PHILADELPHIA — As more states roll the dice on casinos, the traditional pecking order of American gambling is being turned on its head.
Just five years after its first casino opened, Pennsylvania now generates more tax revenue from card games and slot machines than any other state in the nation — and it isn’t even close.
The Keystone State’s treasury raked in more than $1.3 billion from its 10 casinos last year, outpacing its closest competitors Indiana and Nevada, which saw $875 million and $835 million, respectively. Louisiana and New York round out the top five.
New Jersey, the longtime powerhouse of Northeast gambling, now ranks only 10th, with $306 million in tax revenue, according to the American Gaming Association.
Since 2006, casino taxes and licensing fees in Pennsylvania have generated $5.4 billion. Nearly 15,000 jobs have been created at the state’s gambling hot spots, which include Parx Casino just outside Philadelphia, Hollywood Casino in rural Dauphin County near the state capital of Harrisburg, The Rivers Casino in Pittsburgh, and Mount Airy Casino Resort, tucked away in the Pocono Mountains.
Ending an exodus
Like in other Northeast states that have watched in frustration as residents cross the border to spend their discretionary income, Pennsylvania lawmakers eventually grew tired of watching hundreds of millions of dollars leave the state each year. Many gamblers headed east to Atlantic City, N.J. Others drove to West Virginia, where commercial gambling was legalized in 1994. Some boarded planes for the bright lights of Las Vegas.
Each year, one out of every 12 Pennsylvanians left the state to gamble. That exodus, coupled with tight state budgets, helped reframe the debate and win over longtime opponents.
“I think people are getting realistic, just as I was realistic,” said then-Pennsylvania Gov. Edward G. Rendell, whose spirited support of commercial gambling helped drive casino legalization through a skeptical state legislature in 2004.
In 2002, Mr. Rendell, a Democrat, campaigned on bringing casinos to the state as a way to create jobs and lower crippling property-tax rates. Like other proponents, he doesn’t dispute the negative effects casinos can have on problem gamblers and their families.
“If I could stop people from gambling, if I had the power to do that, maybe I would. But Pennsylvanians were already gambling,” Mr. Rendell said. “Why weren’t we getting any of the benefits of that?”
The key to Pennsylvania’s meteoric rise has been its 55 percent tax rate on slot-machine revenue, one of the highest in the nation. The state also levies a 16 percent tax on table games. Nevada and New Jersey, in comparison, tax gaming revenue at 6.75 percent and 8 percent, respectively. They each draw more visitors and generate far more gross gaming revenue, but the low tax rates mean greater profits for casino owners and less money for state accounts.
N.J.’s shrinking chip stack
But in the gambling world, there’s always a loser, and Pennsylvania’s success “has been at the expense of Atlantic City in many ways,” said Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association.
The economic recession and rise of Pennsylvania casinos formed a perfect storm, eating away at Atlantic City’s share of the gaming market it used to dominate.
In 2010, New Jersey saw a 9.4 percent decline in gaming revenue. Pennsylvania’s revenue jumped by more than 26 percent over the same time. The legalization of table games in the Keystone State and in Delaware last year also hit New Jersey hard. Poker players and blackjack lovers now have more than one option, and they’re taking advantage of it.
As many states added gaming jobs over the last several years, the Garden State has shed them. About 34,000 people worked in New Jersey casinos last year, down from 36,377 in 2009, the AMA reported.
There is little New Jersey officials can do to lure Pennsylvanians back to Atlantic City, now that they’ve discovered the benefits of gambling a few miles from home. Instead, the city is trying to shed its image as the East Coast’s version of Sin City and reinvent itself as a tourist destination and family vacation spot.
New Jersey Gov. Chris Christie fired the opening salvo earlier this month, chiding New Jersey residents who may be considering a summer trip to Las Vegas.
“There is no reason people should go to Las Vegas in the summer,” he said during a Sept. 7 news conference. “Why would you go to the middle of the desert in the summer? You’d have to be stupid to do that. Come to Atlantic City, where there’s a beautiful beach. Gamble if you want to.”
Mr. Christie made the comments before introducing the new head of the state’s Casino Reinvestment Development Authority, an agency tasked with making Atlantic City cleaner and safer. The governor chose John F. Palmieri, a New Jersey native who also headed up redevelopment efforts in Boston; Charlotte, N.C.; and other major cities.
“I would hope what we get right now is, we exploit the extraordinary advantages Atlantic City has as a destination resort and a convention resort,” Mr. Christie said, outlining his vision for a seaside resort town.
Casino evolution
Analysts think Mr. Christie is wise to overhaul Atlantic City’s image. The explosion of casinos in recent years has made craps, roulette and other games more accessible to the average gambler, regardless of where he or she lives. Boarding a plane and booking a weeklong stay in Las Vegas just to play at the tables is no longer necessary.
“If you look around at all of the casinos in the U.S., the hotel-casino is increasingly becoming an exception,” said William R. Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno. “Most casinos are now within a two-hour drive for 98 percent of their customers.”
For some in eastern Pennsylvania, a weekend in Atlantic City has been replaced with an afternoon trip to Parx Casino, a sprawling “racino” — industry slang for a casino/horse-racing track hybrid — in Bensalem, just outside the city limits of Philadelphia.
Gino Melucci, a 58-year-old advertising executive from northeast Philadelphia, used to be an Atlantic City regular. Now, when he isn’t on the road, he spends his time at Parx.
“Everybody around here has a positive attitude about this. The people who gambled around here used to go Atlantic City. They were looking for something here,” he said as he pulled receipts from the pocket of his jeans. He had won $3,600 a few hours earlier.
His strategy is not to waste precious time on penny or nickel slot machines. Instead, he finds the busiest area in the high-limit slots room, armed with a wad of $100 bills.
Along with receipts of his winnings, he keeps more than a dozen “player’s club” cards in his pocket. He’s a frequent guest of casinos in Illinois, Nevada, Connecticut, California and other states across the country. Like many others, he showed up the day Parx opened its doors in December 2009.
“Personally, I say, ‘The more the merrier,’” he said.
Unlike their counterparts in Nevada and New Jersey, most Pennsylvania casinos aren’t marketing themselves as vacation destinations. Some don’t even have adjoining hotels.
Instead, the goal of casino owners and lawmakers is to keep the gambling population in state. Luring guests from neighboring states that boast their own casinos is an unrealistic and unnecessary goal, gambling proponents say.
“I’d be satisfied to capture just the Pennsylvanians,” Mr. Rendell said. “There’s enough money to be made from them.”
