Worth the gamble?

By DAVID SCHARFENBERG  |  December 16, 2009

"We have a huge investment," says Representative William San Bento Jr., chairman of the state legislature's Permanent Joint Committee on State Lottery, "and we can't afford to lose it."

Rhode Island currently collects about 61 percent of the revenue from the slots at Twin River and Newport Grand — the highest tax of its kind in the country. That meant $280 million for the fiscal year that ended in June. And those dollars, combined with lottery income, amount to the state's third-largest source of revenue behind the income and sales taxes.

According to rankings compiled by the conservative Tax Foundation, Rhode Island may be more dependent on gaming revenue than any other state in the union. And with the budget in ever-worse shape, the temptation to deepen that dependence will be great.

Cynics like Leonard Lardaro, a University of Rhode Island economist long critical of Smith Hill's failure to enact meaningful economic reform, fear that the General Assembly will win voter approval of casino gambling and then declare victory — failing to pursue real economic growth in the state.

"That's a bigger gamble than gambling," he says.

Lawmakers insist they are committed to broader reform in a state that has leaned too heavily on a rusting manufacturing sector. But even if they see casino gambling as nothing more than a boon for the state budget, they could be disappointed. Barrow, of UMass-Dartmouth, says Smith Hill will actually see a decline in revenues for at least a decade should it move from slot parlors to full-fledged casinos.

A casino, after all, is an expensive proposition. There are hefty building costs. Big marketing costs. And while slot parlors can depend on nifty algorithms and bright lights to separate customers from their money, blackjack and craps tables require large labor outlays.

Higher expenses for casino operators lead to smaller takes for the state — on the order of 25 to 30 percent, elsewhere. And unless officials can finagle a higher percentage than the norm, that means a slot parlor-turned-casino would have to double its revenue — in an increasingly competitive marketplace — just for the state to break even.

But, as casino advocates argue, that's probably not a strong argument for maintaining the status quo. Counting on Twin River and Newport Grand to hold their own as slot parlors in the face of competition from Massachusetts gaming "would be naïve," Berman says.

If state legislators want to maintain anything approaching their current haul, they'll have to make the case for full-scale casino gambling to an electorate that rejected the idea in lopsided fashion just a few years ago.

 CasinoLongView_main
THE LONG VIEW Does Rhode Island need to move from slot parlors to casinos?


'LINCOLN ISN'T LITTLE COMPTON'

Independent gubernatorial candidate Lincoln Chafee has declared his opposition to a casino referendum next year, arguing through a spokesman that "the voters made their position clear in 2006 and it should be honored."

And, as Chafee's quip suggests, there is something inherently awkward in Smith Hill pols asking voters to engage in a do-over so soon after 63 percent voted down a full-scale casino.

But, as one veteran political observer told the Phoenix, Chafee's position assumes that the question would be the same this time around. And it would, in fact, be quite different.

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