4:39pm

Thu January 12, 2012
Gambling

New York gearing up to legalize full-fledged casinos

In last week’s State of the State address, Governor Andrew Cuomo said it’s about time New York adjusted its state constitution to legalize full-scale gambling.

“It is not a question of whether or not we should have gaming in the state,” Cuomo argued. “We don’t realize it. We don’t regulate it. We don’t capitalize on it. But we have gaming.”

There are already five tribal casinos operating in the state. In 2001, racetracks were authorized to add video gaming machines, creating “racinos.”

So it’s easy to make the argument, says SUNY New Paltz political science professor Gerald Benjamin, that allowing full casinos in some places, but not others, makes no sense.

But that doesn’t mean that amending the state constitution to allow gambling will be easy, says Benjamin.

“There’s always been a lot of controversy about the exact geographic locations in which gambling might be permitted, whether it should be run by the government or run by private enterprise under government regulation,” he says.

Basically, brace yourself for a whole lot of political maneuvering.

Cuomo on a roll

After a year like the one Cuomo had in 2011, it’d be hard to bet against him.

During his first year, Cuomo was able to get an on-time budget through the legislature, legalize same-sex marriage, cap property taxes, add a new tax bracket so the state’s highest earners pay more and the middle-class pay less, and wrapped it all up with an approval rating near 70 percent.

Cuomo’s reputation for getting things done should also get a boost from lingering economic hardship, as he moves to legalize full casinos.

That’s according to Bill Eadington, the director of the University of Nevada at Reno’s Institute for the Study of Gambling and Commercial Gaming. He says legalizing casinos has historically been easier for politicians during hard economic times.

“They feel they need to legalize casinos because if they don’t all of their citizens are going to cross the state line and go to casinos in the next state over,” says Eadington.

That’s a very real option for New Yorkers: Pennsylvania has had gambling since 2004. Atlantic City has been around since the ’70s. Maryland, Massachusetts and Connecticut all have gambling of one kind or another.  

Allowing gambling could also be part of the effort to plug the state’s current $2 billion budget hole, though it might not happen in 2012. According to a 2011 report by the American Gaming Association, casinos nationwide contributed $7.6 billion in local and state taxes in 2010.

Gambling’s recent spread

Those revenues have proven too tempting for most state governments in the last few years. According to Eadington, the spread of casinos has led to smaller gambling houses catering to the local market.

“One of the mistakes some states and jurisdictions have made over time is to presume that just because we’ve authorized a casino, the world is going to change very dramatically for that particular community ... that doesn’t tend to happen unless it’s the only casino for a thousand miles,” says Eadington.

And that’s unlikely to be the case in New York, given the availability of gaming at racinos, race tracks and tribal-owned casinos.

Jeff Gural is chairman of the company that owns Vernon and Tioga Downs, two upstate racinos that feature video gambling.

Not surprisingly, Gural says the best way to legalize casinos would be to simply allow existing racinos to begin offering table games like blackjack and roulette.

“That way, there’s not an argument about where these things are located, and whether they’re near a school or whether there’s going to be traffic problems,” says Gural.

Game changer

There is one key exception though, which could be the linchpin of the governor’s plan - a casino in New York City.

“That could be a game changer,” says Eadington.

Eadington says Cuomo’s proposal for a convention center at the Aqueduct Racetrack (also mentioned during the State of the State address), combined with the conversion of the existing racino there to a full casino, would be a huge draw.

“Location is critical for casinos, and location relative to population centers is really the driving economic dynamic,” he says. “New York City is one of the most attractive potential casino venues in the United States right now.”

Genting Group is the Malaysian company that owns the Aqueduct racetrack. According to the governor, they would be on the hook for the $4 billion convention center at Aqueduct.

Eadington says it’s hard to imagine that they would agree to spend that much money on a convention center, notorious money pits, with only a racino to draw people there.

“That is not going to attract any tourists, but if you were to create legislation that authorizes true casinos and then [made] significant investment in non-casino amenities, then you’re going to get a different mix of visitors versus locals,” says Eadington.

Here comes the money

Susan Lerner, executive director of Common Cause New York, says drawing up the new gambling rules and deciding where the casinos will be is a recipe for influence buying.

“One of the things we would see immediately is a significant increase in campaign contributions from gaming companies, and I think we will see an increase in the amount of money that the gaming industry spends on lobbying,” says Lerner.

Common Cause’s Pennsylvania office closely followed what happened when casinos came there. They found that, between 2001 and 2008, the gaming industry and its lawyers and lobbyists contributed almost $17 million to state politicians.

James Browning from Common Cause Pennsylvania says his organization looked at the top 20 recipients of industry money, and found clear ways that the investment had paid off.

“Three of the people were State Supreme Court justices - and the industry has won something like 13 or 14 decisions in a row in the State Supreme Court,” he notes.

Browning cautions that the debate about legalizing gambling will likely focus on whether or not its social costs are too high, which could deflect attention from the gaming money quietly pouring into Albany.

According to Benjamin of SUNY New Paltz, the consensus is that a final legalization of casinos will require an amendment to the constitution.

So the industry’s money will have the potential to influence a lot of elections, given how long the constitutional amendment process takes.

First, an amendment has to pass the legislature. Then, after a general election, the new legislature has to pass it the amendment. And finally, the measure will go out for referendum, and voters will have their say.