that the State had acquired the lands in violation of the Indian Nonintercourse Act, 25 U.S.C. § 177. The Tribe claimed that this violation rendered void the transfer of title to the lands.

This cloud on title prompted the State to enter into settlement negotiations with the Tribe, which led in 1978 to an agreement embodied in a Joint Memorandum of Understanding (JMOU). Under the JMOU, the Tribe would receive 1800 acres of "settlement lands," half of which were provided by the State and half of which were purchased with federal funds. The State agreed to create an Indian-controlled corporation to hold the settlement lands in trust for the Tribe, to exempt the settlement lands from local taxation, and to help secure the federal legislation necessary to implement the agreement. In exchange, the Tribe abandoned its claims of aboriginal title and its claims to lands in the state other than the settlement lands.

In turn, Congress approved and codified the agreement in the Settlement Act. The Settlement Act provided that "the settlement lands shall be subject to the civil and criminal laws and jurisdiction of the State of Rhode Island." Id. § 1708(a).

The Narragansetts' claim is that the "Settlement Act" applies only to the original 1800 acres, and therefore lands they have purchased since then can be made exempt from state and local laws, if the United States Department of the Interior places them into Federal Trust. The state's position is that the Settlement Act applies to all Narragansett lands, regardless of when they were acquired, and that the Federal Government cannot go about carving up the state of Rhode Island without the consent of Rhode Islanders.

The courts, so far, have upheld the Narragansetts' position, essentially ruling that the the Federal Government has a right to cut states up to facilitate the building of gambling parlors. Rhode Island, of course, was famously the last of the 13 original colonies to join the United States of America, fearing that giving up power to a remote Federal government would not serve the interests of Rhode Islanders. Maybe the surly holdouts were right after all...

Keno Con-O

I don't know a whole lot about the world of illicit gambling, but I've heard it mentioned that successful bookies don't believe that they ever give their money away. Bookies take the attitude that gamblers on winning streaks are winning nothing more than the meager privilege of holding the house's money for a short while because, with the help of some teasers, some parlays and maybe a prop-bet or two, "winners" can usually be convinced to hand back everything back they've won -- and eventually more.

Where I'm leading to is this: how does the big advertising blitz for the Rhode Island Lottery's "Keno Doubler" make the State of Rhode Island any different from a bookie seeking to take advantage of his regular patrons by trying to convince them that an extra win or two means they're on a hot streak and should be betting more -- knowing full well that it really means they'll be losing more?

Another Full-Scale Casino Proposal?

Scott Van Voorhis of the Boston Herald's business and market blog has talked to Clyde Barrow of the University of Massachusetts at Dartmouth's Center for Policy Analysis, who says he has talked to William Murphy, Speaker of the Rhode Island House of Representatives, who has apparently said that a brand-new, full scale casino in Rhode Island, more than just an expansion of Twin Rivers, is still an option for the near future...

Rhode Island’s General Assembly is expected to study in January expanding the Twin River racino, a slot machine hall and dog track, and Newport Grand, the slots and simulcast wagering center in Newport. Lawmakers plan to explore adding table games and creating 24/7 business hours at both venues.

House Speaker William Murphy has indicated lawmakers may even explore the addition of a full-scale casino elsewhere in the state, said Clyde Barrow, a gaming industry expert and a professor at the University of Massachusetts at Dartmouth.

Is Rhode Island headed for another gambling dominated political season in 2008?

Roland Benjamin: "It is time for a bold solution that eliminates the corporate income tax in Rhode Island"

Massachusetts Governor Deval Patrick visited Rhode Island last evening to discuss his state's triple-casino proposal, but Roland Benjamin thinks there are better ways for Rhode Island to compete with Massachusetts than by expanding gambling here…

Quite a stir regarding the “not quite dead yet” Casino discussion. The debate reopens in response to rumblings from Massachusetts discussed in the Projo here:

Murphy said gambling revenue critical to the state budget, which is projected to run a deficit for the next few years, will drain away to Massachusetts without action to protect Rhode Island’s slot parlors.

It’s doubtful that the primary intent of the Speaker is to “protect” the slot parlors. It is more plausible that the revenue streams to the General Fund are more coveted. After all, that’s what they are looking for in Massachusetts.

Patrick estimates the casinos would create 20,000 permanent jobs and raise $400 million in new annual revenues for Massachusetts.

So the competing power brokers in the two states are looking to tap into a stream flowing largely into Connecticut, with some residual to Lincoln and Newport. The arguments always reference jobs and economic impact. But it is important and non-trivial to note that these casinos thrive off of wealth generated in other segments of the economy. They create no new wealth for anyone save a handful and end up effectively taxing the entire gaming population.

Instead of taking the Me-Too approach, Rhode Island could view this as an opportunity to take an aggressive competitive stance with neighboring New England states. Why not go after an economic sector that creates wealth instead of one that consumes it? This would be a tremendous challenge given the current business climate of the state and the country for that matter.

According to this KPMG study, the United States compares somewhat horribly to other countries with respect to corporate income tax rates. Of the 60 countries represented, the U.S. has a marginally lower rate than only 5 countries before adding in any state income taxes. Taken in conjunction with this study from the Tax Foundation, Rhode Island ranks worst among states in business tax climate. Add our own corporate income tax rate to the federal rate and the Rhode Island business tax climate is the worst on the planet.

It is time for a bold solution that eliminates the corporate income tax in Rhode Island. After all, corporate income taxes are nothing more than an indirect tax on the employees working for the affected corporation or its owners. Dollars flowing to stakeholders (employees, shareholders, customers, etc.) will be taxed anyway, and dollars staying in the organization will be invested to generate more wealth for more people. Since corporations are far more able to move operations and capital to tax friendly regions, the brunt of this impact is felt by the actual workforce according to this CBO analysis.

Given those values, when capital is perfectly mobile and the tax does not affect the world prices of traded goods, domestic labor bears slightly more than 70 percent of the long run burden of the corporate income tax.

Because we do not have a competitive climate when compared to neighboring states, the effect on the workforce is even greater as many find employment in Massachusetts or Connecticut. But if Rhode Island were to slash the corporate income tax rate to zero, we would compete across ALL economic sectors, not just gaming. We would eat their proverbial lunch in attracting wealth creating business to our state. We would not have to worry about negotiating revenues from slot machines. Until we do something bold, every business that starts up or expands in Massachusetts is a missed opportunity here in Rhode island.

Was the General Assembly Controlling the Narragansetts' Casino Choice All Along?

According to the Warwick Beacon's Russell J. Moore, the Rhode Island legislature is planning to revisit the gambling issue in the 2008 legislative session. The decision is unsurprising, in light of the State of Massachusetts' apparent plans to allow casinos to be built there...

Larry Berman, a spokesperson for Rhode Island House Speaker William Murphy, said the House is poised to take up the gambling issue when the General Assembly reconvenes in January.

“Come January, when the legislature comes back into session, Speaker Murphy would like to do everything we can to protect Rhode Island’s gambling revenues,” said Berman.

“He wants to have Rhode Island in a position where, if Massachusetts were to bring out three casinos, we’ll be able to respond to that.”

