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The Real Stimulus Package

The Real Stimulus Package

Suddenly, gaming is the darling of some U.S. states where the economic downturn has hit hard. That’s not unusual. Gaming has expanded in the past when states needed to find revenues without raising taxes (not too much, anyway).

Now that it’s clear the recession isn’t going to slip away in the dark of night, these states are looking to be proactive to bring in industries that can provide an immediate spark. And it’s not just tax revenues this time. Today, the states want the jobs just as much as they need to fill a budget hole.

Ohio jumped on board for these reasons in 2009 and will see its first casino open by the end of this year. In addition to the tax revenue and jobs, Ohio is using the casino facilities to revitalize areas of four major cities in the state.

Florida, shellacked by the bad economy, has begun to look at the integrated resorts model we see in Singapore. Those of us in the industry have always salivated about Florida: sun, sand and holidays, a perfect combination for the gaming industry.

But it needs to be an in-state movement and not directed from outside. That was a huge mistake the industry made in 1994 when a high-powered campaign was waged by the major gaming companies. It ended in a humiliating defeat because there were few local champions. That won’t happen again. There are complications concerning the gaming compact with the Seminole tribe, but the need is becoming so strong, that could possibly be overcome.

Texas, although its legislature is now dominated by conservatives, is also considering gaming because of a big budget deficit, as well as an economy that is not improving.

Massachusetts came close last year. Caesars’ Gary Loveman told me last month, “We got the bride to the church, but she wound up riding away.” But the problems that casinos would help to fix have not gone away, so clearly gaming will be considered again this year.

And around the world, gaming is also being reviewed for its tax revenues, tourism component and job creation. Asian countries have eyed that Singapore model enviously. Whether it can succeed in other countries where the government’s integrity is not as high as Singapore is doubtful, but it is attractive nonetheless.

And here’s another reason why these states and jurisdictions are eager to court the gaming industry. They don’t need to create incentives outside of a real opportunity to build a good business. But instrumental in that opportunity is a reasonable tax rate. I believe states are finally getting the message that the lower the tax rate, the higher the benefits: more jobs, more investment, more tourism—and in the end, more taxes.

Gaming has created a powerful story for states considering legalization. Just look at the votes in the Iowa affirmation referendum last year. A vote is mandated by the law that created casinos every 10 years to ensure that the communities where they operate still want them. In all jurisdictions where casinos exist in Iowa, the “yes” vote was at least 75 percent and in most cases, it exceeded 80 percent.

In Missouri, where the town of Cape Girardeau approved gaming last year, mayors of other cities in the state where casinos are located testified that gaming works in their towns.

And in one of the hardest-hit regions, Atlantic City, the state of New Jersey—which already offers one of the lowest gaming tax rates in the U.S. at less than 10 percent—has stepped in to create an even greater incentive to complete the stalled Revel Entertainment project. While the original investors have already sunk more than $1 billion into the project, at least another billion will be needed to finish it.

But Governor Chris Christie, who has made it his mission to revitalize Atlantic City since taking office in 2009, convinced Wall Street that Revel would be a good investment by kicking in more than $200 million in sales tax rebates over 20 years.

Now, this is not unusual for a state to attract a big business. For example, several Southern states have lured auto manufacturing plants by giving tax rebates—in some cases eliminating taxes altogether. Typically, those plants create around 1,000 jobs, with few other ancillary benefits.

Revel, on the other hand, will create more than 2,000 construction jobs and 5,000 permanent jobs. It will attract more tourism and meetings/conventions business to Atlantic City. Christie’s gamble with a tax rebate isn’t such a long shot after all.

So the message is getting out: Gaming is the real deal when it comes to stimulus. And without all that government red tape.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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