Pennsylvania Legislature has passed online casino, poker and dfs

With So Much Gambling Expansion, Does PA Have A Saturation Problem?

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While Pennsylvania gaming revenue numbers are slightly up in 2017, some critics worry that PA leaves itself unprepared for a hit.

One such critic that asks for PA to look deeper is the Allegheny Institute for Public Policy.

Frank Gamrat, a senior research associate, and Jake Haulk, president of the Pittsburgh Allegheny Institute, a think tank, told PennLive that issues could be ahead for PA. Indicators include the table games revenue slowdown, resultant tax revenue impacts, and the ever-changing gaming landscape.

“Clearly, the question of ‘saturation’ needs to be answered. Can Pennsylvania’s population and economy support in a profitable manner 22 casinos, gaming in airports, truck-stops and on the Internet?”

Saturation common among expanding gaming areas

This isn’t the first time gaming proponents and opponents have asked this question. It’s not even the first time the question has been asked of Pennsylvania.

Moody’s initially gave PA the thumbs down, despite projections that indicated the state would bring in $120 million in upfront licensing fees and $275 million annually.

The first concern from Moody’s back in November was the 54 percent tax rate on online slot game revenue. This would make it difficult on casino companies to fund operations, but also to compete.

Moody’s also worried about cannibalization. Satellite casinos and video game terminals (VGTs) at truck stops could provide an increase in supply. However, other areas, like Illinois, found that the state revenue only decreased slightly.

Low expectations after New York

New York is a prime example of this right now.

Three new commercial casinos in the state failed to meet revenue projections.

  1. Tioga Downs Racino in Nichols, NY raked in approximately $70 million in gross gaming revenue in 2017. This is about $30 million short of expectations ($100 million in its first year).
  2. Del Lago Resort & Casino in Tyre, NY closed the year with almost $150 million in total gaming revenue, $110 million off from projections ($263 million).
  3. Rivers Casino & Resort in Schenectady, NY earned a little over $103 million in gross gaming revenue, over $80 million less than the $222 million predicted.

These fails could further lower the amount of money for education, property tax relief, host municipalities and counties, and non-host counties in the region.

Even in New Jersey, where gaming did well, there are concerns that adding more casinos to the area could throw off the balance of revenue.

Construction of new casinos in PA and increased competition in Massachusetts, New York, and New Jersey leave room for the question: Will the Northeast run out of gamblers?

Back to the PA numbers

Here is a closer look at year-end revenues for Pennsylvania casinos:

  • Table games revenue: 4.4 percent increase to $890.6 million
  • Slot machine income: 1 percent decrease to $2.3 billion
  • Gross slot revenue 2016 to 2017: almost $24 million
  • Slot revenue tax payment decline by nearly $13 million
  • Table games increase brought $37.4 million in tax revenue
  • Table game tax payment increase by $6 million
  • PA year-end collection: short $7 million

According to Gamrat and Haulk, gaming revenue slowdown started in 2014. The numbers sank from 7.8 percent in 2015 to 5.6 percent in 2016 to the latest numbers. Similarly, the slots revenue had its peak in 2012 of $2.47 billion and is now down.

Bringing the mini casinos would generate a 28 percent increase in slot machines and a 32 percent increase in table games that could lift tax revenues for a short time.

Katie Callahan

About

Katie Callahan is a freelance journalist, blogger and copywriter who covers everything from poker, business, education and politics to construction, startups and cybersecurity.