With respect to Massachusetts’ plan, and its emphasis on inviting gambling companies to bid for the licenses, Berman said the legislature sent out feelers before going forward with the Harrah’s/Narragansett Indian casino deal, and Harrah’s was the only bidder interested. It wasn’t until late in the process that casino mogul Donald Trump came forward with a plan that lacked details, and would have held up the process, Berman said.

What is at least a tad surprising is Mr. Berman's description of the casino process that ended last year with the rejection of a constitutional amedment that would have permitted the establishment of a single destination casino in West Warwick. The language of the amendment led people to believe that it was the Narragansett Indians who would be choosing the casino operator for Rhode Island...

Notwithstanding sections 15 and 22 of this Article, and provided that a majority of the electors of the Town of West Warwick have voted to approve this amendment, the establishment of a resort casino and games located therein is authorized in the Town of West Warwick. The resort casino shall be privately owned and privately operated by a business entity established pursuant to Rhode Island law by the Narragansett Indian Tribe and its chosen partner, which entity shall be: (i) legally distinct and separate from the Narragansett Indian Tribe, (ii) subject to the laws of the state of Rhode Island, including regulation and taxation, and (iii) required in its organizing documents to expressly waive any sovereign immunity relating to any and all matters of the resort casino, including compliance with and enforcement of the laws of the state of Rhode Island, and the regulation and taxation thereof. The per annum tax rate shall be established by the general assembly with all of such tax proceeds to be dedicated to property-tax relief, as prescribed by statute

According to Mr. Berman, however, the legislature was directly dealing with multiple casino operators, early on the process. What good were those "feelers" that the legislature -- not the Narragansett Indian tribe, according to Mr. Berman -- was putting out, if the legislature lacked the power to influence or even control the Narragansetts' choice?

Southern New England, Land of the Resort Casino

The pressure that Massachusetts Governor Deval Patrick's three-casino proposal puts on Rhode Island raises in the imagination a map of the United States with a cluster of red dots representing six casinos squeezed into the tiny area covered by Southern New England. Is that the reality to which we all wish to awake when the money-drunk desperation for state revenue subsides?

I have no moral objection to gambling, but the pending rush on casinos, as if they represent some sort of miracle stock in which to invest, reeks of greed from top to bottom — from the state government that refuses to cut spending significantly to the companies that seek to profit from the cheaply produced entertainment of an illusion of easy riches to the people who direct their own resources from more productive ends toward that illusion. Even if we make the questionable assumption that legalized and industrialized gambling will not come with the seedy chains of its outside-the-law ancestry, a system built on greed will inevitably engulf the entire society in its corruption.

Don't believe me? Then put down the mental map and imagine the result when Big Casino, Big Labor, Big Welfare, and Big Government Democrats turn their murky green gaze in unison toward their mutual prey. It will be far too late for that prey by the time those powerful entities realize, in their greed, that there is not enough of the dying breed to go around.

Virtual Blackjack is No More a “Lottery” than Real Blackjack Is

According to Katherine Gregg in today’s Projo, Rhode Island lottery officials aren’t planning to let little things like the voters or the meaning of the law get in the way of their quest to expand gambling in Rhode Island…

With the threat of casino gambling looming in Massachusetts, there is a move to bring “virtual blackjack” to Twin River, possibly as early as next month.

Lottery Director Gerald Aubin confirmed yesterday that he has asked GTECH and a second vendor, International Game Technology (IGT), whether they are interested in supplying an initial 18 machines that simulate a live blackjack game by allowing five or six players to sit at a table, signaling their moves — hit me again, double-down, split — electronically to a “dealer” on a video screen….

In interviews yesterday, both Aubin and state Rep. William San Bento, the chairman of the legislature’s Lottery oversight committee, said they believe, and have been assured by legal advisers, that voter approval is not required because the machines do not, in their view, constitute the introduction of a new form of gambling in Rhode Island.

“If you look at the components and the definition” of a video-lottery terminal, Aubin said, the new multiplayer games familiar at many commercial casinos and introduced by the Delaware Lottery last year are “absolutely nothing different than what we have.”

Governor Carcieri agrees. Though he was an avowed opponent of the Harrah’s-sponsored Narragansett Indian casino proposal on last year’s state ballot, spokesman Jeff Neal said: “The governor is aware of the Lottery division’s plan and does not object. Based on the information the governor has been given, these virtual table games are no different in substance from a video-lottery terminal. As a result they are perfectly allowable under current statute.”

Sorry folks, but the central concept of a lottery is a random selection of winners. Something where your own skill and/or the skill of other players involved changes the odds of winning is not a lottery.

Middleboro Gambling: Breaking the Law for a False Panacea

David Mittell:

Like marijuana and hanging, casino gambling is against the law in Massachusetts. Yet by the power they invested in themselves, the 2,387 obliged the town and its officials to bear witness in favor of the $1 billion casino; and within moments selectmen signed a 21-page agreement binding themselves to do so.

I know people who would be just tickled to have a binding arrangement for selectmen to support their using lethal force against backfiring motorcyclists, amplified radiophiles and the like. That is absurd, of course, but the legal issue is the same: How can officials be bound to support an activity that is currently against the law? What of their oaths of office? What of the oaths of those who may be elected in the future, who may in good conscience be against the casino? What of oaths if circumstances change?! If the town’s lawyers and planning board prove to have been right? If environmental review foretells catastrophe? Selectmen I have covered have often taken longer to consider a motion to adjourn than Middleboro’s selectmen took to sign on the dotted line. Perhaps the 21 pages of small print will explain everything.

What Middleboro really did on Saturday was to place a bet on the town’s future. Like all bets it was against the odds. It was a sincere bet that their children’s children will live better in a gambling town than in the unconvincingly promoted “Cranberry Capital.” (The real Middleboro today is not a bog!) Good evidence that future reality is probably to the contrary was available; nonetheless, the bet was eagerly placed. That is why it is a bet against the odds, and why gamblers lose more often than they win. The lure of gambling is the illusion that the improbable, which can happen, will happen.

Perhaps they should turn their eyes to us? Dan Yorke was talking yesterday about how Rhode Island's estimated gambling revenue from Twin River and Newport Grand is going down, down, down. Part of it is because the state has become less effective than the Connecticut casinos at attracting the kind of people who willingly like to have their pockets picked. (Aside: and a new, full-fledged casino in Middleboro won't help our "plight" any!) Should Massachusetts ultimately go ahead with a casino, Connecticut will suffer the same reduction. Will the answer be more and bigger casinos? For, as I've often stated, perhaps the biggest addicts to state-sponsored gambling are the state governments who spend to the cap. And expect to keep spending a seemingly endless supply of gambling dough. Unfortunately, it is just as likely that the (State) house will go bust.

Northeastern Casino Status Report

The Norwich Bulletin provides a quick guide to the current casino environment here in the northeastern U.S…

Visitors to Foxwoods Resort Casino played $169 million less in its slot machines during the last 12 months than they did the previous year.

Gamblers pumped $9.2 billion into slot machines at Foxwoods during the 2006-07 fiscal year, which ended June 30. It was the second year of declines for the casino and was $685 million below the casino's all-time high of $9.917 billion, which it hit in the 2001-02 fiscal year.

Gary Border, senior vice president of property marketing at Foxwoods, said part of the dip can be attributed to increased competition in the region from facilities in New York and Rhode Island….

