States and cities bet on gambling

September 27, 1992|By Ian Johnson | Ian Johnson,Staff Writer

New London, Conn. -- For centuries, ships have defined th identity of this small coastal city: Privateers challenged the British; whaling ships later brought prosperity; most recently, locally built nuclear submarines helped fight the Cold War.

Now, as economic stagnation and tax-weary residents combine to strangle the city budget, New London is turning to the sea for help again.

City officials hope that a casino ship soon will ply the waters of the Long Island Sound in search of revenue. The ship could bring this city of 29,500 more than $1 million -- enough to rehire some of the police officers, firefighters and school teachers who have fallen victim to budget cuts, estimates show.

For all the historic parallels, New London's strategy is not unique. Across the nation, many local and state governments -- including Maryland's -- have turned to gambling to try to make ends meet. They have made gambling a $304 billion industry that extends from glittery casinos to neighborhood convenience stores.

Spurred on by the acceptance of lotteries and gambling on Indian reservations over the past decade, other forms of gaming, such as casinos, video slot machines and bookmaking, are rapidly becoming respectable forms of entertainment -- and of government revenue.

"Gambling used to be confined to relatively isolated areas, such as Monte Carlo, Baden-Baden, Las Vegas and Atlantic City," said Bill Eadington, professor of economics and director of the Institute of Gambling and Commercial Gaming at the University of Nevada at Reno. "Now we're seeing a mass proliferation of gambling that had been shunned before."

Such changes draw criticism from people who oppose gambling on moral or social grounds. But economic forces may be more effective in limiting the industry's growth.

Industry experts doubt that gambling will be a sure bet for revenue-hungry state and local governments. Fierce competition among cities and states could saturate the market. Americans constantly demand new games. And revenue from some forms of gambling already has stalled or declined.

But with millions to be made, gambling is on a roll. Some examples:

* Riverboat gambling has begun over the past three years in Iowa, Illinois, Mississippi and Louisiana. Missouri is due to vote this year. And efforts continue to bring a floating casino to Baltimore's Inner Harbor.

* Major cities are embracing casinos. New Orleans already has passed legislation. Chicago and Hartford are debating similar plans. Meanwhile, casinos are being built in six Canadian cities, including Montreal and Toronto.

* Video lotteries, which began three years ago in South Dakota, are spreading to Montana, Rhode Island, Oregon and Louisiana. West Virginia has a pilot project. Maryland, which hopes to net $50 million from the games, could have a version in place next year.

The games work like traditional card or dice games, but instead of sitting down at a table with fellow gamblers, the player is up against an interactive computer.

* The number of state lotteries has doubled in a decade. Lotteries once were confined to the Northeast. With Texas' decision this year to start a lottery, 35 states, with 80 percent of the U.S. population, offer this form of gambling. States pocketed $8 billion in profits on lotteries last year.

The drive for gambling has a common theme: budget crises.

"About 30 states have budget deficits. The public doesn't want to pay taxes anymore and is willing to kick the politicians out of office, so they are being forced to come up with something new," said Wayne Daniels, a gaming industry analyst for the New York investment firm of Wertheim Schroder & Co Inc.

Governments fear that they will be left out if they hesitate. "It may not be the best way to raise revenue, but it may be one of the few allowed us," said New London City Manager Richard M. Brown. "If we don't act now, the market will be filled and cut off."

New London, for example, has an Indian gambling center 20 minutes away in Ledyard. And many states that approved riverboat gambling were afraid of losing out to neighbors along the Mississippi River.

Experts disagree about whether gambling is a sure-fire moneymaker.

Mr. Daniels and some other analysts remain bullish on the gaming industry's long-term prospects. Industry revenues have increased 10 percent annually over the past decade. Hot games can take off dramatically: In just three years, revenue from video lotteries has gone from nothing to $366 million.

But Mr. Eadington, of the University of Nevada, says some new games may steal business from gambling stalwarts such as horse racing and lotto. Revenue from horse racing, for example, fell from 1982 to 1991.

Some of the sparkling revenue statistics in states that recently implemented gambling may also reflect business drawn from established gambling centers such as Atlantic City. That implies that the revenue pie can't grow forever.

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