With casinos as guide, temper gas revenue goal
Editor’s note: This editorial incorrectly identified Seven Springs Mountain Resort in Somerset County as one of several locations to house Pennsylvania’s casinos. It instead should have listed Lady Luck Casino at Nemacolin Woodlands in Fayette County.
Last week, Gov. Tom Wolf laid down his marker in what is sure to be a season of strenuous wrangling and aggressive arm-twisting over a proposed severance tax on natural gas in Pennsylvania. The governor has projected that such a tax could bring close to $1 billion to the commonwealth’s exhausted coffers, and provide a boost to public schools that have been beset by shrunken budgets for most of the decade.
We believe a severance tax would be beneficial, as long as the impact fees that help communities directly affected by drilling remain in place. But as the debate proceeds, it would be wise to cast a skeptical eye on any of the revenue projections that emanate from Harrisburg. There’s every likelihood they will not meet expectations.
How this could happen is illustrated well in an Associated Press story that caught our eye last week. Datelined from Hartford, Conn., it outlined how revenues from casinos that have sprouted up across the Northeast over the last several years, including several in Pennsylvania, have not lined up with the rosy estimates proponents offered at the outset of what the investigation called “the casino bonanza.”
And “bonanza” is not an hyperbolic way to describe it. Where once anyone with an itch to legally gamble beyond the occasional lottery ticket had to gas up the car for a trip to Atlantic City, N.J., or invest in a plane ticket to Las Vegas, casinos in this portion of the country have become ubiquitous. Though not yet as omnipresent as McDonald’s or Subway, you don’t have to burn up much gasoline in our neck of the woods to reach one – there is the Meadows Racetrack & Casino in North Strabane Township, of course, along with the Rivers Casino in Pittsburgh, Lady Luck Casino at Nemacolin Woodlands in Fayette County, casinos in Chester, W.Va., Wheeling, W.Va., and Youngstown, Ohio, and a proposed casino in Lawrence County.
One of the reasons cited for the revenue shortfalls is competition and, yes, there can be no doubt casinos have reached saturation levels in this part of the country. There are, simply, only so many gamblers with only so much money. The proliferation of gambling elsewhere has led to four of Atlantic City’s 12 casinos being shuttered within the last year, and while the Meadows seems to be holding up well now, there’s certainly no guarantee that any of today’s freshly minted casinos will be reliable draws 30 or 40 years hence. Just look at the now-moribund malls that everyone thought would reel in shoppers in perpetuity.
But it also appears that some of the rosy revenue projections for all these casinos were simply the product of wishful thinking. According to the AP, Ohio officials estimated that casinos would bring in $470 million in tax revenue every year. The reality has been a less spectacular $267.5 million. Mike Sobul, who was the director of research for the Buckeye State’s tax department, put it honestly: “In retrospect, we were guessing.”
Similar guesswork was apparently applied in Maryland, where revenue has fallen well short of expectations, and in Pennsylvania, where the numbers have held up better, but some of that is driven by the addition of table games to casinos, which were not originally figured into initial projections.
With sobriety perhaps setting in, revenue forecasts are now being examined more stringently in New York and Massachusetts, which are giving the green light to additional casinos. Officials in Pennsylvania and elsewhere would be wise to follow their lead.
And they would also be smart, in the weeks ahead, to apply the same yardstick to how much revenue a severance tax will yield. Chances are, it won’t be as much as advertised.