Mohegan Sun ended the fiscal year up $166 million from 2005-06, with visitors having played $10.6 billion in its slot machines in the last 12 months….[Mitchell Etess, president and chief officer at Mohegan Sun,] said changes at other such gaming sites at Atlantic City, N.J., have affected visitor numbers, adding pressure on the market from the south…

Both Connecticut casinos will complete massive expansions within the next two years. Clyde Barrow, a University of Massachusetts at Dartmouth professor and gaming industry expert, said gambling traffic also dipped at Twin River in Lincoln, R.I., during its recent expansion but agreed the MGM Grand opening will bring visitors back to Foxwoods.

With both of the big Connecticut casinos expanding, plus the possibility of a new casino being built in southeastern Massachusetts, making any sort of plans that depend on increased gambling revenues to shore up state finances would be a very bad idea right now.

Smoke Shop Trial Moved to Providence

According to the Projo's 7-to-7 blog, Superior Court Justice Joseph Rodgers has ordered the Narragansett Smoke Shop Trial moved from South County to Providence citing better use of "juduical resources". In Saturday's Projo, Katie Mulvaney described the complete argument made by the Narragansetts for changing venue...

While arguments may focus of practical issues, the defense’s petition recounted the tribe’s troubled history in Washington County, namely the massacre of 1,000 Narragansetts and Wampanoags at the Great Swamp during King Philip’s War of the Colonial era. It details legal struggles between the tribe, the state and Charlestown over the Narragansetts’ 1,800 acres.

“What is abundantly clear from this history is that there have been long, consistent and very public disputes between the Town of Charlestown and the Narragansett Indian Tribe over the past 30 years,” the tribal members’ lawyers wrote. “Virtually every legal dispute, including the smoke shop raid, has centered on the issue of Narragansett Indian sovereignty and the use of Narragansett reservation lands in Washington County.”

The totality of the Narragansetts' position is that the people of South County are good enough to live near their casino, but not good enough to sit on a jury.

Congressman Patrick Kennedy Wants to Expand Gambling in Rhode Island, Even Though He Is "Personally Opposed"

Congressman Patrick Kennedy will seek to use Federal law to reverse the people of Rhode Island’s rejection of an Indian casino.

But don’t worry. According to John E. Mulligan and Katherine Gregg, reporting in today’s Projo, Congressman Kennedy does not support the expansion of gambling in Rhode Island. He just favors allowing gambling to be expanded in Rhode Island, without the approval of the state legislature or the people. Hey, it’s his position, not mine....

Nearly a decade after his first high-profile effort to free the Narragansett Indians from having to secure state and local voter approval before opening a gambling hall on their tribal land in Charlestown, U.S. Rep. Patrick Kennedy says he is ready to pick up where he left off.

After meeting with tribal leaders and their lawyers in Washington this week, Kennedy said he will seek a congressional hearing on “the fairness” to the tribe of the so-called Chafee amendment that, in effect, made the Narragansetts abide by the same state gambling-approval laws as any commercial gambling operator….

Spokeswoman Robin Costello said [Congressman Kennedy] personally opposes the expansion of gambling in Rhode Island and voted against the Narragansetts’ proposed West Warwick casino in November, but “he feels the Chafee amendment impedes the sovereign rights of the Narragansetts.”

The Projo article also includes a sentence Rhode Islanders should get used to reading for the next six years…

New U.S. Sen. Sheldon Whitehouse’s position is less clear.

Mulligan and Gregg continue…

Without a specific bill in front of him, spokeswoman Alex Swartsel said Whitehouse could not speculate on his position, but he opposes the expansion of gambling and that would “guide” whatever position he ultimately takes.

Senator Whitehouse's position is remarkably similar to Congressman Kennedy's position. He is opposed to expanding gambling, but not necessarily to legislation that expands gambling. Huh? Maybe "I am personally opposed, but will take whatever position the special interest groups and the activists order me to take!" is on its way to becoming the official Democratic position on all issues. Or, noting that in the Projo article, Senator Jack Reed and Congressman James Langevin express unambiguous opposition to repealing the Chafee amendment, maybe the problem is that politicians from patrician backgrounds are more likely to disregard the wishes of the huddled masses they purportedly represent. Let the voter beware.

If nothing alse, can we at least use this issue to dispense with the argument that voter initiative is bad idea because politicans are somehow immune from special interest influence that might sway the general public?

Congressman Patrick Kennedy Wants to Expand Gambling in Rhode Island, Even Though He Is "Personally Opposed"

Congressman Patrick Kennedy will seek to use Federal law to reverse the people of Rhode Island’s rejection of an Indian casino.

But don’t worry. According to John E. Mulligan and Katherine Gregg, reporting in today’s Projo, Congressman Kennedy does not support the expansion of gambling in Rhode Island. He just favors allowing gambling to be expanded in Rhode Island, without the approval of the state legislature or the people. Hey, it’s his position, not mine....

Nearly a decade after his first high-profile effort to free the Narragansett Indians from having to secure state and local voter approval before opening a gambling hall on their tribal land in Charlestown, U.S. Rep. Patrick Kennedy says he is ready to pick up where he left off.

After meeting with tribal leaders and their lawyers in Washington this week, Kennedy said he will seek a congressional hearing on “the fairness” to the tribe of the so-called Chafee amendment that, in effect, made the Narragansetts abide by the same state gambling-approval laws as any commercial gambling operator….

Spokeswoman Robin Costello said [Congressman Kennedy] personally opposes the expansion of gambling in Rhode Island and voted against the Narragansetts’ proposed West Warwick casino in November, but “he feels the Chafee amendment impedes the sovereign rights of the Narragansetts.”

The Projo article also includes a sentence Rhode Islanders should get used to reading for the next six years…

New U.S. Sen. Sheldon Whitehouse’s position is less clear.

Mulligan and Gregg continue…

Without a specific bill in front of him, spokeswoman Alex Swartsel said Whitehouse could not speculate on his position, but he opposes the expansion of gambling and that would “guide” whatever position he ultimately takes.

Senator Whitehouse's position is remarkably similar to Congressman Kennedy's position. He is opposed to expanding gambling, but not necessarily to legislation that expands gambling. Huh? Maybe "I am personally opposed, but will take whatever position the special interest groups and the activists order me to take!" is on its way to becoming the official Democratic position on all issues. Or, noting that in the Projo article, Senator Jack Reed and Congressman James Langevin express unambiguous opposition to repealing the Chafee amendment, maybe the problem is that politicians from patrician backgrounds are more likely to disregard the wishes of the huddled masses they purportedly represent. Let the voter beware.

If nothing alse, can we at least use this issue to dispense with the argument that voter initiative is bad idea because politicans are somehow immune from special interest influence that might sway the general public?

Gambling Reservation

According to ProJo's 7to7 Blog:

The Narragansett Indian tribe is pursuing plans to build a slot parlor on its lands in Charlestown and has approached Rhode Island’s Congressional leaders about reversing a federal law that would block their efforts.

“We don’t want table games. We don’t want roulette. We want what the state has,” Chief Sachem Matthew Thomas said.

Thomas has requested a meeting with members of the state delegation about the Chafee amendment, a 1996 law that introduced by U.S. Senator John Chafee that bars the tribe from federal Indian gaming privileges on its 1,800 acres. {Hyperlinks added by me.}

In 1998, the Federal Court of Appeals upheld the Chafee Amendment, leaving the tribe no other option but to seek it's revocation. I'm not opposed to the Narragansetts having a casino on their land. It's their sovereign right, after all. Yes, I realize they bargained away some of that sovereignty, but they have every right to redress that mistake. And if they can get someone in the RI delegation to overturn the "Chafee Amendment," then more power to them.

