Sunday, April 11, 2010

A Bay State Gamble against the Odds...

On Tuesday, the Massachusetts House of Representatives will take up the Casino bill unveiled by House Speaker Robert DeLeo, having passed the committee earlier this month.  This bill, the most recent of a long list of casino bills proposed by legislators, governors, and gaming industry execs would create two destination full-service casino resorts and install slots the commonwealth's existing racetracks.  DeLeo has framed the debate and the necessity for slots in Massachusetts about creating jobs, particularly to combat what he characterized as a "blue collar recession," and spurring economic investment and growth in the Bay State.  However, an analysis of DeLeo's plan and the hidden realities of the gaming industry all but ensure that gambling will not be a panacea for the state's blue collar woes.

Opponents of legalized gambling, who are outmatched in funding, but rival proponents in tenacity, tend to argue against slots primarily as a moral issue.  Their complaint about gambling does not impugn the morality of gambling itself, but rather the ethics of endorsing an industry that attracts, if not preys, upon many who are least able to afford the loss.  Dismissing the relative political security of what casino advocates call a voluntary tax, anti-casino groups argue society does itself a disservice, when knowing full well that the poor and elderly will be undermining whatever finances they have by participating.  Less reported, but equally important are casino opponents' concerns about gambling addition (which is related to the above issue) and the impact on communities.  The latter may be the most effective concern since NIMBYism runs rampant among Bay Staters, whom polls suggest support gambling as long as the establishment is no where near them.  The leader of a leading anti-gambling group, United to Stop Slots,  is from nearby Monson, only a town over from where a major casino development is planned.

However, there are other concerns about expanded gambling in Massachusetts that have failed to coalesce with the moral concerns.  Because most proponents will hide behind the "voluntary tax" nature of gambling revenues it is easy to dodge criticism of expanded gaming.  When dodging fails, a strike back in the form of personal responsibility is inevitable and swift.  Therefore, the moral arguments against casinos must find an accord with others if they hope to succeed.  That said, this blog will make its only moral stand against expanded gambling before reciting the others.  DeLeo plans in essence to counter the very real "blue collar recession" by introducing a vice will only serve to deepen this recession in a blue collar malaise.

DeLeo, a Winthrop Democrat, argues that the construction of casinos and the introduction of slots will provide jobs both in construction and in the casinos themselves.  The fact that the state would pocket 25% of gambling revenues plus licensing fees is an added plum.  However, those construction jobs would be temporary and, since even under the rosiest of economic circumstances competition for these jobs will be fierce, the actual wages earned will be depressed.  If we wish to take the situation a little bit deeper and find fault with the construction industry, the sympathy fades further.  Despite its massive losses during the recession, the construction is not above reproach.

The industry, both contractors and the ne'er-do-well leaders of some construction unions, receives extensive backing from the state already.  Some have criticized the Massachusetts School Building Authority as a feather bed for the industry as it has its own revenue stream (1% from the states 6.25% sales tax) and usually covers up to 90% of school projects, usually new buildings.  The effect is not only a giveaway, but massive waste as consistent repairs and low-cost renovation eventually lead to expensive new building or huge renovation projects like Newton North's new High School or even Longmeadow's costly renovation, which might have been far cheaper is properly maintained over time.  Similar arguments have been made about Putnam High in Springfield.  The construction industry bears some blame, along with civic leader who support such projects solely for the tax revenue, for the housing crisis as, often in cities like Boston, housing construction was geared almost entirely to the upper markets.  The consequence has been either homeowners with underwater mortgages or empty upmarket housing depressing developers and banks balance sheets.

However, DeLeo knows as well as anybody that more jobs for the construction industry will not win many friends outside of the industry itself.  Instead, he points to the jobs that will be created in the casinos themselves from the directors of security to the pit bosses to the change handlers to the cooks to the custodian.  Although no specific reference to successes in Las Vegas have been reported, DeLeo is probably trying to draw a parallel to that oasis in the dessert.  However, here too, a fuller examination needs to be had.  Anybody who has been to both Atlantic City and Las Vegas can see the stark parallels.  Part of that is because the Las Vegas strip is an uber-sanitized image of what glamor and possibility Las Vegas has to offer.  Venture off the strip or away from downtown and in short time the image changes quickly. 

Atlantic City is a much better example of the dark side of the gambling industry.  Whereas it may take a decent drive to find Sin City's darker side, a short walk off the Atlantic City boardwalk will reveal the seedy underbelly of New Jersey's premier gambling resort.  Legalized gambling there was enacted some thirty-odd years ago to revive the moribund seaside resort town.  While its establishment has brought investment, Atlantic City's casinos face the boardwalk, while their ass-ends face a community that remains a den of poverty, crime, and corruption.  Meanwhile, the revenue that New Jersey gleans from the industry has failed to ward off chronic deficits.  Admittedly, New Jersey, even more than Massachusetts suffers from spending and corruption problems.  However, you need not visit the garden state to see how much gambling has blessed the land with milk and honey.  The Mashuntucket and Uncasville areas, the homes of Connecticut casinos Foxwoods and Mohegan Sun respectively, are by no means mini-Vegas.  Otherwise rural areas of the state, those two communities have not escaped the problems that define New England's one-time agricultural communities now in decline.

