The Rhode Island House of Representatives unanimously approved a bill Thursday that would allow Twin River Casino in Lincoln to build a hotel on its premises, a move that officials and lawmakers say is necessary as an impending "casino arms race" heats up in the Northeast.
But with competition from neighboring Massachusetts — which plans to open no fewer than four gambling facilities with the next few years — and a decline in consumer spending, lawmakers have cause for concern.
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"They're going to have to reckon with the reality this is not going to be an ongoing source of revenues," said Patrick Kelly, associate professor of accounting and chairman of the accountancy department at Providence College.
Kelly said lottery revenues are no longer a safe bet, and experts agree.
A Moody's Investors Service outlook report released in October predicted that gambling revenues would continue to decline for at least the next 12 to 18 months. What's more, Moody's said, consumers will continue to limit spending to necessary items even as the economy shows improvement.
"When you have these new casinos coming in, it's like they're competing for the same people," said Ryan Mulcahey, policy analyst for the Rhode Island Public Expenditure Council. "That pie isn't really growing; it's just going to be split up differently."
A 1,250-machine slot parlor in Plainville, Massachusetts, is to open as early as June, and analysts predict Rhode Island's lottery revenues will take a hit almost immediately.
By 2020, the state's lottery revenues will decrease by up to 40.9 percent if a casino is built in southeast Massachusetts as is planned, according to a 2014 Christiansen Capital Advisors report for the state Department of Revenue.
"I don't think there's any question it's a legitimate concern because it's more competition," said Paul Dion, chief of the department's Office of Revenue Analysis.
Lottery revenues are the third largest source of revenues in Rhode Island. Last fiscal year, revenues were $376.3 million, and $293.8 million of that came from Twin River, Dion said.
"A big part of the problem for Twin River and Newport Grand is where their clientele comes from," Mulcahey said. "A lot of the people who are coming to Twin River are coming from Massachusetts, where they don't have casinos."
The Center for Policy Analysis at the University of Massachusetts-Dartmouth found in 2011 that 46.8 percent of Twin River clientele is from Massachusetts; these patrons account for 49.1 percent of the money spent at Twin River.
Twin River officials have said that adding a hotel would create about 200 temporary construction jobs and 100 full-time jobs. The goal of the hotel is to keep existing customers, they said.
The bill to allow the hotel now goes to the Senate.