Healey: Question 1 Results Prove Viability of Voter Initiative

Robert Healey, Cool Moose Party Lt. Governor candidate, writes in a letter-to-the-editor that appeared in Friday's Warwick Beacon (and probably in other local papers):

In the aftermath of Question 1 there is an interesting point for those who support Voter Initiative.

Too often labor and others with vested interests in maintaining the status quo of legislative access via lobbyists have indicated that the initiative process would be too easily manipulated by those special interests with money.

These opponents of initiative have already purchased their protection and see initiative as an assault on their stronghold. Thus, they argue that anyone with tons of money could use the initiative system to circumvent the process.

The vote on Question 1 is a direct confirmation that such an argument is specious. The amount of money spent in support of Question 1 dwarfed the money spent in opposition.

If, as initiative opponents state, money can buy a vote, then why was it that such did not happen?

Buying elections is still in the purview of political parties, but the reality is that because someone with money wants something it still can be voted down by an electorate after an open and public debate on the issue.

Sure, there was effort to influence opinion. Sure, there were mindless voters in the process. But, through it all, the public was heard on the issue.

So, now, just what is the argument against voter initiative? The ability to buy influence is still concentrated in the lobbying process and away from the voters, but the argument that the voters can be swayed by a corporate interest with deep pockets is no longer a realistic argument.

Casino Redux: The ProJo Position Gets Curiouser and Curiouser

Hopefully, this will be my last Casino post for a while (but ya never know...) I was driving home from work and heard the Providence Phoenix's Ian Donnis talking to Dan Yorke about the curious ProJo flip-flop on the casino. As Ian noted, Dan had covered the issue at length (and I had a few comments of my own).

In particular, Ian was remarking on ProJo's explanation as to why it flipped, which was available only on-line, and briefly at that. He was kind enough to point listeners (and readers, here's Ian's piece--updated 11/10/08) to Anchor Rising and my post commenting on the ProJo's non-explanation. For posterity, I've included the entire ProJo explanation in the extended entry.

Continue reading "Casino Redux: The ProJo Position Gets Curiouser and Curiouser"

ProJo: Here's Why We Flip-Flopped on Casino

The ProJo disavows conspiracy theories and tries to explain why it changed it's mind on the casino:

The editorial speaks for itself, but we repeat here that the prospect of more jobs for Rhode Islanders, especially for hard-pressed low-income people, including immigrants, was the overwhelming factor.

That's it. One run-on sentence of explanation as to why 12 years of previous editorials against a RI casino now mean nothing. The rest of the piece is a too-inside baseball explanation of "how an editorial is written." In short, they devoted the meat of the editorial explaining to us ignorant rubes how really smart editorialists go through the process of editorializing.

That wasn't the question, guys.

What we want to know is how a newspaper that has previously doubted that a casino will deliver high-quality, well-paying, economically stable jobs can now--after 12 years of making these anti-casino arguments--turn around and say "Vote Yes on 1" because a casino will deliver "more jobs for Rhode Islanders, especially for hard-pressed low-income people, including immigrants."

What about putting our efforts into long-term economic development instead of a quick-fix casino? What about the damage that a large, economically dominant casino will do to the quality of life in Rhode Island? What about the burden to our government services (police, fire, roads, infrastructure) that haven't been properly accounted for? What happened to all of these other concerns? Well?

The Destination versus the Convenience Gambler: Is There Really any Evidence of a Distinction?

Casino proponents want you to believe that the universe of casino gamblers is divided into two groups, "destination" gamblers, who want to make an event out of their gambling trips, and "convenience" gamblers, who are interested in more frequent but less expensive trips. Based on this hypothetical partition, casino proponents claim that a Harrah's casino in West Warwick won't cannibalize gaming revenues at from Lincoln Park or Newport Grand. Lincoln and Newport are convenience facilities, they say, and convenience gamblers won't be interested in the things a destination gambling facility will provide.

It is difficult to look at Rhode Island's gambling revenue numbers and take this argument seriously.

First of all, the term "convenience gambling" doesn't really capture what goes on at Lincoln Park. According to the University of Massachusetts at Dartmouth's Center for Policy Analysis' 2006 New England Casino Gaming Update (performed by the same research group who performed the pro-casino Rhode Island Building Trades study), the typical gambling visit of a Lincoln Park patron is a larger event (measured in dollars lost) than the typical gambling trip of a Foxwoods patron. The average Lincoln Park gambler from Rhode Island loses an average of $154 per visit; Foxwoods gamblers from Rhode Island lose only an average of $129 per visit. (Philosophical question: Should it still be called gambling when you know you're going to lose over the long haul?). Does it make sense to associate the gamblers who spend more-per-visit with convenience-oriented behavior?

In addition to spending more money, Lincoln Park patrons also make many more trips per year to gamble than do Foxwoods patrons (or Mohegan Sun patrons). On average, the average Rhode Island-based Lincoln Park patron makes 18.45 gambling trips per year. By contrast the typical RI Foxwoods patron makes only 5.19 visits per year (and the typical Newport Grand patron makes only 5.68 visits per year). The large amount lost per visit to Lincoln Park times the large number of trips per patron means loss per patron at Lincoln is staggeringly high -- $2,850 per patron per year.

Lincoln Park patrons aren't "convenience" gamblers, they are "heavy" gamblers, looking for the nearest place where they can gamble very large amounts of money very often.

Another result from the 2006 Casino Gaming Update casts doubt that these "heavy" or "convenience" gamblers won't choose to make frequent trips to a West Warwick casino instead of Lincoln Park. The study looked at what percentage of Lincoln Park/Newport Grand patrons had visited Foxwoods/Mohegan Sun and vice-versa. The study found that most (meaning numbers in the 80% range) Lincoln and Newport patrons have made a visit to Foxwoods or Mohegan Sun, but most Foxwoods and Mohegan Sun patrons haven't visited Lincoln or Newport. The sensible conclusion is that the most significant partition of the gambling population is not between destination and convenience gamblers, but between slots-only players and more diversified gamblers. Diversified players are not satisfied by slots alone, so they go to the destination casinos (Foxwoods or Mohegan Sun). Slots players, on the other hand, will go anywhere where there are slots (Foxwoods, Mohegan Sun, Lincoln Park, or Newport Grand) regardless the other activities that might be available.

Since slots players are going to go anywhere there are slots, the idea that Rhode Island's significant population of heavy gamblers isn't going to take some of its many trips each year to West Warwick and reduce the state?s Lincoln Park's revenue is self-serving speculation. And fiscally speaking, because Rhode Island has become so addicted to gaming revenues to balance its budget, it is potentially ruinous speculation.

Arguing Against a Casino in a Soundbyte Culture

Ah, well. I understand the choices that are unavoidably part of crafting a short news segment, but I can't say I'm thrilled with the soundbyte that BSR88.1 reporter Chris Gang chose from my 20 minute conversation with him for his piece on the casino question on Off the Beat. The argument I tried to present was as follows.

