Run the numbers before gambling on third casino
The Boston Globe
The Editorial Board
December 23, 2019
State gambling regulators have been in no hurry to award a third casino license in Massachusetts, and the disappointing financial performance of the first two casinos makes their inaction seem downright prescient. Neither the MGM casino in Springfield nor the Wynn Resorts casino in Everett has lived up to its rosy expectations, calling into question whether the state really needs a third gambling palace.
Still, those disappointing numbers haven’t dampened enthusiasm for gambling in Southeastern Massachusetts, the only region of the state left out of the casino action so far. The state Gaming Commission is now mulling whether to invite developers to submit ideas for the area encompassing Bristol and Plymouth counties, along with the Cape. As a matter of fairness, officials in Southeastern Massachusetts say it’s high time they got a piece of the economic stimulus other regions have enjoyed.
But if there’s one thing the commission should have learned by now, it’s that projections from casino proponents can’t be taken at face value. Before commissioners act on any proposals, they should conduct their own independent market analysis to determine whether another resort casino of the size required under state casino law would really be viable. The commission voted Thursday to begin seeking public comment on a potential Southeastern casino, a process that could — and should — lead to a full-fledged market study.
The major reason the region doesn’t already have a casino is the legal travails of the Mashpee Wampanoag tribe, which the Legislature originally expected would own the third casino. Although a tribal casino remains a possibility, the outlook for the 2,800-member tribe has gotten worse since 2011. It’s suffered setbacks in court — a judge tossed out the decision recognizing its land in Taunton as a federal Indian reservation — and also in Congress, where the Senate has declined to pass legislation that would override the judge’s decision. Recently, local media reported that the tribe’s leaders were subpoenaed for records by a grand jury.
But even if the tribe’s efforts fail, that shouldn’t automatically mean awarding a license to a commercial applicant instead. Under the law, the commission doesn’t have to award a license at all. The market has changed since the casino law’s passage in 2011, and the state needs to be sure that the region can sustain a resort casino that costs $500 million, the required minimum investment specified in the law. MGM’s revenues in Springfield were a whopping $144 million below projections. And while it’s early yet, the Everett casino is on track to miss its first-year projections too. The commission has conducted market studies before that concluded a third casino was viable — but that was before the opening of the two casinos.
Neil Bluhm, whose proposal for a casino in Brockton is the only fully developed casino plan in the region, says he wouldn’t be seeking a license if he didn’t think the casino would make money. But that’s not the only factor for the state to consider. The commission also has to take into account whether a third casino would cannibalize revenue from the other casinos and the slots parlor in Plainville. If the market becomes oversaturated, casinos could also start demanding tax cuts to stay in business, putting the state in the position of choosing between state revenues and jobs. (There’s even a scenario in which the state could end up with four casinos, if a commercial casino opens and then the tribe gets recognition, which would allow it to open a casino outside the state’s regulatory framework and pay no casino taxes.)
The basic contours of the dilemma facing regulators in the Southeast region haven’t changed in years. There’s a moral argument for waiting for the tribe, in order to compensate for centuries of poverty and oppression. There’s an economic development argument for going ahead with Bluhm or some other commercial applicant to grab jobs and tax revenues. The one thing that actually has changed since 2011 is that the state now has two casinos operating, and showing disappointing results. With more data at its fingertips, the commission should run the numbers and figure out whether a third casino is a good idea.