The process by which the casino provision was added to the Senate budget is a foretaste of how the predatory gambling lobby will manipulate, corrupt, and dominate New Hampshire politics if we legalize slots.

• The casino provision in Senate budget was written and its revenue estimates provided by gambling lobbyists. During debate on the Senate floor, race track lobbyist Dan Callahan was jokingly referred to as "the 25th Senator." For those preferring their legislators to be elected, this is no joke.
• The provision was added to the Senate budget by the Finance Committee in the dead of night, with no public hearing, no substantive discussion among senators, no fiscal note, and no review by critical state agencies, including by the Attorney General's office.
• Due to this budgetary sneak attack, LBAO was not able to provide a fiscal note in time for the Senate vote, forcing Senators to rely upon gambling industry revenue projections which have repeatedly proven inflated and unreliable.
• Providing more evidence as to how these revenue estimates are poorly substantiated (and plucked from thin air), prime sponsor Senator D'Allesandro magically increased them from $185 to $205 million during debate on the Senate floor.
• The Senate casino provision guarantees track owners that the state will not permit a new track within 40 miles of their locations.
• The tracks are granted a new type of liquor license, called a "lounge license," not permitted elsewhere in the state, and specifically rejected last session. This could allow 24/7 drinking within casinos, a known contributor to problem gambling.
• ATM machines are specifically allowed within 51 feet of a slot machine, an absurd non-protection for addicted gamblers.
• There is no competitive bidding required in awarding fixed-price casino licenses to tracks, a give-away valued at hundreds of millions of dollars and a reckless distortion of the free market.
• Some members of the House and Senate report having been bullied into accepting demands made by gambling advocates.
• If we legalize, the predatory gambling industry will become the single most powerful political force, overwhelming our small state, much as did the railroad industry in 1880-1910, when it controlled both the legislature and the courts, including selection of candidates. See this 1890 New York Times story.

The Senate budget rushes to get gambling money at the expense of sound regulation.

• With zero prior experience regulating casinos and within 3 months of a cold start, the lottery commission is charged with hiring staff, finalizing interim rules by which casino licensees will be approved and administered, then selecting the required central computer system, developing standards by which specific types of slot machines would be considered, implementing the computer system, and having slots operating in 12 months. As noted below, no other state has been able to move at even close to this speed.
• The AG's office has 60 days to complete and report on background checks. Nevada and Mississippi, states with deep experience in gambling regulation, often require in excess of one year to complete a background investigation.
• It will be too late to correct mistakes once licenses are granted. Since license applications would be filed and approved on the basis of interim rules. Any subsequent rule changes deemed adverse by casinos would be subject to litigation.
• Tracks would be allowed to apply for licenses immediately upon passage of the budget, and must be approved or denied within 6 months from the date of application. It is likely that the approval deadline will arrive before completion of final rules as to the conduct of investigations. The casino amendment partly end runs this serious problem by allowing the lottery commission to accept applicant eligibility determinations made at any time in the past by other jurisdictions. Many parties requiring background check will lack any determination in other states.

Casino license and operating revenues will not flow quickly enough to fix the budget.