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As usual, in this state, one gets the feeling that the interested parties haven't come forward with an honest proposition, but rather that we're merely seeing the public face painted on rank self interest. Throw in all of the other "only in Rhode Island" details, such as slippage and contentious debates about how long politicians have to wait before they can collect handouts, and the whole deal is just suspicious.

But the bottom line, even were everything completely ethical, is that Rhode Island is too small. This will become a central — perhaps defining — characteristic of the state.

To explain: I grew up in New Jersey, and I never understood the (sort of) primetime sitcom jokes about how urban and polluted the Garden State was until my father explained that most people judge New Jersey not by its suburbs and family beaches, but by the drive from the airport to New York City or to Atlantic City. Similarly, throw a large casino into the heart of Rhode Island, and the qualities that make this state genuinely attractive will recede.

The most recent pro-casino commercial that I've seen tacitly confirms this by emphasizing how significant supplying the casino can become to the Rhode Island economy. Personally, I don't want a casino to become significant to Rhode Island. If it's another thing to do (like Hai Lai or Lincoln park), fine, but as a Rhode Islander, I don't want it to become the thing to do.

Now, the most relevant argument from casino proponents is that a major casino would act as a draw — that visitors will explore the state, as it were. But who will visit this sort of destination? If it's night-trippers, as everybody I know has been every time they've gone to Foxwoods, then they're not interested in exploring the area. For example, if they haven't dined in their own area, they'll do so at the casino. If it's people seeking a casino vacation, then the resort casino is designed to keep them in the hotel gambling. Beyond gambling, food is there; shopping is there; shows are there.

The only people likely to leave the casino to explore Rhode Island's other attractions are those who've come with the intention of doing so. And even if the casino's lures to keep them in the building fail and they go out into the state, at the very least it will be true that some other hotel — a hotel located with the primary goal of providing access to Rhode Island — will have lost that business.

The ProJo's Naive and Logically Suspect Casino Endorsement

The ProJo's endorsement of a casino displays a willingness to believe everything good about the proposal and nothing bad. That alone makes it perhaps one of the most sophomoric endorsement I've ever read. Yet, even the naivete could be dismissed if the Journal's editorial board had seen fit to mention at least once in their endorsement that approving Question 1 meant amending the RI Constitution. They didn't. In their endorsement, the ProJo ignores one of the central points of contention in the entire casino debate: that approval of Question 1 hinges on changing the State Constitution. Thus, the endorsement becomes more than a display of naivete and can only be characterized as an irresponsible and disingenuous attempt to obfuscate.

In addition to the ProJo's silence on the fact that approving a casino hinges on changing the RI Consitution, their endorsement has at least 2 examples of naivete (or amnesia) and one huge display of bad logic. Together, I think these undercut the ProJo's argument for approving a casino.

Naive Example 1:

[A casino] would also provide substantial property-tax relief: Some of the revenue from the project would be dedicated to such relief, much needed in a state with among the country's highest such levies.

The conclusions are correct, but the problem is in the premise: how much revenue is going to be dedicated to tax relief? The ProJo asks that we just believe that the General Assembly will follow through. And when confronted with funding higher pensions and pet projects, they'll still follow through, right? Of course, the ProJo also isn't troubled by the vagueness of the amendment where it states that "a portion" will be devoted to property tax relief. What if $1 were put towards it? Wouldn't that still be Constitutionally legal?

Naive Example 2:

And the casino would increase state income- and sales-tax revenue, thus reducing pressure for rises in those taxes for Rhode Islanders. That, in turn, could make it easier to draw other business to the Ocean State.

Same problem as above. Ever hear of slippage?

Logical Fallacy 1:

Many people assert that Rhode Island must not have "a casino." Too late! The proposed project would be the third casino in the state. The casinos in Lincoln and Newport are big and well established, although, it is true, they function mostly as slot-machine palaces, without the (far-more-social) card and other gambling games that the West Warwick project would have.

As for gambling itself, Rhode Island and most other states have been deep into state-sponsored betting for years -- starting with the state lotteries established in the 1970s. To complain about yet another gambling venue seems a bit disingenuous at this point.

Hm. I never realized that card games were morally superior to slot machines because they were more "social." But back to the point. Here, the ProJo tries to justify changing the RI Consitution to allow for the building of a casino and expanding gambling through a rhetorical trick and an exercise in circular logic.

First, to equate the "gaming parlors" at Lincoln Park and Newport Grand to a casino is specious. I'll grant that the long term goal of the owners of each is to expand gambling at both sites, but that isn't what the ProJo is arguing. Right now, these two establishments aren't casino's and it's an improper comparison. Not all gambling is the same.

Second, and at the heart of the ProJo argument, is the use of the time tested "hypocrisy" argument in conjunction with the rhetorical strawman. The big question I have is this: How can I (and others) be "disingenuous" if we've never agreed with state sponsored casino gambling to begin with? Rhode Island voters have voted down casinos multiple times. The ProJo assumes that because--despite the efforts of anti-gambling people--we have state-supported gambling now, we must, ipso facto, support it's expansion. If not, why, it'd be hypocritical! (Is there anything worse than being a hypocrite?). People who support the lottery or slot parlors don't have to support a big casino. To them, a big casino is a step too far. In fact, it could be argued that this is the "moderate" approach to gambling. And doesn't the ProJo usually revel in being "moderate"?

But, according to the ProJo, gambling is gambling, right?

Aw heck, I give up. The ProJo has convinced me.

So I propose that we push for legalizing sports gambling in Rhode Island. Sports betting is popular (football pools, March Madness, etc.), very "social" and the state could generate a lot of revenue by taking a piece of the action via state-run sports books. Heck, every restaurant and bar could have one in the back room. This would make them more popular and increase traffic in places like Federal Hill!

And isn't it obvious that such a move would increase jobs?

It could also help make Rhode Island THE destination of sports gamblers worldwide!!!!! Think of the boon to the tourism industry?

And there's no slippage clause associated with sports betting that I'm aware of!

So, why not, ProJo? Why stop at a mega-casino? Let's make all gambling legal. Now is not the time for half-measures. All gambling is the same, after all, right? At this time we simply can't afford to be too moralistic or "too preachy". We need more cash for our politicians to spend in an honest and forthright manner and gambling is the quickest way. Let's profit from vice! It's the only practical solution to the state's financial problems, after all, and we're doing it already.

What's that? No? Now don't be a hypocrite....

Continue reading "The ProJo's Naive and Logically Suspect Casino Endorsement"

The Slippage Formula

One reason that the RIPEC casino study and the Rhode Island Building Trades casino study (links via Dan Yorke) come to different conclusions about the financial impact of building a West Warwick casino is that the Building Trades study assumes there slippage payments will only be made for two years after the opening of a new casino, while the RIPEC study assumes payments to Lincoln Park and Newport Grand will be required until the slippage clause expires. The analytical difference is that the RIPEC study assumes that the amounts guaranteed to Lincoln and Newport move upward on a yearly basis, while the Building Trades study assumes the amounts guaranteed are static.

From reading the law, I think the Building Trades interpretation is correct. This is the infamous slippage clause as expressed in Chapter 322 of the 2005 Rhode Island Public Laws...

