For Some in NY, Gambling is a Losing Proposition

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The Empire City racino at the Yonkers Raceway, one of nine tracks around the state authorized to offer video lottery terminals, which operate much like slot machines.

Photo by: Adi Talwar

The Empire City racino at the Yonkers Raceway, one of nine tracks around the state authorized to offer video lottery terminals, which operate much like slot machines.

At Yonkers Raceway, the trotters don’t come out to race until 7 p.m. But by early afternoon, the bleachers are already scattered with scruffy men ready to wager on races at other tracks throughout the country.

Meanwhile, ad-covered mini-buses arriving from New Jersey, midtown and parts of the Bronx and Brooklyn pull into the enormous parking lot, as passengers file out to station themselves before wall-like rows of more than 5,000 electronic slot machines with names like African Dusk, Cashman, Gypsy Moon, Inca Gold, Peacock Magic and Win Win Situation.

And gambling in Yonkers isn’t just about the slots or the ponies, either.

The racino’s ZIP code —10704—also cashed in the most winnings statewide on instant scratch off games in 2012, indicating a strong propensity for play there. The award-winning Raceway Diner across the parking lot from the track and casino has a Lottery machine all its own and there are special TV’s are hooked up to broadcast the drawings on the walls.

There’s something for everyone here. That’s even the theme of a TV ad that features a Yonkers Raceway trotter talking inside the casino.

The interplay between Empire City and the raceway itself reflects a gamble that the state of New York took when it approved so-called “racinos” in 2001: The people playing the electronic games are helping support New York’s racing industry, which in turns create jobs and tourism right here in New York.

Boost to horse racing unclear

In 2001, the legislature approved the installation of Video Lottery Terminals (VLTs) at seven harness racetracks and two thoroughbred tracks.

The state requires VLT operators to pay part of their commissions to help increase purses — the money given to the owners of the horses that win — and aid the financially troubled racing industry. Bigger purses were meant to increase handles (the amounts wagered on the races) as well as to boost attendance, for the mutual benefit of racing and adjoining casinos.

Racing is serious business in New York State. Last year, the industry published figures boasting of its impact on the state economy. For every 100 horses, there are 80 jobs and $92,100 of both direct and indirect economic impact, according to the New York State Equine Industry Economic Impact Study. With 157,000 horses in New York State, it’s a nearly $4.2 billion industry, supporting 32,991 indirect and direct jobs, from breeders and trainers to veterinarians and horse farmers.

NYRA spokesperson Eric Wing says the VLT revenue has been successful, boosting purses and handle at the state’s thoroughbred tracks 10 percent and 40 percent respectively since 2011, when Resorts World Casino came on board.

But its quarterly financial statement shows operating revenues decreased 13.5 percent from $50.8 million to $44 million from the same quarter last year, even while non-operating revenue increased $3.2 million, thanks mostly to a $2.5 million increase in VLT purse support payments. Attendance has also been down or flat over the last few years, he says.

According to a July 2012 report by state Comptroller Thomas DiNapoli, a review of purse handles and statistics from the New York State Racing and Wagering Board found that the handle at VLT-associated racetracks actually decreased 13 percent between 2004 and 2010.

“Although one could say that the VLT contributions may have slowed down the rate of decline at New York’s racetracks, we are unable to determine whether the millions of dollars that pay for increased purses, rather than for education, are having their intended effect,” the audit said.

In Fiscal Year 2012/13, 47.1 percent of net win from VLTs went to education while 44 percent went to gaming facility commissions.

But Wing says attendance is not a good indicator of success because off-site betting accounts for 90 percent of wagering while online horse-betting (it’s the only legal form of online gambling in the state) allows people to to pick up the phone or turn on computer and place a bet.

“More and more money is migrating to account wagering… as opposed to people getting in their cars and driving 40 miles or so to a race track,” he says.

As for the idea that racinos would encourage new people to bet on horses, Wing says such experiments have routinely fallen short.

“When casinos have sprung up at racetracks, it’s been challenging to get a crossover of attendance between casino goers and racetrack goers,” he says.

Which explains why wagering numbers are increasing, “even though it can seem to a casual observer like people aren’t going to the track like they used to. “

Playing to play

But even if racing fans are showing up at the track less and less, the racinos are attracting their own crowd.

Standing at the ground-level Bar 360 at Aqueduct Casino—the Resorts World racino attached to the long-running racetrack in Queens—William Carter, 53, says he comes with $200 and leaves with about $80 during his three-hour sessions playing the electronic slots and table poker three to four times a week.

“Maybe I win, I lose, I drink, I go back and gamble, I go out for a cigarette,” Carter says.

The music video above the bar where he is sitting features a high-paced techno backing up a frenetic treble line and the hip-hop-esque chorus of “Heyyyy, the party ain’t that far away — let’s win some money!” It stars stand-up comedian Nick Turner, who tells viewers to take the Chinatown bus, the A, E, Z or J trains, the Long Island Rail Road, or just to come straight from JFK airport.

