Charitable gaming operators in NH say large casinos in either state could decimate their businesses. What's at stake? In FY 2010, charitable gaming in NH raised $11 million for 300 charities and $1.6 million in state revenue. This isn't your grandmother's Monte Carlo night in the church basement. Charitable gaming is now run by professional gaming operators in venues ranging from poker rooms in the backs of restaurants to mini-casinos, such as Rockingham Park in Salem, that offer tables for poker, blackjack, roulette and craps, as well as other card and table games. That's not even counting bingo, Lucky 7 games and simulcast horse racing.
The only thing missing is slot machines and electronic gaming. And there's the crux of the problem. Gaming operators say without slots, major casinos won't look at NH, and, year after year, the NH Legislature has defeated proposals to expand gaming. The biggest expansion was a 2006 law allowing charities to hire professional operators to run charitable gaming events for them. Charities had held fundraising casino nights since the 1970s, but until 2006 they had to run those events themselves.
There are now nine licensed game operators, operating year-round at 12 locations, says Paul M. Kelley, director of NH Racing and Charitable Gaming Commission, which regulates charitable gaming. The state mandates that 35 percent of net revenue (gross revenue less prizes), go to charities, Kelley says. The state takes 10 percent, and the balance goes to the gaming operator; and no more than 80 percent of gross revenue can be paid out in prizes. In addition, a charity must have a representative on site to sign an affidavit that the proceeds are for that organization.
Recession Take its Toll
While the recession took a toll on games of chance, they remain big moneymakers. Consider these stats from the NH Racing and Charitable Gaming Commission's 2010 Annual Report:
Total state revenue from racing and charitable gaming in FY 2009 was $6.4 million, versus $2.1 million in expenditures.
Revenue from games of chance in FY 2010 was $1.6 million, down from $1.7 million in FY 2009.
Revenue from racing, bingo, Lucky 7 and charitable gaming combined was $5.5 million in FY 2010, down from $6.4 million in FY 2009.
Bingo and Lucky 7 events combined contributed $1.4 million in administrative costs to the Education Trust Fund.
Games of Chance events contributed $1.2 million in administrative costs to the General Fund.
Of the $218 million wagered in FY 2010 for pari-mutuel racing, bingo, Lucky-7 tickets and charitable games of chance, $32.9 million was wagered through charitable games of chance (See chart).
Despite these numbers, charitable gaming doesn't have high stakes. The maximum wager is $4, according to NH regulations, although in games where players raise on initial bets, wagers ultimately go higher. After paying prizes, covering expenses, paying nonprofits and the state, gaming operators say there is little profit left.
The reality is it's a very expensive business to operate and heavily regulated. Our margin is 2 to 3 percent. We've already seen some game operators come and go. It's expensive, says Rick Newman, general manager of The Lodge at Belmont, a 35,000-square-foot facility that offers table games, poker tournaments, and bingo as well as live entertainment on weekends and a bar and restaurant. Among its expenses is paying 45 employees, 25 of whom are full-time. Dealers make anywhere from $14 to $21 an hour, Newman says.
Richard Bedrosian, owner of New England Gaming and Consulting, LLC in Dover, operates a poker room in Gary's Restaurant and Sports Bar in Rochester. As the economy began its slide, Bedrosian began to make cuts. Fourteen months ago, I was five days a week. Then it dropped to four, then three, he says. Bedrosian operates four to five tables in his card room, and sees 15 to 60 players at any given time.
Shawn Flanagan, whose family has hosted bingo halls for decades, obtained a gaming license for Atlantic Gaming in 2010 and opened in February at Lochmere Country Club in Tilton on Thursdays. In September, he added games on Fridays and he plans to expand to a third night soon. The mistake people make is they get involved, but forget it's still a business and have to control overhead. It's like any other business; it gets competitive. To be competitive with other houses, you have to pay close to max for your payouts, Flanagan says. Once expenses are covered, he says, It's not a windfall of cash.
Getting in Line
So if margins are tight, why are gaming operators in business? For many, they see it as putting themselves in place in case the NH Legislature legalizes electronic gaming and slots. My company [opened] in 2007 because we really believed that if we ran a good charity poker room and were leaders in doing it right with solid regulation and trusted management, that if a slots bill got passed, we would be in line for one of those licenses, says Jim Rafferty, president of NHCG, LLC, which operates the River Card Room in Milford. Customers want both. They want slots and they want table games.
Adding slots is seen as crucial to the future of NH's racetracks, which no longer host live races. Lakes Region Greyhound Park, after seeing diminishing returns on live and simulcast racing, closed in 2005 after 30 years. It reopened in 2006 as The Lodge at Belmont by the Torguson Group NH, which offers casino games and bingo. The Lodge continued live greyhound races until 2008 and simulcast dog and horse races until 2010. Those ended when the state enacted a 10 percent tax on individual's winnings. The Legislature repealed that tax this year and The Lodge is examining restoring simulcast races in 2012, Newman says. Rockingham Park in Salem still offers simulcast racing, but stopped holding live races in 2010-the first year live racing was not offered in NH since 1933.
According to the NH Racing and Charitable Gaming Commission's annual report, the Legislature removed all funding for positions that provided oversight and regulation for races, which prevented Rockingham Park from being able to offer simulcast gambling on live races.
Rockingham Park has 700,000 customers annually. That's one-third of what we used to be, says Ed Callahan, vice president and general manager of Rockingham Park. We were not able to run live in 2010 or 2011. That's regretful. The current commission does a terrific job with tools they have to work with, but it seems every year their budget gets reduced.