(x) "Adjusted Base Year Net Terminal Income" means Lincoln Park's or Newport Grand's, as applicable, two (2) year average net terminal income during the twenty-four (24) calendar months ending on the last day of the calendar month preceding the opening of a new gaming facility increased by the change in the December Consumer Price Index All Urban Consumers (CPI-U) for the immediately preceding year published by the Bureau of Labor Statistics of the United States Government or its successor agency from the index for the December immediately preceding the opening of a new gaming facility, not to exceed three percent (3.0%) per year change in any year.

(y) "Slippage protection" shall mean: for any subsequent year (other than the first subsequent year occurring after the base year), whenever the net terminal income is less than the adjusted base year net terminal income, the blended rate shall be increased to that rate that would have eliminated the resulting adverse impact from that difference upon UTGR or NGJA. Provided, however, that for any subsequent year (including the first subsequent year) in which an amount equal to twice the first six (6) months' net terminal income for such subsequent year shall not exceed ninety percent (90%) of the adjusted base year net terminal income for such subsequent year, the aforesaid increase to the blended rate shall occur beginning in the seventh month of such subsequent year.

I think this says that if a new casino were to open in RI, the adjusted base year income for slippage payments would be calculated only one time, and not be adjusted upward for inflation on a yearly basis. Ten years after a new casino opened, the slippage guarantees to Lincoln and Newport would be calculated relative to their take from ten years prior plus a one-time adjustment for inflation, with no assumption that revenues to Lincoln and Newport would have increased each year.

Casino Opponents: Strange Bedfellows

Harrah's is spending $106,000 a day and still can't move the poll numbers. Rhode Island College's Bureau of Government Research and Services has released a poll that indicates 56% of likely voters oppose the casino, 33% support it and 10% are undecided. This is in line with the Brown University poll last month that had it 55% against to 36% for. All that money and no movement. Why? According to Darrell West

"All these millions are being spent on an electorate where 90 percent of the people have already made up their minds," West said. "They don't seem to be getting a lot of bang for their buck."

West said people tend to make up their minds early with "hot button" issues such as gambling, abortion and gay rights. Those undecided at this point are the least likely to vote, he said.

I think he's right. Which is why Harrah's and Chief Sachem Thomas are trying to undermine the credibility of Save Our State--and it's titular head former Gov. Lincoln Almond--by questioning who is supporting SOS in the hope of casting them as hypocrites. In a letter written by Thomas to Almond (PDF provided by Dan Yorke), Thomas "exposes" the owners of Newport Grand, Lincoln Park, Mohegan Sun, Foxwoods as those--out of state gambling interests all--who have put money into SOS. True, but I don't think that Thomas' tactic will work.

The bottom line is that many people oppose the casino for different reasons. Other casinos and gaming establishments don't want competition. The same goes for many other businesses like restaurants and concert halls like PPAC or "The Dunk." Theirs' is opposition based on economic self-interest.

Then there are those who oppose it because it smacks of a "special deal" and insider politics. They also think they state could get a better deal with competitive bidding. I'd call these the good (or smart) government types.

Finally, there are those who oppose it because they simply think that gambling isn't a good thing, much less something to be relied upon for funding state programs. These are generally "casino conservatives" and even a few "nimbys".

In general, these groups may not agree on many other issues. In fact, most of these small businesses, good government folks, "casino conservatives," and nimby's would probably oppose any expansion of gambling in Rhode Island--even if the beneficaries would be their current (temporary) allies from the other gaming companies. These gaming companies may have the money, but the other groups that oppose Harrah's have most of the votes. They joined together based on their opposition to Harrah's. That doesn't mean that they will stay together forever, much less past November 7th.

Dan Yorke has postulated that there will be a full-fledged casino at Lincoln Park within the next few years. Maybe, maybe not--but one thing for sure is that many of Lincoln Park's current allies against Harrah's will turn around and fight just as hard against Lincoln Park should it try to expand its gaming footprint. Politics is about coalition building after all. As the issues change, so will the coalitions. It's not hypocritical--it's politics.

Thus, I think that Chief Thomas' hypocrisy allegations have neither exposed anything new nor will they change many minds. As the aforementioned polls indicate, the position of the electorate has chrystalized already and most people are opposed to a Harrah's casino. During the course of this debate, the disparate groups who oppose the Casino have become well acquainted with those with whom they've jumped into the Save Our State bed. And they rightly regard the relationship that they've developed with each other for what it really is: a one night stand, not a marriage.

Paying for Gambling Slippage

Scott Mayerowitz of the Projo gives a concise explanation of the "slippage" formula that applies to Rhode Island's existing gambling facilities...

The deal the state struck with Lincoln Park protects it through 2020; Newport Grand is protected through 2015.

The slippage clause takes the average revenue at each facility in the two years prior to a casino opening [in Rhode Island] and assumes that income there should grow each year by inflation. If revenues drop below that figure, the state has to make up the loss.

The slippage clause was one of two incentives for Lincoln Park and Newport Grand operators considered by the General Assembly in 2005. The other was a deal in which the percentage of revenues paid by Lincoln and Newport would automatically drop if the legislature allowed a new casino to operate in Rhode Island at a lower tax-rate.

In a Projo letter to the editor, State Representative Larry Ehrhardt argues that while the slippage clause remains in effect, the only fiscally sane way to authorize a new casino in Rhode Island is to make the new casino owners directly responsible for the slippage payments...

Since the future is unknowable, the only way the state can protect itself would be to require Harrah's to take full responsibility for the slippage payments to Lincoln and Newport. Deputy Finance Chair Paul Crowley stood and reinforced my remarks, by agreeing that any new operator must be required to take that risk.

From the other side of the aisle, Representative Gordon Fox also believes this is an idea worth discussing...

If this vote should pass, nothing prevents a discussion with the casino, with Harrah's, that if there is slippage . . . that they make it up," Fox said last week.

However, given the language of the current version of the casino amendment, it may not be that simple. Could the real reason that casino supporters are so intent on specifying property-tax relief in the constitution be to block the legislature from being able to make a casino owner take responsibility for slippage payments? In other words, if the General Assembly tries to pass legislation (if the current casino amendment passes) making Harrah's directly responsible for payments to Lincoln and Newport, would Harrah?s (and their lawyers) say "sorry, can't be done". "The Constitution says any revenue you collect from us can only go towards property tax-relief"?

We've now got at least two questions that should be asked if a casino debate happens:

1. If circumstances work out so that Harrah's and the Narragansetts end up taking huge profit checks at the same time their business is driving the state in the shortfall, will their response be "sorry, a deal-is-a-deal". "We got ours, and budget shortfalls are your problem", or is there a contingency plan?
2. Do Harrah's, the Narragansetts, Tim Williamson, Stephen Alves, William Murphy and/or any other casino supporter that would like to chime in agree or disagree that the current language of the casino amendment allows the state to hold Harrah's directly responsible for slippage payments?

Casino Profits and Budget Shortfalls

Beyond the sloganeering, here is the budgetary aspect of the casino debate in a nutshell...

1. Harrah's is going to take money away from Newport Grand and Lincoln Park. Even the study that casino supporters paid for says that.
2. Because the state gets about 60% of gambling revenue from Lincoln in Newport, while it is projected to get about 25% from the proposed Harrah's deal, the state will lose money every time a gambler decides to spend his or her gambling money at Harrah's instead of at Newport or Lincoln. This could result in a net loss of revenue for the state.
3. Legally mandated "slippage" payments, where the state must pay Newport and Lincoln after the construction of a new casino if certain revenue targets are not met, further increase the likelihood that a Harrah's casino will cost the state money.
4. But, according to the terms of the deals currently being discussed, Harrah's and the Narragansett Tribe can still make huge profits, even as their business drives the state into budget shortfalls totalling hundreds of millions of dollars per-year.

