New York is Banking on the Casino Industry to Save Struggling Cities but it should Consider Online Casinos Instead

New York is planning to issue casino licenses this year. While the move is intended to provide job opportunities, it comes with a lot of risk.

New York state is one of the most populous and prosperous states in the union. It is home to some of the world’s most recognizable companies like Calvin Klein, Bloomberg and Goldman Sachs. The country’s (and the world’s) best and brightest flock there to earn sky-high salaries.

But that comes with a catch. Almost everything described above is exclusive to New York City, the coastal enclave which is isolated from the rest of the state. New York is a big place but almost all of the economic activity is located in one city, leaving residents of the rest of the state to grapple with low incomes and a lack of employment opportunities.

Governor of New York Andrew Cuomo recognizes this and wants to do something about it. His plan? Expand legal casino gambling in upstate New York; licensing casinos in locations which are off the beaten path but close enough to New York City and Connecticut to attract large numbers of customers.

The casino plan

• New York is looking to casinos to boost employment in the depressed upstate region

• Neighboring New Jersey, Pennsylvania and Connecticut also have large casino markets

• New York is not currently considering legalizing online casinos

Last year the government made gambling news by amending the state constitution to open the possibility of licensing commercial casinos for the first time. This year applications were submitted and the state’s gambling commission is expected to have approved some plans by the end of the year.

It should be noted that the state capital is in Albany, not New York City, and lawmakers are attempting to balance the desire to improve the economic fortunes of depressed upstate areas with the need to put casinos in profitable areas.

The issue was raised earlier this year when lawmakers brought up the topic of opening a casino in Orange County, roughly one hour away from Manhattan. That was bothersome to officials in the Catskills who fear that a casino there would absorb most gamblers from New York City.

As it stands, the Catskills Mountains area is to be the epicenter of New York’s new casino industry. The area has history as a center of tourism; during the mid-20th century it was a popular summer resort destination for New Yorkers and is mostly associated with Russian Jews, which is what gave it the nickname “borscht belt.”

Extending casino licenses to companies pledging to operate in the Catskills is thus seen as a well to restore the region to its former glory, and many see casinos as a risk-free way to boost employment and tax revenue.

Why it’s a risky maneuver

Cuomo’s plan to revitalize the economic spirits of upstate New York is admirable but misguided. Neighboring New Jersey is learning the painful lesson that there are already too many large-scale casinos and American poker rooms in the region.

New Jersey and Pennsylvania are home to the country’s second and third-largest commercial casino markets after Nevada. Atlantic City’s struggling casino industry is feeling the squeeze of competition from casinos in Pennsylvania.

Neighboring Connecticut has only tribal gambling, not commercial casinos. But it is home to the Foxwoods Casino and the Mohegan Sun, two of the world’s largest casinos by gaming space and major draws for gamblers across the East Coast.

And if that weren’t enough competition, Massachusetts recently legalized commercial casinos for the first time in the state’s history and plans to issue licenses sometime this year.

Like any industry, the outcome won’t be known until several years after the first operations launch. But there are many reasons to be pessimistic that the land-based casinos in upstate New York will be highly profitable.

What assurance is there that tourists and gamblers from New York City or across the region will visit those establishments rather than casinos in any of the multitude of states which border New York? Gambling industry analyst Harold L. Vogel was speaking of this competition when he said that Cuomo is“15 years too late to the party.”

People will visit those casinos and they will provide opportunities for some of the region’s unemployed. But if they fail to turn a profit they’ll go bankrupt in a few years, and those workers will be back pounding the pavement yet again. It will be a blight on the reputations of Cuomo and the state legislature.

What about online casinos in New York?

The state is pushing for land-based casinos primarily as a means to boost employment, not raise tax revenue. That’s a secondary objective, and is part of the reason why casinos are more likely to launch in the Catskills than in locations closer to New York City.

But considering that New Jersey and Delaware now have the first-ever licensed online casinos in the US, Cuomo and other lawmakers could consider following the model. Similar legislation is being debated in Illinois, California, Colorado and Massachusetts, among some other states.

These websites don’t employ large numbers of low-skilled people, but they have the potential to provide tax revenue to the state. The government could then use that money to fund education and training programs to help the state’s long-term unemployed reenter the job market.

And while land-based casinos carry a high financial and political risk, online casinos are much cheaper to operate. The revenue which they provide may be smaller, but it is more likely to be predictable and sustainable.

It’s a less-risky alternative to the current casino plan promoted by Cuomo, but it seems to be one that state officials are not currently considering.