Fitch Warns About RI Gaming Revenue

Fitch Warns About RI Gaming Revenue

The Bond rating agency Fitch Ratings  says growth in gross commercial gaming revenue across the U.S. slowed to 1.2% last year from 4.8% in 2012 as the industry grapples with saturated regional markets, a still-sluggish U.S. economy and newly expanded gaming operations in several states. Rhode Island was singled out due to the expansion of gaming in MA. While many states benefit from favorable tax rates on the industry's $38 billion of annual revenue, shifting dynamics have positioned some states with more to lose than others. 

'Taxes on gaming are not the jackpot they once were for many states,' says Marcy Block, Senior Director in Fitch's U.S. Public Finance group. 'Outside of Las Vegas, gaming supply has largely met demand so we don't expect overall revenues to increase dramatically; however, in the game for tax revenue, states with newly legalized or expanded operations are likely to grab a piece of the pie from those more established states.'

According to Fitch, a notable example is Massachusetts, which Fitch expects to weaken the established gaming markets in Connecticut and Rhode Island when its casinos come online in the coming years--a trend that is increasingly prevalent throughout the northeast region. Connecticut is expected to be impacted both from expansion in Massachusetts and New York.

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Pending casino development in New York would have a similar effect for surrounding states as Connecticut, New Jersey and Pennsylvania vie for gamblers in the tri-state area and near Atlantic City.

Fitch Ratings says: Established markets like those in Delaware, New Jersey, Missouri and West Virginia lost ground to new entrants like Kansas, Maryland, New York and Ohio. While new entrants have pushed growth in gaming tax revenue up by 9.8% across all states, many states saw trend reversals on this front in fiscal 2013 due to inter-state competition.
The benefit of gaming for any state will depend on both the volume of gambling activity its casinos draw, as well as its tax rate for gaming revenues. At more than 11%, Nevada continues to lead other states in gaming revenue as a percentage of its total government revenue due to its $9.7 billion gaming industry. However, with gambling accounting for less than 1% of total government revenues in more than half of states with legalized gaming, Nevada remains an outlier.