January 1, 2009

Carrot and stick
New Hampshire businesses and Rockingham Park bet on slot machines
By Heidi Masek hmasek@hippopress.com

Just before a good portion of the state lost electricity for days, a press conference from the new Fix It Now NH coalition made news: Millennium Gaming, Inc., is interested in investing $450 million in Rockingham Park in Salem — if video slot machines are allowed there.

Chuck Rolecek chairs Fix It Now NH (fixitnownh.org) and spoke at the conference, citing an estimated $400 million to $500 million deficit over the next state budget cycle as reason to consider limited gaming. Rolecek heads Premier Companies, C.R. Sparks Restaurants and Hanover Street Chophouse in Manchester.

Ed Callahan, president and general manager of Rockingham Park, said business people and others who want gambling revenue to fill state budget gaps rather than sales tax, income tax or increases in business or property tax joined Millennium and Rockingham in launching Fix It Now.

Ron Doucet, owner of the Executive Court Inn & Banquet Center and The Yard Restaurant is a member.

“They keep raising business profit taxes. That’s like an income tax for business,” Doucet said. “I just think [gaming] would be a natural ... less painful for everybody,” he said.

The prospect of construction work is a reason for that industry’s inclusion in the coalition, said Rich Killion, New Hampshire spokesperson for Millennium and Fix It Now.

Ultimately, Rockingham would need these machines to keep racing, Callahan said. Currently, there’s live harness racing in the summer, but there has not been thoroughbred racing in five years. They host simulcast wagering on horse and greyhound races from tracks around the U.S., and charitable bingo, poker, roulette and blackjack.

Millennium of Las Vegas has had an option to buy “the Rock” from shareholders of Rockingham Venture, Inc., for three years. “Without gaming, I don’t believe they would proceed,” Callahan said.

Callahan explained that in most jurisdictions that allow video lottery, there’s a state tax or assessment based on how much is left in the machine after people are paid off, Callahan said. In most cases, 40 to 50 percent of revenue goes to the state, he said.

State Sen. Lou D’Allesandro (D-Manchester) is working on drafting legislation. According to proposed rules, operators would need a costly license: originally the idea was $50 million for a license at a horse track, and $20 million at dog tracks with a few reserved for the North Country, he said.

“We want this to be limited and controlled,” D’Allesandro said. The number of licenses would be set, “but anyone can apply,” D’Allesandro said.

State Senator Theodore Gatsas (R-Manchester) is a proponent of “state-run, state-controlled” video lotteries. Six licenses would be issued, at no fee since the state would have control, he said. The licensee would be paid 16 percent of daily revenue, Gatsas said. He thinks the state would take in 60 percent of net, “somewhere around $170 million ... I’ve used conservative figures,” he said.

Probably more than 90 percent of the money in a machine goes directly back to customers as winnings, Killion said. The operator portion is used for obligations including wages, local property taxes, business taxes, rooms and meals tax, workers comp, etc. In some states, the state owns and maintains the terminals.

If the tax rate and license fee are too burdensome, the system may not make for an attractive investment, Killion said.

How much is projected as income from the slot machines is dependent on those things, too, Callahan said. If gaming is taxed “to oblivion,” you generally won’t get a great facility and won’t be as competitive, he said.

Other people don’t see gambling as the way to fix the state’s budget hole. “There’s no silver bullet with that type of gaming. What you get is, you’ll have a big chain come in ... and have the giant sucking sound of money coming out of our economy, going back to Las Vegas,” said State Senator Robert J. Letourneau (R-Derry).

Nonprofits that depend on charitable games will suffer, Letourneau said.

In Derry, Boys & Girls Club operations are funded mainly by bingo. “Why would anyone who likes to gamble go to nonprofit bingo when they could go down to lose money ten times faster at a slot machine?” Letourneau asked.

Callahan thinks video slots will actually attract more patrons for charity games.

“There’s definitely a crime element that comes along with it,” Letourneau said. He cited domestic disputes and suicides. Jim Rubens added divorce, embezzlement and lost workplace productivity. He chairs the Granite State Coalition Against Expanded Gambling (noslots.com).

“What the predatory gambling interests are trying to do is persuade us to trade our state’s reputation, our high quality of life and our low crime rate for a tax that will make almost everyone in the state poorer and a handful of track owners much, much richer,” Rubens said.

“New Hampshire has the lowest crime rate in the country. Why on earth would we want to give that up?”  Rubens asked.

“We pay for police details here. To the tune of about $220,000 per year to the town of Salem,” Callahan said. “If gambling creates all these problems ... apparently we’ve been creating them since 1933, but surprisingly nobody has seen them yet,” Callahan said.

There’s skepticism about projected returns.

Doucet thinks the projected $200 million for the state is optimistic, but “anything would help,” he said.

Rubens thinks as soon as New Hampshire legalizes slot machines, Massachusetts will follow with “bigger, better, flashier casinos.”

Callahan thinks competition won’t be as much of a worry if “we can get in first and develop costumer loyalty.”

Letourneau pointed out that 700 people were just laid off at Foxwoods. Gambling is down due to the economy.  The Boston Globe has recently reported that Massachusetts Governor Deval Patrick is no longer pushing for casinos in his state.

Proponents think the idea can recapture money from area residents who head to places like Mohegan Sun or even Las Vegas, but Rubans said slots at racetracks will be convenience casinos, not destinations.

Slots could make Salem a destination for some, Letourneau said. But what about the guy who stops on his way home from work and loses his paycheck, he asked. “Slot machines are the crack cocaine of gambling,” Letourneau said.

“The governor believes any discussion regarding an expanded gambling proposal needs to include a discussion on the impact gambling may have on our quality of life. And that includes our economy, job creation, crime and any other social issues that may arise,” Colin Manning, spokesperson for Gov. Lynch, wrote in an e-mail.

Millennium Gaming is interested in The Rock, because of its “rich history,” Killion said. They think adding video terminals would help provide the right purse structure to compete on the national level again in thoroughbred racing, Killion said.

Also, Salem is “uniquely positioned to succeed and compete,” Killion said. Its proximity to Interstate 93 and the Massachusetts border brings high traffic. They estimate more than 4 million unique visits to Rockingham annually would occur if limited gaming was extended there. Their analysis shows 70 percent of those would be from out of state, in particular, Massachusetts, Killion said. Salem voted twice to support video lottery terminals in the park, he said.

Millennium bought the Meadows in Washington County, Pa., where they built and opened a temporary facility in seven months. “They’ve really created a model which we think can be brought to the Rock,” Killion said. The Meadows has performed even in the tough economy, Killion said.