In light of this, two important questions that you need to consider when voting in November on Question 1 and for your state legislators are...

1. If the proposed casino creates big profits for Harrah's at the same time it creates a state budget shortfall, what will be the response of Narragansett Chief Sachem Matthew Thomas when it comes time for him to collect his share of the profits? Will the attitude be "a deal is a deal, I got mine, and a budget shortfall is your problem", or will some kind contingency plan where the Narragansetts (and Harrah's) defer their profits be considered?
2. Can Rhode Island taxpayers afford to leave the details of a casino deal in the hands of a legislature that is probably too dumb and/or too corrupt to structure a deal that includes safeguards to prevent a private corporation from making a huge profit while it depletes the state budget? Do we perhaps need to replace some of the legislators who have already spurned the public interest by voting for a no-bid casino deal with legislators who will better protect the interests of Rhode Island taxpayers?

RIPEC's Casino Analysis

The Rhode Island Public Expenditures Council has released their analysis of the impact of a Harrah's casino in Rhode Island (pdf format). Here's the key result from their executive summary...

While the introduction of a Harrah?s Commercial Casino would increase overall gaming activity statewide by 27.0% by FY 2020, The State would experience a 17.3% decline ($1.1 billion) in net tax revenue.

• If the casino were not built, gaming activity over the ten year period is estimated at $10.3 billion, and the State would collect $6.3 billion in taxes.
• If a casino is approved and operational by FY 2010, gaming activity over the ten year period would total $13.0 billion, but the State would collect $5.2 billion in net taxes.

Bottom line of the RIPEC analysis: To compensate for the revenue that the state loses because of Harrah's, the constitutionally mandated "property tax relief" will have to be more-than-offset by either other tax increases or spending cuts, and there can be no net tax relief for Rhode Island without major spending cuts.

RIPEC is not the final word on the matter, but they've laid out their argument in detail. If you don't like their conclusion, try to explain which of their assumptions are unreasonable.

What the Heck...Even More Poll Numbers!

(Heads Up--or Nota Bene for the cultured sort--Andrew and I were obviously working the same story and posted them within 1 minute of each other. This proves we Anchor Rising Contributors don't collude!!!! I kept my post up because of the wonderfully witty and pithy observations....but I did truncate most of it to the "extended" section.)

As noted in the comments to my earlier "poll post" {and Andrew's new post--MAC} a new Brown poll (Darrell West) is out, with some encouraging numbers for both Governor Carcieri and Senator Chafee.

Continue reading "What the Heck...Even More Poll Numbers!"

Rhode Island District Court: Casino Question Will Stay on the Ballot, Despite a "Substantial Likelihood" That It's Unconstitutional

Federal District Court Judge William Smith has denied a motion to stop the constitutional amendment from being placed on the November ballot that, if passed, will allow the state to name a single, private casino operator without a competitive bidding process. The short version of the ruling in Ajax and Johnston v. The Narragansett Indian Tribe and Harrah�s West Warwick Investment Company (2006) is that, Fourteenth Amendment problems with the casino amendment notwithstanding, Judge Smith doesn�t want to rule on something that might never be passed by the voters anyway...

After reviewing the excellent memoranda filed by the parties, listening to the arguments of counsel, and reviewing the authorities cited, this Court finds that while Plaintiffs and the Attorney General have raised serious constitutional questions regarding the proposed constitutional amendment, the dispute is simply not yet ripe for adjudication....

This Court appreciates the gravity of Plaintiffs� claims, particularly their allegation that the proposed amendment violates the Fourteenth Amendment because it amounts to an unlawful racial or ethnic preference. However, the Court is not prepared to say without doubt that the proposed amendment is �patently� unconstitutional....nor is this case of such an �exceptional� nature as to warrant intervention before the election has yet come to pass....This Court may never be called upon to rule on the constitutionality of the proposed amendment: the electorate may vote it down in November. Courts should not wade into constitutionally torrid waters unless doing so is unavoidable. That is not the case here.

The opinion then goes to a second level, where Judge Smith determines that Ajax Gaming and the Town of Johnston haven�t met the legal standard for injunctive relief, which requires showing than an injunction is necessary to prevent irreparable harm. Again, however, Judge Smith is clear that failure to meet the standard for injunctive relief is a matter entirely separate from the casino amendment's constitutionality....

Furthermore, even if the matter were deemed ripe enough for review, Plaintiffs have not satisfied their burden for preliminary injunctive relief....While it is probably true that Plaintiffs have demonstrated a likelihood of success on the merits for at least one claim � perhaps even a substantial likelihood of success � this Court is not persuaded of the potential for irreparable harm to Plaintiffs if the referendum question appears on the ballot.

Examining the Casino Promises II

Katherine Gregg of the Projo and Ryan Gainor of the Kent County Times reported yesterday on the details that have been released about the deal between Harrah�s and the Narragansett Indian Tribe. According to the summary released to the public, the Narragansetts get 5% of the casino revenue that�s left after the state takes its share. Based on the optimistic revenue estimates released earlier this year, that translates to about $21,000,000 per-annum for the tribe by the 3rd year of casino operation.

According to Narragansett Indian Tribe attorney Jack Killoy (as quoted in the KCT) the 5% that the tribe will receive is not much less than the profit Harrah�s will clear in operating the casino�

[Killoy] emphasized that because the tribe is getting 5 percent of revenue after taxes, it does not mean 95 percent of that money will be making its way to the Las Vegas desert.

"Our opponents are not accounting for the maintenance or operating costs," he said.

Killoy said after those costs Harrah's would make only slightly more than the tribe in profit.

The Projo article mentions a $45,000,000 owners share, which means Mr. Killoy's "slightly more" probably refers to Harrah�s making about $24,000,000 per year in profits, after operating costs are subtracted.

Now, the most conservative figure I�ve seen for the cost of building a West Warwick casino is $650,000,000 (and that figure is several years old). This means, if we take Mr. Killoy at his word, Harrah�s is looking at at least 27 years (650M divided by 24M) to recoup its initial investment.

It is difficult to believe that it takes a casino developer 27 years to break even -- that it is an industry standard for casinos built in 1980 to just start breaking even today. (Would any business owners reading this like to comment on what reaction they think they would get if they presented a business plan to investors that said �under optimistic estimates, we expect to recoup our initial investment 27 years from now�?) Call me cynical, but it seems more likely that the summary that has been presented doesn�t include all of the revenue streams that Harrah�s intends to draw out of Rhode Island.

Examining the Casino Promises

In today�s Projo, Katherine Gregg reports on the vague promises being made in support of voting "Yes" in the constitutional referendum that would allow the state to name a private casino operator without a competitive bidding process�

Framed as an open letter to the governor from Gary Loveman, president and CEO of Harrah's Entertainment, and the Narragansetts' Chief Sachem Matthew Thomas, the ad states the oft-lamented fact that Rhode Islanders "currently pay among the highest property taxes in the country."

