Hedging the bet

Like most games of chance, the numbers looked too good to be true. And now it looks like they were.

At the unveiling Thursday of  House Speaker Robert DeLeo’s gaming bill, state Rep. Brian Dempsey, who put the plan together, said the two resort casinos and 3,000 slots at the state’s four race tracks would generate $1.4 billion to $1.9 billion in annual revenue for the state.

Dempsey’s initial claim, which was affirmed by his aides despite opponents expressing skepticism that the numbers were unrealistic, was incorporated into stories by a number of media outlets attending the State House press conference, including CommonWealth.         

But Patrick Lynch, an aide to Dempsey, said Friday the estimate of $1.4 billion to $1.9 billion was actually an estimate of total gaming revenues. DeLeo is proposing a 25 percent tax on casino revenue and 40 percent tax on slot revenue, which would work out to estimated state tax revenue of at least $350 million to $475 million.

Lynch said Dempsey was going with even different numbers, estimating the state’s gambling tax revenues will be $200 million to $600 million. No justification for any of the numbers has been provided.

“I don’t know what to say other than sorry,” said Lynch, who added the numbers mixup was the result of a misunderstanding and there was no intent to mislead anyone. Dempsey’s office, however, did not release a statement clarifying the numbers mixup and Lynch said he wasn’t sure how to address the problem. “I’m bracing for the calls,” he said.

Gambling projections have often been controversial. When Gov. Deval Patrick unveiled his three-casino proposal in 2008, his estimates of 20,000 permanent jobs, 30,000 construction jobs, and $400 million a year in tax revenue were widely criticized as unrealistic.

DeLeo’s revised numbers, if true, still would put Massachusetts in the upper echelon of gaming revenue. Comparing the Massachusetts projections to 2008 data from the American Gaming Association, the Bay State would rank fifth in the nation in terms of tax revenues on gambling.

Nevada’s 266 casinos, for example, generated $924 million in tax revenues in 2008 on $11.6 billion in gross casino gaming revenues. Iowa reported $1.4 billion in gross gaming revenue and, with a tax rate similar to what DeLeo is proposing, took in $324 million in tax revenue with its 17 land-based, riverboat and race track casinos.

Pennsylvania, which in 2008 licensed one resort casino and six slots-only racinos, reported gross gaming revenue in 2008 of $1.6 billion, with the state collecting $767 million. Pennsylvania assesses a 55 percent tax on gambling revenue, but redirects a portion of the money to the horse-racing industry in the state.

The gambling tax revenue is a key aspect of DeLeo’s casino/slots proposal, second only to the estimated 16,000 to 18,000 permanent, construction, and indirect jobs he says the initiative would produce. The speaker’s proposal earmarks hundreds of millions of dollars for cities and towns, Massachusetts’ community colleges and the fast-draining rainy day fund.

“We will reinvest the funds we garner through gaming licenses in our state,” said DeLeo. “We will distribute this money to fund manufacturing, workforce partnerships, tourism and local capital projects.”

According to a summary of the bill, the measure will:

• Create a five-member gaming commission;
• Tax casino revenues at 25 percent;       
• Tax slot revenue between 40 to 50 percent;
• Collect a one-time $100 million license fee from each casino operator and a $15 million fee from each race track;
• Mandate a minimum investment of $500 million from each casino developer and $75 million from race track owners;
• Earmark $5 million a year for treating compulsive gambling.

The one-time licensing fees would be split between a number of public functions including the state’s Manufacturer’s Fund, which would receive $50 million, and the state’s community colleges, which would be in line for a one-time infusion of $25 million.

Initially, the state would direct 100 percent of the slot tax revenue to local aid, about $100 million a year, until the casinos are up and running. After that, local aid, the state’s rainy day fund and education would each receive 30 percent of the tax revenues with the remainder split among a variety of line items including a mitigation fund to offset costs of affected communities.

State Rep. Daniel Bosley, a Democrat from North Adams, one of the House’s most ardent opponents, said the promises of any gambling bill are as illusory as a casino patron walking away from a table rich.

“You can’t do everything the proponents say they are going to do with this bill,” said Bosley, who is leaving the House this year to run for Berkshire sheriff. “This really is not a great economic strategy.

The tone of the rally and the framing of the bill were clearly designed to garner enough support to override a potential veto from Gov. Patrick, who supports destination casinos but opposes slots.

“This is a bill, I believe, that should get the support from every member of the House,” said DeLeo, adding there will not be any public hearings on the proposal, which should come up for a vote in the next two weeks. DeLeo said the slots should be in motion six to nine months after passage but could not put a time frame on casino openings.

Patrick was noncommittal about a veto, saying he would work with DeLeo and Senate President Murray to fashion a gambling measure acceptable to all.

“There’s a right way and a wrong way to do this,” said Patrick, who said nothing has changed his mind about slots.

There’s another factor in DeLeo’s need to get 107 House votes. Bosley said DeLeo also needs the two-thirds vote to attach an emergency preamble to the bill to enact it right away. If not, then it would take 90 days before the measure becomes law and if opponents mount a campaign to put a referendum on the ballot and certify the signatures before that period, then the law would be in limbo until after the election.

“If there’s no emergency preamble, you’re not getting any revenue until after the next election,” said Bosley. “I don’t think he’s got the votes to do that.”

In case anyone doubted it, DeLeo said time and again his gaming bill is about jobs and every speaker that followed the Speaker took up the mantra.

Paul Guzzi, president of the Greater Boston Chamber of Commerce, threw his support behind the bill because “there is no way this state can have an economic recovery unless we have a jobs recovery.”

One of Guzzi’s strange bedfellows, AFL-CIO President Robert Haynes, pointed to all the out of work union members as a backdrop gathered on the State House Grand Staircase.

“To me, this bill is about three things: jobs, jobs and jobs,” said Haynes.

Dempsey said the two proposed destination casinos and four racinos would mean 16,000 to 18,000 jobs, including construction and indirect jobs. Michigan, with three casinos, reports 8,500 permanent casino jobs and Pennsylvania, with one casino and six slots-only racinos, has about 5,800 jobs, according to the 2008 gaming association data.

Les Bernal, executive director of Stop Predatory Gambling, says revenue figures tossed about are only meant to draw in people who are vulnerable to throw away their money and the job numbers are unsupported. The recession the country has been going through is an indication of mortgaging the future on a chance for easy money, he says.

“The era of phony prosperity is over,” says Bernal. “The ultimate example of phony prosperity is casinos.”