NEW YORK (AP) — A Malaysian company’s plan to build a $4
billion convention center and big-time casino on the outskirts of New
York City could be the biggest shot fired yet in a tourism arms race
that has seen a growing number of Eastern states embrace gambling as a
way to lure visitors and drum up revenue.
New York Gov. Andrew
Cuomo announced last week that he would work with the Genting Group, one
of the world’s largest and most successful gambling companies, to
transform the storied, but sleepy, Aqueduct horse track into a megaplex
that would eventually include the nation’s largest convention center,
3,000 hotel rooms, and a major expansion of a casino that began
operating at the site in October.
The proposal came less than two
months after once-puritanical Massachusetts passed a law allowing up to
three resort casinos, plus a slot machine parlor, at locations around
the state.
Ohio is poised to see its first commercial casinos open
this year, after voters approved up to four gambling halls in 2009.
Maryland’s first casino opened last year, with more on the way.
Pennsylvania’s first casinos opened in 2006, and already the state is
threatening to surpass Atlantic City as the nation’s second-largest
gambling market.
And in Florida, lawmakers are hotly debating a
whopper of a bill that would allow up to three multibillion-dollar
casinos, plus additional slot machines at dog and horse tracks. Genting
appears confident the law will pass. It has already spent around $450
million to acquire waterfront property in Miami, where it wants to build
a $3.8 billion complex that would include a casino, dozens of
restaurants and a shopping mall.
States have embraced casinos,
after years of trepidation about their societal costs, for two simple
reasons: a promise of a rich new revenue source, plus the possibility of
stimulating tourism.
"They are faced with tough decisions. They
are in recession … And we pay taxes far over and above normal taxes,"
said Frank Fahrenkopf, president of the American Gaming
Association.
Last
week alone, Genting’s new gambling parlor at Aqueduct, now limited to
4,500 video slot machines and another 500 electronic table games, made
nearly $13 million — putting the "racino" on pace to make $676 million
per year, with 44 percent of that take going to a state education fund.
And
that total is nothing compared to the $1.4 to $2 billion per year
Genting predicts it would bring in at the huge complex it is planning in
Miami.
Some experts, however, have questioned whether revenue
bonanzas that large are realistic, and say states should be cautious
about giving up too much to lure these projects. Competition for a
limited pool of gambling and tourism dollars is already fierce, and
recent years haven’t been kind to casinos.
Nevada’s larger casinos
lost $4 billion in 2011, according to a report released this month by
the state’s Gaming
Control Board, as the state continued to feel the
effects of the global economic slump.
As gambling options have
increased in the East, revenue has slid substantially at the pair of
Indian tribe-owned casinos in Connecticut and declined by a dramatic 30
percent in Atlantic City, which has lost customers in droves to the new
casinos in nearby Philadelphia, according to David Schwartz, director of
the Center for Gaming
Research at the University of Nevada Las Vegas.
That
trend could deepen with the introduction of big-time gambling in New
York and Massachusetts, and in the end result in a situation where few
people need to travel to gamble.
And that could mean that the
tourism promise of the casinos largely goes unfulfilled, as the gambling
tables and slot machines are played predominantly by locals taking
revenue from other parts of the economy, rather than out-of-state
visitors bringing in new dollars, said the Institute on Taxation and
Economic Policy, a Washington D.C. research group that advocates for
progressive tax codes.
"Gambling may simply shift money from one
tax to another, limiting the net gain to the state," it said. "Consumers

spend more money on gambling activities, they will spend less money on
other items, such as recreation and even basic needs."
Gambling
resorts, most notably Las Vegas, have responded to tougher competition
by trying to make themselves into destinations for visitors of all
stripes, offering concerts, theater, museums, zoos, restaurants and
other attractions.
Genting appears to be planning a variation on that model for New York.
The
company and the project’s champion, Cuomo, have heralded it first and
foremost for the planned convention center, which they have boasted will
be the nation’s largest.
Genting has insisted it will go ahead
with construction of the center even if the state doesn’t pass the
constitutional amendment needed to fully legalize the type of casino it
wishes to operate at the site, with table games run by human dealers
rather than the electronic machines.
"I can’t be clearer about
this: This project, this convention center, is in no way predicated on
the legalization of table gambling in New York," said Stefan Friedman, a
publicist for the company. "We think there is a real opportunity here."
The
company has, however, asked for permission to expand its current casino
operation as part of the deal. It also wants to alter its
revenue-sharing deal so it can take home a bigger slice of the profits.
There
are some skeptics. The convention center the company wishes to build
will be a 45-minute taxi ride from Manhattan, or an hour or longer by
train. It will be located in a residential area where there are now no
restaurants, shops or sites of interest, aside from nearby John F.
Kennedy International Airport.
Convention centers across the
country have been losing money for many years, and suffering from
attendance declines even while going ahead with expansion projects.
"I
would consider that a very risky business proposition," said Heywood
Sanders, a professor of public administration at the University of Texas
who is a leading critic of using taxpayer money to build convention
centers.
He noted that the nation’s biggest convention center,
Chicago’s McCormick Place, has seen attendance drop steadily in recent
years, despite several expansions and costly upgrades. The Chicago
Convention and Tourism Bureau reported that 2 million people attended
events at the center in 2010, compared to 3 million in 2001. Convention
delegates dropped to 890,000 from 1.3 million over that same decade.
Cuomo
himself noted in a letter to New York legislators this week that many
convention centers lose money, and he expressed doubt over the wisdom of
using public money to pay for such facilities, saying it was
"debatable" that they generate enough new tourism to validate the
investment.
But he noted that, in this case, the building would be privately funded and operated.

"The
state is not building anything. We are not spending public money on a
convention center. Genting, a private entity, will take the risk of
economic success," he said.
That argument rang true with Kathryn
Wylde, president of the Partnership for New York City, an influential
group of business leaders.
"There is only upside for the city and state," she said. "We have very
little to lose by encouraging them."
As
in Florida, Genting appears to be betting big that the state will
eventually eliminate legal hurdles to expanded gambling. It paid $380
million up-front for the right to operate at Aqueduct for 30 years, and
said it is prepared to spend billions of dollars constructing convention
and exhibition space, as well as a theater and 1,000 hotel rooms, even
without the gambling expansion it desires.
Clearly, Friedman said, the company doesn’t believe the East Coast is saturated with
either casinos or convention centers.
That
said, it isn’t necessarily keen for more competition. As part of its
negotiations with the state, he said, the company is discussing a
possible grant of exclusivity that could prevent another casino from
opening "right in our backyard."
Copyright 2012 The Associated Press.