"If voters pass Question 1," the ad says, "they can be confident it will substantially reduce those rates."

But when asked yesterday to be more specific about the kind of "tax relief" a voter could expect, casino-campaign spokesman Jonathan Romano said: "property tax relief."

Asked what specifically that meant, the newly hired Romano said: "What does it mean to you?"

Here�s what it means to me: under best-case assumptions, a 10% cut in property taxes is possible, but using more realistic assumptions, a much smaller cut is likely.

The best-case casino tax revenue figure quoted in this and other reports is $144,000,000 dollars. The most up-to-date data available from the Rhode Island Department of Municipal Affairs website (from 2004) reports that Rhode Island municipalities collect about $1,760,000,000 in local taxes. That figure includes some sources of revenue beyond residential property taxes, like commercial property taxes, inventory taxes, etc. If it is assumed that 80% of the municipal levy comes from residential property taxes, and that the projected $144,000,000 all goes towards replacing residential tax-revenue, a property tax-cut of about 10% is possible.

But $144,000,000 is 1) a best-case scenario 2) that includes the dubious assumption that revenues at Lincoln Park and Newport Grand stay the same as they are now. Because the state gets 60 cents on the dollar from the exisiting facilities, but probably only 25 cents on the dollar from the new casino (under the proposals the legislature favors and will be able to implement with no checks or balances if the constitutional amendment passes), the same amount of people gambling the same amount of money could result in a big loss in revenue for the state.

And as Gary Sasse of the Rhode Island Public Expenditure Council points out, there is no guarantee that city and town governments will use casino revenues for tax relief rather than increased spending �

"It's hard to see how anybody can guarantee property-tax relief because they don't control municipal spending," Sasse said.

On multiple fronts, casino proponents seem to be promising more than they can deliver.

Casinos, Monopolies, and the Right to Vote

Tracy Scudder of the Kent County Times reports that the West Warwick Town Council will vote on a casino resolution next week�

A casino item has been added to the West Warwick Town Council agenda for Tuesday night. The council will vote whether or not to ask the Rhode Island General Assembly to allow the voters to decide if there should be a casino in West Warwick.

The resolution reads: "We are memorializing the General Assembly to enact legislation to permit the qualified voters of the State of Rhode Island to vote on the establishment of a casino in the Town of West Warwick."

Casino supporters (and the Town Clerk) emphasize that the resolution is not an endorsement of a casino, just an endorsement of the people�s right to vote on a casino�

Town Clerk David D. Clayton said the resolution doesn't say that the council is in favor of the casino or against it.

The council is "just asking the General Assembly to enact legislation to allow the voters to vote on the subject," said Clayton. "This is strictly asking (the General Assembly) to do legislation so people can vote"...

If the governor is for the voter initiative, the governor should be for letting the people decide on the casino, according to [Councilor Jeanne] DiMasi.

"I think one way or another we will know if the people in Rhode Island want a casino," she said.

"What the council will be voting on is whether they believe that the people should have the right to vote on the issue. I think that is very important. So it will be very interesting to see how the two opponents of the casino on the council will vote on this because this is what the issue has become," said Council Vice-President Edward A. Giroux (D-Ward 3).

"Let the people decide. Let the people have a choice. Get it on the ballot once and for all and put it to bed."

However, if the West Warwick effort is really mostly about the right of Rhode Islanders to vote, then a gambling referendum that does not favor any specific town, corporation, or Indian Tribe should be acceptable.

And as the Cato Institute�s John Samples points out in today�s Projo, breaking the state-created monopoly on gambling is the most effective way to end the problems associated with gambling corruption (problems that spawned the creation of a lobbyist named "Abramoff")�

By raising barriers to market entry, government fleeces its citizens. The resulting monopolies also induce people to take risks with ethics and the law, in the interest of preserving their unjustified status. The government-created monopoly of Indian gaming and [lobbyist Jack] Abramoff's shenanigans are two sides of the same coin. That's the real scandal we're in danger of missing in the Abramoff affair.

What can we do? If the government simply permitted free entry into gambling, monopoly profits would be washed away by competition, reducing the incentive for wrongdoing. Should this prove politically untenable, a possible second-best solution would be auctioning off the right to enter the gambling business. Investors would pay sums for that right consistent with reasonable (not abnormal) profits.

What exactly is the rationale behind locking a provision for locking a single mega-casino in the Constitution -- besides the fact that a casino monopoly can make one town, corporation, or Indian tribe rich? If this really is about the right to vote on a casino, and not the casino itself, is there any reason why the sections of casino amendments creating monopolies are not disposable?

The Fundamentals of Casino Economics

Earlier this week, Marc asked why Rhode Island's casino proponents are taking such a convoluted route towards changing the state constitution to legalize gambling...

Instead of writing a clean, concise line or two saying something like, oh, I don't know...."gambling does not have to be state-operated", we have this:

"Approval of this amendment to the state Constitution will authorize a casino gaming facility in the town of West Warwick, to be privately owned and operated in association with the Narragansett Indian Tribe, with tax proceeds from the casino being dedicated to property-tax relief for Rhode Island citizens, and will permit future privately owned and operated casino gaming facilities in this state only upon further vote of the people."

Where's the part that says only Del's Lemonade and Saugy's weiners can be served at the establishment?

For an expert opinion on this matter, I refer you to Richard Posner, currently a judge on the Seventh Circuit Court of Appeals, a faculty member at the University of Chicago, and author of books with titles like Economic Analysis of Law and the Economics of Justice. Judge Posner recently posted to the Becker-Posner Blog (which he hosts along with Nobel Prize winning economist Gary Becker) on The Economics of Indian Casinos.

Posner begins by describing the essential nature of a casino, arguing, in an economic sense, that there is no difference between a casino and any other entertainment business...

A casino is just a retail entertainment establishment, like a restaurant, bar, nightclub, supermarket, or game room. The investment involved in a casino is modest, consisting of little more than a building plus gambling tables, roulette wheels, and one-armed bandits.

So if a casino is just a business, then why are casinos so much more profitable than movie theaters or restaurants? Or, to put the question in local context, why is it believed that a casino in West Warwick will have an economic impact on the entire state of Rhode Island that a multiplex movie theatre will not? Posner answers...

The answer is that gambling is a regulated industry. More particularly, entry is limited by government. This is not just a matter of requiring a license available to anyone able to pay a modest fee and perhaps meet some minimum legal and financial qualifications. In many states entry requires as a practical matter the entrant to prove that it is a bona fide Indian tribe, or, if it is not Indian, to convince a state legislature to permit non-Indians to compete.

The huge profits of gambling and the resulting temptations to corruption, both the quasi-corruption of large campaign contributions and the outright corruption of bribes, could be eliminated at a stroke by abolishing the limitations of entry into gambling. Then entry into the gambling business would proceed until the price of gambling fell to the cost of operating a gambling business.

The high-profitability of casinos is created by an artificially low casino "supply" created by strict government regulation.

So this is my question to Rhode Island's gambling proponents. Government, we agree (at least in public) should not be in the business of protecting artificially high profits of non-essential business sectors. You cannot get any more non-essential than a casino. What, then, is the justification for government being so intimately intertwined with the casino business and carving out monopolies for a group of preferred casino operators and a particular town? If there really is strong public support to bring gambling to Rhode Island, then why not just legalize gambling in general?