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Photo by: Karla Ann Cote
Lottery slips at the Resorts World racino in Queens, where the three pillars of New York’s current gambling industry—horses, video slot machines and the lottery—come together.
Smoking a cigarette as he stood on a balcony overlooking the track at Resorts World in Queens one fall day, Michael DiMauro, 64, explained that gambling is like a second job for him.
DiMauro, a math teacher, keeps track of his winnings like any good gambler would, maintaining a Rewards Club card so that when the casino alerts the feds to single winnings of more than $1,200, Uncle Sam counts his losses against it.
Soon we’ll find out exactly how much New York State is willing to wager on its own gambling habit when voters decide through a ballot referendum on Nov. 5 whether to substantially expand gaming in the state.
With chips already on the table, New York is deciding whether to double down on an experiment with state-sponsored gambling that began in 1967 with the New York Lottery. But unlike DiMauro’s tracking of wins and losses, determining whether New York State’s nearly 50-year-old gaming experiment has broken even is no simple calculation.
Gaming companies, contractors, lobbyists and politicians are so far the clearest-cut winners, along with the few, individual jackpot winners.
The state has touted gambling’s contributions to education, job creation and horse-racing as reasons to raise the stakes. And schools have received billions. But state funding for education, which is the stated sole purpose for the lottery, has actually decreased in recent years even as state gaming revenue has soared.
Gambling facilities have created jobs, but have also offered new temptations for habitual gamblers wishing to test their luck — some of whom end up losing their shirts. And while a portion of profits at the state’s existing slot-machine parlors go to the state’s floundering multi-billion dollar racing industry, it’s unclear whether those “racinos” and the full casinos that could come next will save racing or put the final nail in its coffin.
An itch to scratch
New York State amended its constitution by referendum in 1967 to allow the Lottery. Since then, the Empire State has repeatedly upped the ante.
“Lotto” was introduced in 1978. The subsequent game “Daily Numbers,” introduced in 1980, and Win 4 a year later set off “unprecedented growth” according to the New York Lottery. Then came Pick 10, Take 5 and new instant-play technology that made it easier for retailers to sell scratch offs and catapulted instant game sales from $298 million in 1994 to more than $1 billion in 1997.
The games kept coming with new additions like Mega Millions in 2002, Sweet Million in 2009 and Powerball in 2010. Each year, there are between 35 and 45 new instant scratch off games.
The Supreme Court ruling in 1987 that casinos on Indian reservations were legal, began a proliferation of gaming operations on reservations. Racinos, which combined electronic gambling with traditional racetracks, were allowed beginning in 2001, based on the premise the state needed to raise money after the World Trade Center attacks that year. The first one opened in Saratoga in 2004. Now there are nine.
By 2010, the number of slot machines outside Indian territory in New York State exceeded those at tribal casinos, 12,469 to 11,979, according to an American Gaming Association report.
Meanwhile, the state’s revenue from a combination of lottery tickets and electronic slots (or video lottery terminals) has continued to rise steadily, from $4.2 billion in 2000/2001 to $8.9 billion in 2012/13.
Of the $8.9 billion in sales in 2012/2013, nearly half — $4.2 billion — went to prizes, more than $1.2 billion to retailer commissions and more than $209 million to gaming contractor fees. Marketing and advertising accounting for an additional nearly $90 million.
More than $3 billion was earmarked for education in the state — $2.8 billion (31 percent of total sales) from the traditional lottery and $860 million, or 47 percent of net, from video gaming.
The sure winners
Among the top winners in New York’s experiment with gambling are the gaming companies — which for the last decade have been on a winning streak. And Kien Haut, the Malaysian parent company of Genting Malaysia Berhad, a resort, entertainment and gambling conglomerate, has hit the jackpot.
Genting New York owns Resorts World Casino in Queens, which beat out every other casino in North America with its net win of $696,555,056 in fiscal year 2012/13, calculated before payouts to support horse racing in the state.
Empire Resorts, a gambling and horse-racing company that owns and operates the Monticello Casino and Raceway in Monticello, N.Y., is also majority owned by Kien Haut and brought in $63,695,004 in net win last year.
In exchange for 10 percent of profits, Kien Haut also financed the start-up of the Foxwoods Resort & Casino in Connecticut in the early 1990s, according to news reports, and the Seneca Niagara Casino in New York, built in 2002.
The company is on track to develop the site of the former Concord Resort in Sullivan County into a resort and gambling complex.
From the gaming company perspective, one particularly exciting aspect of the proposed gambling expansion is that it would not only permit four upstate casinos. Seven years later, it would allow three downstate ones.
Proximity to the city has already been good for gaming companies. After Aqueduct, the newly expanded Empire City Casino — owned and operated by Yonkers Raceway — brought in the second highest net win with $545,370,374 in 2012/13.
Yeah, that kind of rich
The companies that produce the state lottery’s tickets, ticket machines, gaming machines, back-end systems and marketing campaigns are also doing just fine.
Since July 2011, Scientific Games has been under a $98 million contract with the state for instant ticket design and development, according to contract data posted online by the Office of the State Comptroller. The lottery’s website says the company will provide marketing services, including research, game design and retail support, and will get at least half the lottery’s printing work.
According to its 2012 annual report, the company made more than $35.7 million from its New York retail sales in fiscal year 2012 — more than any other of the many states it serves.
Gaming executives are betting that the country’s financial problems will lead to new opportunities for gambling vendors. “We believe several recent developments fueled by the challenging economic situation could expand our revenue opportunities over the long term. In the United States, legislators have passed or are considering enabling new or expanded gaming legislation in Ohio, Illinois, Kansas, Iowa, Maryland, California, New Hampshire, New York, Florida, and Massachusetts,” according the most recent annual report of WMS — which was acquired by Scientific Games in January. The merger brought SG — the leading lottery content and service provider — together with the leading supplier of casino games and machines.