Nonetheless, the mirage of casino gambling in Massachusetts may be most aptly illustrated by a revolution in Las Vegas undertaken a little more than 20 years ago.  Steve Wynn, the father of the Vegas mega-resort, opened the Mirage in 1989.  Although Vegas had already become a land of dreams replete with dozens of decent-paying jobs for dealers, waiters, and counters, the Mirage was different.  It was huge.  It required thousands of more workers than anything built before it and set the stage for the modern incarnation of the Strip known for resorts like Bellagio, New York-New York, and yes, Wynn's most recent development the twin resorts Wynn and Encore.  However, then-recession proof Vegas lacked enough workers needed to bring the Mirage itself online.  The developers had no choice but to turn to their arch-nemeses: the unions.  The story of the Culinary Workers Union, a local of UNITE-HERE in Las Vegas, is a rare modern organized labor success story because the industry came to them to draw in experienced individuals from both within Nevada and without to staff these resorts.  The result has been a robust history of organizing gaming establishments (notably not those directly involved in gambling) despite Nevada's status as a right to work state.

Casino employees in Massachusetts are unlikely to see the same story, however.  Although labor protections are all but inevitable in the final version of the bill, the developers will not find it difficult to draw a pool of qualified applicants to staff the resorts' restaurants, buffets, bars, and hotels.  Workers in those industries have already been hit particularly hard and the state's rich culinary tradition (chefs were particularly difficult position to staff for Vegas mega-resorts builders in 1980's and 90's) ensures that finding qualified applicants  whether employed or not will not be hard.  As a result, it weakens labor's hand to negotiate agreements for its members not because they can't bargain, but because local organizers, probably of UNITE-HERE or SEIU, will, unlike their Vegas counterparts, not be in a position to gather a pool of experienced workers in exchange for lucrative contracts.  Even among the state's existing unionized hospitality workers there is a decided weakness that could be furthered if travelers are lured away from hotels in Boston, Worcester, or Springfield to the casinos.

Entire industries have also marshaled opposition to casino resorts in Massachusetts, particularly the Massachusetts Restaurant Association.  In 2008, when Governor Deval Patrick's gambling bill was introduced and slaughtered by then Speaker Sal DiMasi, the MRA expressed legitimate concerns that resorts could negatively affect their business.  Whether near the resorts or not, the MRA said that patrons of restaurants may be disinclined to dine at off-resort eateries simply out of convenience.  More alarming to the MRA was that many meals at resorts are comped or given away.  If they are not given away by the restaurant, they are paid for by points built up on a card that racks up points based on dollars spent on a machine or a table.  Why eat at someplace near home or the casino if you can gamble a bit and then get some money off your check at the on-site buffet or restaurant?  This also serves to undermine tax revenue from the meals both for the municipality (if meals tax enabled) and the state as the sales tax is applied to meals after all discounts and coupons are applied.  The only silver lining might be liquor since discounts of any kind on liquor in Massachusetts are illegal.  However, unless an unlikely total repeal of this is enacted, resorts will probably be given more leeway on this issue, again to the detriment of off-premises eateries.

In recent weeks even theater and stage owners and groups have become concerned about the prospect of a multi-million dollar resort and the performance venue that will assuredly be part of it.  Although theater owners and municipal stages like Symphony Hall have stopped short of outright opposition, they have a realistic concern that Massachusetts gambling resorts and their theater may attract top acts, performances, and concerts if not by their mere presence, then by sweetening the pot by using their gambling revenue to one-up civic institutions like Symphony Hall.  Lawmakers expressing these concerns have called for a limit to the seating capacity of any resort, a requirement that could prove difficult to maintain indefinitely.

Perhaps most striking about this push for casinos is the apparent ignorance both by lawmakers, voters, and prospective Bay State gaming execs is the present weakness in the gaming industry.  Propelled in large part by the global nature of this recession and the effects of housing market meltdown, Vegas and the gaming industry nationwide are experiencing quite possibly its first recession.  Revenues in Vegas plunged 18% in February 2009, although there was a massive boom the same month in 2010 credited partly to an odd rise in Baccarat revenue and the recent opening of a casino at the strip's massive CityCenter casino.  Even so, the report was mixed showing lingering declines in slots, and continued weakness off the strip. Foxwoods and Mohegan Sun have reported declines in revenue, which is especially important as those resorts are probably the best to compare to a theoretical Bay State resort.  Despite success of some of its casinos, resorts built in Detroit have failed to effectively staunch Motown's economic bleeding or fiscal woes.  Notably, one Detroit casino, filed for bankruptcy.  Bickering, financial issues, and politics have retarded progress on casino development in Philadelphia and Pennsylvania in general. development. 

