Study Says Costs of Casino Will Cancel Out Benefits

A gambling study released by the New Hampshire Center for Public Policy Studies on Thursday concludes that there will "essentially be a 'break even' point" for total financial impact to the state.

The report doesn't deny that the state will see tax revenue from expanded gambling, but adds that negatives include competition from surrounding states, tax rates, regulatory fees, license fees and social costs of a casino.

"There is a significant body of economic development literature which holds that novel entertainment values, such as municipal sports stadiums with a professional team, bring little "new" economic growth to a region," reads the study. "In the same way, local residents who spend their discretionary income at a casino are potentially shifting their dollars from other discretionary purchases."

The paper was authored by NHCPPS Executive Director Steve Norton, Deputy Director Daniel Barrick and Economist Dennis Delay.

The report is an update of an earlier model produced by the organization in 2010 that explained the potential impact of expanded gambling. That model was created to support the work of the Governor's Gaming Study Commission.

The summary of the study explains that it is difficult to predict when New Hampshire would see new revenue from a casino license fee or casino operations.

"Experiences in other states say it could take at least two years before any tax revenues from casino operations would be available to the state," said the study.

The model also estimates that at a tax rate of 40 percent, a $300 million casino investment would provide an annual net benefit of close to $32 million, while a $500 million casino would provide $51 million in net benefit.

On the notion of job creation, the study suggests that many of the potential jobs created by a casino would act as a replacement for other jobs.

"The extent of this so-called "substitution" will be driven by how many visitors to the casino come from outside the market.

New Hampshire Gov. Maggie Hassan has publicly supported Senate Bill 152, which seeks to legalize expanded gambling.

Hassan released a statement on Thursday explaining factors that the NHCPPS study fails to recognize: 

“Today’s report reinforces that one high-end, highly regulated casino can generate a licensing fee of $80 million dollars or more for the next budget that will help New Hampshire invest in priorities that are critical for building a more innovative economic future. The report also emphasizes that a high-end casino with a significant capital investment will generate thousands of jobs and tens of millions of dollars a year in revenue to the state.

“And while the study appropriately notes the impact of social costs, it fails to recognize that with gambling already taking place in our communities and with Massachusetts moving forward with casinos, costs will be felt with or without a New Hampshire casino. The study also fails to recognize other benefits of a high-end casino in the form of local and state tax revenues and economic development opportunities.

“Moving forward with a New Hampshire plan will allow us to invest in the priorities that are critical to an innovative economy and fund programs to address on-going social costs, and I will continue working with the legislature to finalize legislation for one high-end casino that can help strengthen our state’s economy while protecting our brand as a family-friendly state with a great outdoor economy. The true risk we all face is the risk of letting our economy fall behind and allowing the good jobs and growing businesses of the innovation economy to develop elsewhere. We must take action and lead the way to build a stronger, more innovative New Hampshire.”

Senate Finance Committee Chairman Rep. Chuck Morse (R-Salem) also issued a statement regarding the study:

Having served on the Board of the New Hampshire Center for Public Policy Studies, I appreciate the work done by Steve Norton and his group. However I must respectfully disagree with the assumptions presented in their recent report.

As they have done in past studies on this issue, I believe the Center has significantly overestimated the social costs of gaming while underestimating the revenue benefits to the State of New Hampshire. Specifically, this report assumes no more than $51 million in net benefit to the state. However, our Lottery Commission, the professionals who know the industry best and base their estimates on similar sized casinos in three other states, have estimated a high-end casino along the Massachusetts border will net New Hampshire upwards of $120 million in new revenue.

Moreover, studies have shown that if New Hampshire is slow to move forward with expanded gaming, we are likely to see a loss of up to $50 million in revenue each biennium while at the same time experiencing increased social costs related to casinos in other states. I agree with Governor Hassan in this area. If anything, this report should serve as a signal to lawmakers that now is precisely the time to move forward with expanded gaming in order to reap the revenue benefits and establish a clientele before Massachusetts is able to get their operation off the ground.

To see the complete text of the NHCPPS expanded gambling study, see the attached PDF.