A place to play that’s “minutes not hours away” is just what has brought many of the people to Aqueduct.

“… It’s very convenient, that’s a problem for some people,” says Carter, who loses hundreds of dollars a week playing there. But he says gambling isn’t a problem compared to his former addiction to crack cocaine.

“I was stuck in a black hole for years,” he says. “That was something I couldn’t stop doing. This I can stop doing.”

The nearness effect

But Carter wasn’t gambling nearly as often until it became so convenient. He used to take a trip to a casino about every six months, he says, and make a trip out Vegas every year. When he was interviewed, he anticipated returning to work and cutting down on his time at the casino, but he was also in the habit of coming three to four times a week.

Resorts World Casino is the most profitable — with more than $696,555,056 of net win in Fiscal Year 2012/13 — of the state’s nine, topping Empire City Casino on the outskirts of the city by more than $1 million and out-earning the third-ranked racino, Saratoga Casino and Raceway, by more than $500 million.

And most of its customers are local.

Among users of Resorts World Casino Rewards Club cards in August, 87 percent had addresses either on Long Island or within the five boroughs. The highest percentage of card holders from any one place was the 34 percent from Queens. After that, Brooklyn — the closest borough — was home to 26 percent of Rewards Club card holders, followed by Manhattan, with 4 percent, and Staten Island, with 2 percent. Long Island accounted for 21 percent of card holders, and 13 percent came from someplace else.


Where the Winners (and Losers) Are

Click on the red dots to see total lottery sales and winnings by ZIP code in 2012.


Dueling research

John Welte, a senior research scientist at the Research Institute on Addictions at SUNY Buffalo, has conducted one of the only national studies on problem gambling to date.

In “The Relationship of Ecological and Geographic Factors to Gambling Behavior and Pathology,” published in the Journal of Gambling Studies in 2004, he lays out the oft-cited findings of a study he conducted in 2000, which concluded that while a stand-alone racetrack had no effect on gambling there was a strong correlation between gambling problems and proximity to facilities offering casino games.

After adjusting for a number of factors, his survey also found that respondents who lived within 10 miles of a casino had more than double the rate of pathological or problem gambling as those who didn’t. Welte’s research also found and that the frequency with which people gambled increased in relation to the number of forms of legalized gambling in the state.

Data released in 1999 by the National Gambling Impact Study Commission includes the National Opinion Research Center (NORC) at the University of Chicago’s examination of the proximity to gambling facilities. Telephone and patron survey results showed that having a gambling facility within 50 miles roughly doubles the prevalence of problem and pathological gamblers among residents, though results differed in a telephone-only survey.

Seven of the nine communities that NORC investigated reported more pathological gamblers after the introduction of nearby casino gambling, the research said.

However, the American Gaming Association counters such claims with its own research analysis, which shows that while the number of states with commercial casinos has increased 10-fold over the last two decades, the prevalence of pathological gambling has held steady at about 1 percent of the U.S. population.

The group also claims that while in some cases the “novelty effect of new forms of gambling, including slot machines, has resulted in a temporary increase in problem gambling,” research supports the idea that problem gambling rates return to previous levels over time.

Problem, or just persistence?

Part of the disagreement might stem from differences in how “problem gambling” is defined.

However many problem gamblers there are, there’s no doubt that frequent gamblers are money makers for casinos, according to a fact sheet last year by Professor Earl L. Grinols (author of “Gambling in America”) that compiles various studies on gambling.

Gambling facilities not only tend to attract players from nearby, but they attract a dedicated group of local gamblers over and over. Grinols’ survey of localized research leads him to conclude that 30 to 50 percent of gambling facility revenues come from problem and pathological gamblers and that 10 percent of gamblers account for 66 percent to 80 percent of wagers.

The National Gambling Impact Study Commission released a report in 1999 that is the only study of its kind to date, in which researchers estimated that problem gambling accounts for 15 percent of dollars lost gambling.

Pro-gambling groups highlight the fact that many people with gambling problems also have drug and alcohol problems and so casinos cannot be blamed for their compulsive behavior.

But while Welte’s research does find a correlation between people with drug and alcohol problems and people who have gambling problems, he found a stronger link between problem gambling and coming from disadvantaged neighborhoods or a lower socioeconomic class.

“Poor people are more vulnerable to being harmed by gambling,” Welte says, explaining that poverty itself is a dangerous motivation to get into gambling because it leaves a losing player desperate to make up what he or she has lost.

The study found that respondents who lived in the 10 percent most disadvantaged neighborhoods have 12 times the rate of pathological or problem gambling— at 10 percent — as those who lived in the least disadvantaged neighborhoods, where problem gambling was at 0.8 percent.

People who lived in more disadvantaged neighborhoods also gambled with twice the frequency— 29 times a year — than those in the top tenth.

A dollar and a dream

In a separate study, Risk Factors for Pathological Gambling, Welte found that “participation in a greater number of types of gambling is strongly predictive of gambling pathology” and found that the playing Lottery or Bingo was a predictor of problem gambling.

