A Closer Look at Manhattan’s (Inevitable) Casino
A Closer Look at Manhattan’s (Inevitable) Casino
Proposals by developers have been released and licenses may be awarded this year -- a look at what is going on with developing a casino within New York City.
A casino in New York City has been a decades long push by developers, but major hurdles were cleared with the 2012 Upstate Economic Development Act. Approved by voters in 2013, the law allowed four destination gaming resorts in Upstate New York and prevented downstate commercial casinos for at least seven years after first upstate gaming license was awarded.
The Act authorized seven casinos in total, three of which are intended for downstate or the New York City area. It is important to note the Act allows for either gaming facilities to be entirely new resorts or conversion of existing New York racinos (which already operate in the New York City area).
Prior to the moratorium on downstate casinos being lifted, neighboring states tried to gain a footing in the New York City metropolitan market:
In 2016, about the same time as headlines of Atlantic City’s fiscal troubles, voters in New Jersey rejected a casino expansion amendment allowing gambling near New York City by a margin of 77% to 23%.
In 2019, MGM Resorts International renewed a contract giving it the option to develop a casino in Bridgeport Harbor (Connecticut), but ran up against a tribal gaming compact that gives them exclusive gaming rights in the state.
Developers have been eyeing casinos in and around New York City for decades and will now get their opportunity.
Where in the Process are we for a New York City Casino?
This month, New York State’s Gaming Facility Location Board issued its Request for Applications (RFA) to award up to three licenses in the New York City area, including Long Island and surrounding counties. Bids require a minimum of $500 million in capital, $1 million for filing an application, and another $500 million to acquire a gambling license fee.
Per the RFA, the Board has determined to not implement certain deadlines. According to The New York Times the board’s website had said that final selections would be made no sooner than late 2023, but that estimate has been removed.
Some of the casino licenses are likely to go to existing racinos in Yonkers and Queens that allow betting (i.e. electronic Baccarat, Blackjack and Three-Card Poker games), but no human dealers.
Some of the proposals already coming to light include:
SL Green Realty Corp. (Times Square) – converting an existing office tower, into a taller tower, with hotel and casino amenities.
Related Companies (Hudson Yards) – partnering with Wynn Resorts to develop a casino along with a nightclub, a theater, and 20 restaurants.
Soloviev Group (Midtown East) – developing 6.7 acres south of the United Nations that would include sports fields, a hotel, performance space and a Ferris wheel.
Saks Fifth Avenue (Midtown) – announced it would pursue a gaming license to convert the top three floors of its store at 611 Fifth Avenue into a casino.
RXR Realty (Nassau County) – partnering with Las Vegas Sands to redevelop the Nassau Coliseum into a casino and hotel.
What does a Manhattan Gaming Resort mean for the City and State?
With the shear size of the possible consumer base – from residents, to tourists, to the entire metro region and surrounding states – a casino will likely pay off in direct tax revenue. For example, Resorts World Casino New York City, in Queens, announced in 2020 it had generated more than $3 billion for New York’s Lottery educational fund since opening in 2011.
In New York State, all of the state's commercial casino revenues are used for school aid and if casino revenues drop below estimated levels, the state’s general fund is expected to absorb the shortfall. When pandemic related closures abruptly halted in-person casino revenue for months, the state estimated in its fiscal 2021 first-quarter update that casino revenue was going to come in $288 million less than expected, which in turn, increased strain on its general fund.
If New York State overestimates a significant amount of education aid generated by New York City casinos it could impact the budget. However, it’s important to note that casino revenue is an insignificant portion of the state’s budget. From a public policy perspective, at least school districts will not bear the burden of any volatility in casino revenue.
Casino gaming revenues rarely meet expectations. According to the Pew Charitable Trusts:
More than two-thirds of states that legalized casinos, lotteries or racetrack casinos in the past 10 years have yet to see the state and local revenue that political and industry champions of legalization had promised.
In New York, a study by the Comptroller of pre-pandemic performance found that State receipts from gaming taxes for calendar 2019 from the four upstate casinos totaled $618.3 million, nearly $295 million below their initial application projections.
In the end, New York doesn’t want to miss out on new revenues, no matter how marginal. The state was late getting sports betting up-and-running compared to its neighbors and doesn’t want to miss out on commercial casinos. With the gaming industry pulling in $54.9 billion in 2022, a new record, New York wants a larger portion of that revenue. But it might not pay off in the long-term.
What are the Possible Externalities of a Commercial Casino for New York City?
University of Buffalo researchers found residents within 10 miles of a casino were twice as likely to have a gambling problem than those who lived farther away. They also found that “neighborhood disadvantage had a substantial effect on problem gambling, even after controlling for a person’s socioeconomic status, age, gender or race.”
In December, The New York Times reported on how casinos target older Asian gamblers:
“Although there is limited research on the prevalence of gambling by race, studies have shown that Asian Americans are at greater risk of developing a gambling disorder than the population as a whole.”
There are about 1.2 million New York City residents of Asian descent, the highest of any city.
Thousands of jobs will likely be created, but with gambling comes social costs as well. It is important to consider all factors before awarding a commercial casino license in the City. The bottom line is that while a casino may bring some revenues to the city and state, there are externalities associated with it. It is not too late for the legislature to ensure that safeguards are in place to protect vulnerable communities from the potential harms of gambling.
New York State already guards against local governments not bearing the burden of volatility in commercial casino revenue. But policymakers need to ensure that the costs do not outweigh the benefits.
Any opinions expressed herein are those of the author and the author alone.