Should these resorts and slot parlors open in Massachusetts arise and the above problems come to be, DeLeo will not have corrected our blue collar recession.  Maybe the jobs in the casinos will pay half-way decent wages, but they are unlikely to be on par with what the Culinary Workers did.  Meanwhile, there is no effective answer to protect the commonwealth's existing hospitality businesses and performing arts venues.  Some lawmakers have floated a lower sales tax rate for eateries near a resort, but it may hard to keep resorts themselves from benefiting and a 4% break on tax cannot beat $20 or more off a meal entirely.  Although a limit to any resorts stages may offer hope, lawyers make millions finding ways to sidestep even firmer restrictions.

DeLeo's plan also faces opposition from Patrick and Senate President Therese Murray.  While both support expanded gambling, both also feel that slot parlors would create fewer jobs while exacerbating the social concerns about gambling.  Recent polls of lawmakers indicate DeLeo lacks a veto-proof majority necessary to overcome Patrick's opposition, but the governor has not even said he would veto a gambling bill that includes slots.  As for Murray, the state's first female Senate President has often failed to show a firm stance on issues.  Although it would be wrong to accuse her of wavering, she has been reluctant to fully seize the full power and scope of her office, except on something like gay marriage.  She and her position on the fate of a gambling bill remain a wild card.

Should Patrick and Murray hold fast, however, it could be the one thing that will doom this bill.  An article in today's Globe highlights a personal connection DeLeo has to the slot parlors.  In the glory days of Suffolk Downs, the racetrack near Boston, DeLeo's father worked at the facility's Turf Club.  Oddly enough, the elder DeLeo did not approve of his son gambling.  DeLeo, in the article offers a naive defense of his position though, saying gamblers are " 'old-timers' with $10 or $20 to spare."  Given DeLeo's personal connection it seems his hope for slot parlors are part of a nostalgia to revive the state's race tracks, which are withering for years, suffered a further blow in 2008 when voters passed a referendum banning dog racing.

Particularly troubling about DeLeo's casino push is his decision not to air a public hearing on the bill.  Claiming that all the issues and testimony on the subject have been played out time and time again over the last few, decades, no public testimony or hearings are scheduled on the bill in the House.  It is possible that the Senate may insist on some before its approve it, however.  Nonetheless, the situation and reasons for expanded gambling in Massachusetts are different than they were when the governor's bill went down in flames.  The recession has colored all the data on both sides.  Learned testimony and the impact the industry will have on future recessions, much as we may like to pretend we can indefinitely avoid them, is essential.  Not only that, but DeLeo is personally lobbying this issue hard, as the Globe article noted.  Meeting with a powerful leader's aid can bring pressure, but meeting with the man himself is like a thousand pounds per square inch.  In Beacon Hill's world of rewards of plum committee chairs (and their stipends) and vindictive personalities, House members may be low to interfere much with the Speaker's bill.  DeLeo is not above retaliation either, despite his claim that he allows dissent.  After he won a battle for the speakership, he unceremoniously dumped his rival in back bench positions on important committees, but a far cry from his former place as majority leader.  What reps, particularly those faint of heart, are going to be eager to take on speaker on an issue as personal as this?

There is only one way that the balance between social responsibility and ancillary economic damage can be balanced again casinos and that is the fear that gambling could come and Massachusetts get nothing.  At least one Native American tribe in Massachusetts is considering opening its own resort.  If Massachusetts decides not to play ball, the tribe could develop a casino on federal designated reservation land under existing federal statutes.  Were this to happen, Massachusetts could receive nearly nothing in revenue and lose its place at the table to make decisions about what Bay State gambling could look like.  Legalizing gambling with the intent of working with federal recognized Native American lands would mirror what Connecticut did and keep the number of establishments low.  If for no other reason, this could serve as a test case, permitting legalized gambling to get a foot hold and make the decision to expand further after an analysis of the resort's impact.

It is unfortunate that this is what fiscal and economic redemption has come to when one considers the roots, scale, and impact of this recession.  As our economy attempts to work back toward stability without relying overwhelming on consumption and debt, expansion of gambling only serves to run counter to this trend.  Overspending, whether for consumer goods or the chance at fabulous wealth, was part of what made our economy susceptible to the current calamity from which we are only now beginning to emerge...we hope.

*DeLeo and Murray photos from Massachusetts General Court Website, other photos from wikipedia

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