But a review of ZIP code level Lottery data did not show huge income difference between those the state’s biggest betting areas and those who bought few tickets.

The median income for the 20 ZIP codes where retailers took in the lowest number of wagers on Lottery tickets was about $50,375. The 20 ZIP codes with the highest wagers on the lottery had a median income of about $44,573.5, according to New York State Lottery sales data obtained through a Freedom of Information Act request and Census data from the 2007-2011 American Community Survey.

Disadvantaged or not, the data did show how profitable New York City’s residents are to the game overall.

Not only is Resorts World Casino (the only gaming facility within the five boroughs and the newest in the state) the highest earner of all the state’s eight such facilities, all but one of the top 20 ZIP codes for the highest amount wagered on Lottery tickets in 2012 were from within the five boroughs. Each borough was represented, with Brooklyn making up eight of the 20 top ZIPs.

The nine top ZIP codes from within New York City wagered more than $9.2 million — representing nearly 10 percent of the more than $8.6 billion wagered in New York State.

Meanwhile, only 10 of the 20 ZIP codes that won the most from the Lottery were within the city.

The sellers

Lottery retailers are supposed to among the beneficiaries of the state’s gambling habit. But you can’t necessarily judge their fortunes by the flashing signs in their windows and long lines at the counter.

They complain that the 6 percent they get from sales has not risen with the cost of doing business, even as they’ve helped turned New York’s Lotto into the highest yielding in the country.

Jose Fernandez is president of the national Bodega Federation, representing 12,700 stores in five states, more than half of them — 7,200 — in New York City. He says the lottery brings customers through the doors, particularly because some form of Lotto is familiar to the large immigrant population that bodegas serve. But he says the stores don’t see a big profit margin unless there’s a huge jackpot, when they get a cut.

Usually, he says, the profit from the Lottery makes up about 10 percent of a bodega’s total, and not more than 12 percent. “If it goes away, I don’t think nobody’s going to go out of business,” he says.

Jim Calvin, president of The New York Association of Convenience Stores — representing nearly 5,000 neighborhood mini marts and convenience stores licensed to sell Lottery tickets — says the association continues to call for an increase in commissions.

Retailers have helped build the lottery into the multi-billion dollar industry it is today, the organization argues, and workers’ wages, utility charges, property taxes and maintenance costs have risen dramatically while commissions have remained stagnant.

While the games bring people into the stores, they require more staff—and the rising cost of some instant tickets increases liability in the case of theft.

“The issue of rising operating costs is continuing even though the commissions on lottery rates are flat,” Calvin says.

One-armed bandits

Back at the Aqueduct racino, Damien Jenkins, 31, says he had been to Atlantic City about four times before Resorts World opened in 2011, and has also been to Las Vegas. Now he spends about $800 a week on gambling right in his own backyard—he lives just a few minutes away, in Jamaica.

Time spent at the casino would otherwise be spent sleeping or exercising, but now he even comes out to Bar 360’s Club Night on the weekends. For the year, he’s down probably about $4,000, he says.

If New York voters approve full-scale casinos on November 5, the change will in some ways be fairly subtle. While slot machines will arrive, the state already offers gamblers the next best thing: Video Lottery Terminals.

VLTs are made by contracted companies retained for both their marketing and technical know-how, are all tied to a central computer system. Because the system is run by the New York Lottery, they are not considered slot machines and are legal.

An American Gaming Association’s paper Demystifying Slot machines, which attempts to counterbalance negative views of electronic gaming devices, assures readers that the industry follows a standard (though not a regulatory requirement) that VLTs only be programed to generate up to six times the near-misses—say, two cherries aligned and a third right below the line—as other combinations.

The machines in New York are required to pay out in prizes an average of 90 percent of credits played, but a survey of research published as part of a study The impact of near-miss events on betting behavior: An examination of casino rapid roulette play, shows near-misses can keep players engaged longer.

The fixation stems form believing the chance of winning on the next round is higher or due to the level of arousal that comes from a near-win, which tops that of a win or loss.

“You want instant gratification and that’s what a slot machine does,” Carter said. “When you take a hit of crack you get that instant rush. Same thing as playing a slot machine… You get that same rush…”

Mark Berrone, 56, another Aqueduct visitor, said the machines move so fast that the logical mind is left trying to catch up.

“It’s hypnotic,” he said.

But Jim Maney, executive director of the New York Council on Problem Gambling, couldn’t say much at all about what causes people to gamble or what new gambling opportunities could mean.

While he says he sees signs of a rising awareness of problem gambling, he hopes that any new expansion of casinos in the state will lead to more safeguards and counter-messages about the risks that come along with gaming. At the very least, he hopes the move toward full-scale casinos will permit state to size up its gambling problem.

Right now, he says, “We don’t have any statistics in the state of New York on anything.”

This is one of a series of articles on the past, present and future of gambling in New York State. Click here to read more. The Fund for Investigative Journalism’s generous support made this series possible.