As a revenue enhancing device for a needy New York City, the City Council Committee on Economic Development expects to begin requesting proposals for slot machines and gambling riverboat cruises sometime this year.
With budget deficits running at all time highs, and pressure mounting to come up with revenues from sources other than taxes and layoffs, the Council last year turned to exploring casino gambling and a city-run lottery as revenue enhancing opportunities. A consumer study released last month found the city to be a potential gambler's market and that two out of three residents favored the introduction of casino gambling into New York City.
"It's just a matter of time," said Councilman Jerome X. O'Donovan who is chairman of the Council's committee on Economic Development. The study, he said, "shows that people are ready for it."
O'Donovan said the council will begin making recommendations for some limited types of gambling later this summer. At that time, he said, they would be concentrating on proposals for slot machines "one-arm bandits", in hotels, catering halls and on the riverboats.
Meanwhile, New York hotels, which experienced lower rates and occupancies last year, could use a new incentive for tourists and convention groups, experts say.
The gambling would be limited to hotels with 1,000 or more rooms, catering halls accommodating over 200 people and riverboat gambling in the harbor. The Staten Island Councilman expects the gambling would only be open to guests of the hotels or of parties and the first requests for proposals would be for night cruises and slot machines. "We're taking this very seriously," he added.
Last year, the committee reported, approximately 10 million New York State residents visited Atlantic City, 15.2 million domestic visitors spent time in New York City and 4.5 million foreign visitors spent more than one day in the Big Apple.
The consumer study also found that while 80 percent of the survey respondents were not amenable to any tax increase, 68.2 percent favored the introduction of casino gambling into New York City. Resistance to raising revenues through increased property taxes was shown to be high with 79.4 percent of the respondents against these taxes.
Tom Butler, a spokesperson for the Council, said the report in 1990 looked at different types of gambling and proposed different scenarios after studying how other cities' gambling casinos worked. "We're not looking to make New York City a gambling haven," Butler said. "Maybe a tourist will spend eight days now and instead of going to bed at 10 p.m., they might gamble one night until 11. We're not looking at it on a grand scale but looking for something that can generate money for the hotels and revenue for the city."
Butler said with the hotel tax, amounting to 19.25 percent plus a $2 occupancy tax per night per room, people now take a second look before they come here to see the sights. "Gambling might enhance the look of the city," he suggested.
Later this summer, to the council's policy division expects obtain real estate developers' viewpoints, as well as have people testify about organized crime. The city is not going to have a "Taj Mahal" built for gambling, Butler said, and for now, gambling would be a "sideshow," at pre-existing hotels. In the future, he suggested, perhaps a hotel might be built near city beaches.
John A. Fox, a principle in Pannel Kerr Foster, CPAs who provide hotel consulting, said, depending upon how the gambling is organized and structured, gambling will be to the hotels' and to New York City's advantage.
Fox said hotel occupancy is down and rates are down. "I don't know if it will be the cure all," he warned, "because there are other issues that have to be carefully looked at." Fox explained that there is a whole process that occurs, and it is not just a simple thing to allow gambling in a hotel. "New Jersey has been fairly successful in controlling the process," he added.
Steven Spinola, president of the Real Estate Board of New York said, "Gambling is something worth looking at if it can generate some money and you can provide the proper protection against abuses, and that's the concern that people would have." The political problem, Spinola said, is where should it be located. "Do you have it in Manhattan, do you have it in the Rockaways?"
Arthur Goldstein, an attorney with Davidoff & Malito who represents the Hotel Association, said the Association is waiting to see what the City Council's next step will be and will sit in on any hearings the Council has to evaluate any proposals.
Stephen W. Brener, a hotel broker and consultant said "Anything that will legitimately increase visitation to the City of New York will help the hotel industry. Brener said legalized gambling is very beneficial in areas where it is well-policed, well-marketed and well-operated. "Major hotel facilities that have gambling use gaming as more than just another item in the infrastructure," he noted. "People go there for the gaming and for tourism and conventions."
Brener said the problem with gaming "is that it cannot be considered in a desperation mode as a revenue raising device." It must be considered, he said, from a social and economic basis, and include the effects of gaming, pro and con, and the handling of gaming. "You can't just open the casino and have the buses go in reverse," he added.
The city will have to decide what format to allow, Brener said, then what requirements must be in place to control the gaming. Brener said there is also a problem "to keep it controlled so that the mob doesn't get control."
Other states and cities are beginning to take gambling seriously as well. The State of Iowa began riverboat gambling April 1 on paddleboats on the Mississippi River. A representative from the Iowa tourism department said during one week, the four boats brought in $1.5 million in wagers, not including the charges for boarding.
As cities and states look for additional sources of revenue, gaming becomes a real potential, Brener noted. "I believe in the next 10 years, you will have gaming in at least five to 10 times more locations, statewise, than you do today." In the 21st Century, he said, gaming will most likely be in a resort or destination city. "You will see it because people want the money," he added.
Butler said the city would have to get the approval for casino gambling and any taxes on it from the state legislature and the governor. Community boards are also concerned about the kinds of people who might be hanging around a casino, Butler noted, adding that Council members Ronnie Eldridge of Manhattan and Stephen DiBrienza of Brooklyn are opposed to the idea.
Eldridge said she was "appalled" by the whole thing. "I don't think it will be an enhancement to the city or to revenues," she said. "I've never been satisfied that it won't open the door to more organized crime." She believes it is a waste of time and noted, "we have an Economic Development Committee which has had three hearings on gambling and none on tax abatements."
The report found an average New York City 610-room hotel has the potential of earning approximately $227.9 million with slot machines and gaming tables, and $91.2 million with just gaming tables. With a 20 percent tax on this, as suggested by Governor Hugh Carey's Casino Gambling Study Panel in 1979, New York City would receive approximately $45.6 million per hotel or $18.2 million. Governor Carey's panel also recommended that hotel casinos should have a minimum of 650 rooms. A Miami, Florida study suggested using hotels with a minimum of 500 rooms, while O'Donovan is envisioning starting with hotels having 1,000 rooms or more.
Brener believes the gambling should go into hotels with more than 200 rooms. There is a concern, he said, that the gambling should not be in too many hotels. Gambling is not like cigarette machines, he said, with some in every lobby.
Based on earnings reported in 1988 in Atlantic City of $3,951 per square foot of casino, a hotel such as New York's St. Moritz with 769 rooms, could bring in revenues to the city of $23.31 million based on the 20 percent tax and having 136 gaming tables in 4,476-square-foot casino. By adding 2,125 slot machines, and increasing the size to 70,000 square feet, the city's revenues could be $58.27 million on a total take of $291 million.
The Council report noted 94 percent of the games in each Atlantic City hotel are slot machines while 6 percent are table games and based its figures on the same model. The average size of an Atlantic City casino is 58,000 square feet (pre-Taj Mahal) and approximately 97 square-feet of casino space is allocated per room.
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|Title Annotation:||gambling in NYC?|
|Publication:||Real Estate Weekly|
|Date:||Jun 19, 1991|
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