• Gambling companies will not allow license monies to be paid or released from escrow until full grant of state and local authority to operate machines. This will require prior completion of these steps: regulations written, revised, and approved; criminal background checks completed; referendum approval by local voters; local planning and zoning approvals for temporary and permanent facilities; selection and testing of the central computer system; litigation and appeals won. Yes, there will be litigation.
• Temporary facilities do not avoid any of these hurdles.
• The Senate first year budget assumes casino license fees being paid by the Rockingham, Seabrook, and Belmont tracks and released into the General Fund. The second year budget assumes casino revenues (net of license fees for additional locations) of about $100 million - assuming $200 Win Per Day (WPD), the current win rate in Delaware, and a 40% tax rate - implying that 3,500 slot machines will be in operation during the entire 12 months of the second year of the biennium. This means that half the total number of authorized machines at Rockingham and Seabrook will need to be installed and operating in newly constructed temporary facilities 13 months from today. Since construction would not start until state approvals are granted, which is inconceivable until 6 months after passage of the budget, only 6 months are left to obtain local approvals and to complete construction. This timeline is completely unrealistic.
• Casinos cannot open without the required central computer system. Sufficient monies to select, purchase, and implement this system would come from casino license revenues, which casinos will not pay or release until they are granted final authority to build and operate. A chicken and egg problem that the gambling industry must figure will be resolved via a General Fund raid.
• Provided this problem can be overcome - and within 12 months if year 2 revenue projections are to be believed - the lottery commission must develop a specification for the central computer system, put it out to bid, review the bids, and select a vendor. The vendor must then develop the system, provide it to the lottery commission, who must then test the system for suitability, then successfully deploy the system at two racinos. Compare this timeline to the state's experience with its ERP system.

• In the six states most recently to have legalized race track casinos, the earliest that any revenues started flowing was 22 months after legalization. The average for the four that are now operating is 25 months.

  • New York legalized slots at racetracks on October 2001. Saratoga Springs was the first racino to open in January 2004, 27 months later.
  • Maine passed a law allowing slots at Bangor in November  2003. The racino opened 22 months later in November 2005 in a temporary facility with 475 slots. The final facility with 1,000 machines opened in June 2008, four and a half years after passage of the law.
  • Pennsylvania passed its law authorizing 61,000 slots in June 2004. The first racino opened in November 2006, 27 months later. As of December 2008, four and a half years later, only 16,000 slots have been installed and at least one of the casinos has not opened.
  • Florida voters authorized racino slots via a constitutional amendment in November 2004. The first racino at Gulfstream Park opened in November 2006,  24 months later.
  • Kansas passed a law authorizing four publicly owned casinos in March 2007. Today, 26 months later, three of the companies that won a bid for the right to build those casinos have dropped their plans, and the fourth just broke ground on phase one of their project, a 575 machines slots barn due to open at the end of 2009, 33 months later. Phase 2 of the project isn't expected to be ready until early 2012, almost 5 years later.
  • Maryland authorized 5 casinos in November 2008. The first casino is not expected to open until 2011, with significant revenues coming in 2012, more than 3 years later.
• Legislators with questions about revenues, revenue timing, and casino regulation are welcome to contact Mike Marsh at Mike@Marsh.org. Mike spent 18 months studying these matters last year as a member of the House Ways & Means gambling subcommittee.

The Senate budget assumes an unrealistically huge market for slot machines.

• The 13,000 machines authorized by the amendment are far in excess of the New Hampshire market. Connecticut's two casinos, the largest in North America, have a combined total of 13,800 slot machines.
• The casino provision allows 2,000 slot machines at each of two North Country locations, a far greater number than this market could sustain. The Bangor, Maine slot facility, with a greater surrounding population of 130,000, can sustain only 1,000 machines with a weak $150 WPD. Monthly total WPD there is only slightly greater than with the 475 machine temporary facility.
• Maryland received valid bids for only 6,550 of 15,000 authorized machines. The largest casino proposal has proven highly contentious among area residents and is tangled in zoning problems. One Maryland casino licensee is already pushing for a lower tax rate.
• Kansas had no bidders for its southeast Kansas casino license.
• To achieve second year casino revenues assumed in the Senate budget, over $3 billion would need to be gambled, a severe hit to the New Hampshire retail economy, meaning serious cannibalization of existing businesses and consequentially reduced business tax revenues.

Additional budgetary mistakes.

• The Senate budget gives roughly $2.5 million per year to subsidize horse racing. Given current budget stress, should we be using public money to subsidize this dying and unprofitable form of entertainment?
• The Senate budget's casino provisions create several new dedicated funds, though which an additional $20 million in revenue would presumably flow. Each dedicated fund should be carefully considered on its own merits.