Rockingham Park has offered charitable gaming, specifically bingo, since 1996, attracting 800 players weekly, Callahan says. In 2006, it was among the first to offer casino games for charitable gaming, opening the Poker Room at Rockingham Park. About 5 percent of its revenue now comes from charitable gaming.
Callahan and Rockingham Park are longtime advocates of expanding gambling. Callahan says offering slots is essential to the park's future. Having offered gambling for more than 100 years, Rockingham attracted the attention of a major investor, Millennium Gaming in Nevada. While Callahan won't discuss details of Millennium's interest in Rockingham Park, We still feel the best option for this property is racing with gaming.
Newman of the Lodge at Belmont says they have successfully transitioned from racing to charitable gaming. We've grown every month since October 2006, Newman says, explaining crowds can vary from 70 on weeknights to 500 on weekends. But Newman seems resigned that the Legislature will resist slot machines. Even if it does approve it, he says, the question becomes who will be able to offer it. Rafferty of the River Card Room says if larger venues like Rockingham Park are allowed to have slots and others are not, smaller operations could get wiped out.
Border Battle
Resort-style casinos in Massachusetts and southern Maine would make for a stacked deck against NH. Eighty percent of our clientele is out of Massachusetts, Callahan says. If either state moves forward, he says NH's gaming revenue would be cut and smaller rooms would likely fail. Bedrosian, who operates a room in Rochester, says if Maine allows a casino, he will be forced out of business. Sixty percent of my players come from southern Maine, he says. You can't compete with facilities with slot machines.
However, Newman says, while casinos with slot machines in nearby states would affect some operations, particularly those in the Seacoast and Salem, others would survive. Not everyone that gambles play[s] slot machines. A poker player is a poker player. They don't get up to play slot machines, he says.
Continued Investment
Despite the uncertainty, the gaming industry is investing in the future. Sharky's, a card room in Manchester, was overhauled last year into the Manch Vegas Poker Room, offering 17 tables of poker, blackjack and roulette, and a new Jokers Sports Bar and Bistro. Rafferty of NH Charitable Gaming says he will be adding a craps table. And, in May, Ocean Gaming was opened at Hampton Beach by Ocean Front Gaming, run by Peter, John and Nick Anzalone and Sam Pollina. Ocean Gaming has 12 poker tables, six blackjack tables, 2 roulette tables and one craps table, and 30 employees. It also works with 36 charities. Players at Ocean Gaming are a mix of locals and tourists, and Anzalone plans to be a year-round operation in a town that closes up when snow flies. As such, it is applying for a license for a 90-seat sports bar with live entertainment to complement its existing patio bar.
Lottery Concerns
It's not just gaming operators concerned about major casinos in neighboring states. State Lottery officials express unease about the potential effect on lottery revenue. The NH Lottery generated more than $234 million in revenue in FY 2010, contributing $66 million to the State Education Fund. And it's feeling pressure from the Legislature and Governor to generate more.
Charles McIntyre, executive director of the NH Lottery Commission and previously one of the top officials with the Massachusetts State Lottery, says people need to think of gaming revenue as a pie, with the lottery, racing, charitable gaming and bingo as slices. He says there is a finite amount of money spent on gambling in New England, and most people play with a budget. McIntyre cites research that shows 45 percent of NH lottery players have also visited a casino in the past year.
McIntyre says casinos in Massachusetts would affect NH's lottery revenue by an appreciable amount. In addition, he says casino gambling in bordering states would saddle NH with the social problems related to gambling without any of the financial benefit. He says casinos will likely be running in Massachusetts in the next few years, and any attempt by NH to expand gambling after that would be in vain.
NH players already spend $22 million on keno in Massachusetts, according to McIntyre. Debra Douglas, chairman of the NH Lottery Commission, says the Commission wants to repatriate those dollars by introducing keno here, which would also boost sales for the bars and restaurants that offer it.
Nonprofits
The biggest losers from casinos in other states could be NH's nonprofits. Rockingham Park alone has generated $7.8 million for charities since 2006 and $6 million from its other gaming room in Seabrook. The River Card Room has generated about $1 million for more than 60 charities. The big challenge is we have a waiting list of 80 to 90 charities. We get two to three calls a week from charities, and I have to tell them there is a two-year wait to get into my room, Rafferty says.
That's a common lament. As charities have faced budget cuts from government sources and donors who give less, they have turned to charitable gaming for fundraising. The Lodge at Belmont raises about $300,000 annually for 36 charities. Newman says he currently gives a charity 35 percent of revenue over 10 days, but he's considering reducing that to five days in 2012 to assist more nonprofits.
This particular way of funding, through games of chance, is an example of how many small and volunteer-based nonprofits work with the community and business to fund some critical programs, says Mary Ellen Jackson, executive director of the NH Center for Nonprofits. For some small nonprofits this means a revenue stream of about $40,000 or more a year, which could be their entire budget, while for others it's a piece of their funding base. Among nonprofits benefiting from charitable gaming is the Boys and Girls Club of Salem, which participates in the games operated by Rockingham Park. We have received between $50,000 and $60,000 a year, says Michael Goodwin, chief professional officer.
Goodwin says, Poker players want professionals running games. This enables us to raise money with a high return on investment without as much volunteer effort. He says of Rockingham Park, If it wasn't there, charities could not make the impact in the community that they are currently making. n