Separately, G-Tech, a Rhode Island-based company that has faced bribery allegations in Texas and the UK, is one of two alternative vendors for the New York Lottery. It is under a more than $674 million contract for instant ticket design and development that includes lottery retail equipment and communication lines from the retailer to headquarters, as well as computing system and the backup site, warehousing and distribution of instant tickets and some instant ticket printing.
Pollard Banknote Limited, the second alternate and an instant ticket company, is under a $63.7 million contract. The lottery also had another multi-million dollar deal with Schafer Systems Inc. for still more dispensers.
There’s also money to be made in getting people to play. DDB Worldwide Communications Group Inc. — the lottery’s sole marketing company which created the “Yeah, that kind of rich” ad campaign, among others — is under contracts totaling more than more than $167 million. The state has already paid more than $419 million to the company on a contract that began in 2007 and expired in January.
Marketing for all games increased by $155 million between 2003 and 2012. The amount the state paid for instant ticket marketing increased from $20.7 million to more than $29.2 million over that period and online and jackpot marketing increased from more than $33.9 million to more than $47 million. According to the Gaming Commission, these fluctuations have to do with changes in actual games and concentration of marketing — pushing games that are slipping and introducing new games.
Greasing the wheels
Meanwhile, the state’s incremental move toward adopting new forms of gambling has given casino gaming and racing interests multiple opportunities to lobby legislators in Albany.
The most recent data released by government watchdog group Common Cause show that from 2005 through the first quarter of 2013, gaming interests spent total of $59 million on lobbying and campaign contributions in New York.
While the industry gave at a stable rate from 2005 to 2011, a sharp rise in 2012 accompanied legislative consideration of gambling expansion.
The amount spent on trying to win legislative favor in Albany jumped by 35.9 percent from 2011 to 2012, with more than $1.6 million spent on campaign contributions and more than $7 million paid for lobbying last year.
Between 2005 and June 2012, Patricia Lynch Associates was the best compensated gambling lobbyist, according to data compiled by Common Cause, taking in more than $4.2 million in fees.
From 2011 to July 2013, Genting spent the most of any company — $3,299,135 — on lobbying and campaign contributions combined.
But the New York Gaming Association, created in 2011 and made up of various racino interests, was the top industry campaign contributor with $543,051.58 during that period.
G-Tech made the bulk of its lobbying contributions — $917,030 of its $972,530— between 2011 and July 2013 and gave away another $55,500 in campaign contributions during that time. Scientific Games Corporation also spent $276,000 on lobbying since 2011.
High rollers
The recent top beneficiaries of campaign contributions have been the New York State Democratic Assembly Campaign Committee ($414,750), the Senate Republican Campaign Committee ($403,750) and Gov. Cuomo ($361,500), according to data compiled by Common Cause of contributions from 2011 through July 2013.
Democratic State Sen. Jeff Klein — also a legislative leader as head of the Independent Democratic Conference — got $51,800 from gambling interests. He voted for the referendum, but not before pushing for some casino revenue to go to a “Dream Fund” for young immigrants.
The fourth highest beneficiary of gaming contributions was Attorney General Eric Schneiderman, who received $129,500, according to the report. As required by law, Schneiderman’s office wrote the initial ballot language for the referendum but it was later altered by the Board of Elections in a way that critics say unfairly paints the proposal in a good light.
Legislators who already have gaming facilities in their districts and the chairs of the Racing and Wagering Committees — Republican Senator John Bonacic and Democratic Assemblyman Gary Pretlow — got slices of the pie, too.
Bonacic and Pretlow were the fifth- and eighth-highest recipients of gambling money between 2011 and 2013 and each sponsored gambling bills in their respective houses of the legislature.
Not surprisingly, the report found more money flowed into top recipient’s coffers after they gained prominent positions. From 2005-2011, before Bonacic became chair of the Senate’s Racing and Wagering Committee, he received less than $4,000 in contributions from the gambling industry. He has received $85,000 since 2011. Bonacic did not respond to requests for comment.
Pretlow has taken in more than $112,000 from gambling interests since he became chair of the Racing and Wagering Committee more than a decade ago but most of it — $64,000 — has been deposited into his war-chest over the past two-and-a-half years, according to the report.
Pretlow doesn’t deny that nearly half his fundraising for the 2012 election cycle — $132,000 — came from gambling interests.
“The facts are the facts, it is what it is,” he said. “But it doesn’t mean anything.” He said he has sponsored numerous pieces of pro-gambling legislation — including one to legalize sports betting — because gambling is good for the state economy. “I have been a strong proponent of casino gaming and gaming in general” since he began in the legislature in 2002, he said. “As such, those industries have supported my campaign.”
You can’t win—or lose—if you don’t play
Through the Freedom of Information Act, City Limits obtained 2012 data on lottery sales for every vendor location in the state and a breakdown of winnings by ZIP code.
Hartsdale, New York, in Westchester County, contained the zip-code with one of the top win-rates in the state in 2012. Tara Ramirez, of Hartsdale, won the Powerball for $70 million in February.
Dairydel grocery, where she bought the ticket, got a $10,000 bonus. Ramirez, then 37, deposited a more than $43 million lump sum check into her account, and the New York Lottery got to post pictures of her grinning in front the New York Lottery sign.
But like in any game, where there are winners, there are also losers. In a quarter of the state’s 1,480 ZIP codes, winnings in 2012 equaled 50 percent of less of lottery sales.
Correction: Because of an editing error, this figure was originally published as $67.4 million.
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.