On November 25, the Virginia Joint Legislative Audit and Review Committee (JLARC) released the results of a 10-month study that reviewed other states’ gaming laws, evaluated the fiscal and social impacts of gaming in those states, and projected the benefits of a legal casino industry in the Old Dominion State.
Conducted by the Innovation Group (TIG) and Regulatory Management Counselors (RMC), the study found that casinos in five approved cities—Richmond, Norfolk, Portsmouth, Danville and Bristol—could generate $970 million in total revenues and $260 million in tax revenues based on a 27 percent tax rate; nearly one-third of the total revenues would come from a Richmond casino—$297 million—with Bristol bringing up the rear—$130 million.
Legal sports wagering was estimated to produce $55 million in taxes yearly, with online casinos bringing in another $82 million. Altogether, the new industry could create 10,000 jobs.
The study, commissioned under Senate Bill 1126, noted that revenues could soar if a gaming hall was built in Northern Virginia, which was not included in the scope of the original bill. A casino there, which would pull from the Maryland and Washington, D.C. markets, might be the real jackpot, potentially bringing in an additional $155 million in taxes, creating 3,200 more jobs, and allow Virginians to gamble at home, retaining $100 million in revenues now spent out of state. But Senator Thomas Norment, who spearheaded the legislation to introduce casinos in the state, said approving a Northern Virginia casino would be “ a complete folly,” as the property would compete directly with the massive MGM National Harbor and Cordish Companies’ Live! Casino & Hotel Maryland.
The study suggested five “resort-style” casinos in the authorized locations could reduce revenues from historical horseracing (HHR) to the tune of $300 million. The latter industry segment helps to subsidize Virginia’s live horseracing industry and is fairly new, having launched in the state in April. The horseracing industry is already up in arms at the prospect of new competition, according to an article in the Richmond Post-Dispatch that was posted on the website of the Virginia Equine Alliance. The report said Colonial Downs Group, owners of a horse racetrack in New Kent County and four Rosie’s HHR Gambling Emporiums Rosie’s, said the opening of five or more casinos without an opportunity to compete for the licenses would “lead to job losses and a loss of tax revenue for localities and the state” by undermining a new industry that’s invested $300 million in Virginia since 2017.
“This would send a terrible message to other job creators and capital providers looking to invest in Virginia,” spokesman Mark Hubbard said.
In a statement, Colonial Downs Group urged lawmakers not to “undo what legislators approved just two years ago.” The study said five statewide casinos would cause live horseracing purses to drop by $9 million a year.
Casinos could also siphon off some $30 million in profits from the Virginia Lottery, which supports K-12 public education. In the last fiscal year, the lottery generated more than $600 million after prizes were paid out, but officials said those profits already are being reduced due to competition from thousands of unregulated, unlicensed and untaxed video machines. The lottery said HHR machines present much less of a threat than the so-called skill games in bars and convenience stores across the state. The study said allowing unregulated and untaxed machines could harm other types of gambling and leave consumers unprotected.
In Bristol, one of the locales approved for a casino, developers said the venue would be operated by Hard Rock and would employ up to 3,000 people by its fifth year. The study, however, estimated 1,000 jobs would be created. United Company President Martin Kent said, “There’s some things pointed out that obviously didn’t seem consistent with what our understanding was. We’ve got to go through the whole report.”
The Pamunkey Indian Tribe also expressed concern about the study’s results. The tribe can operate a casino under federal rather than state law if it chooses. Tribal spokesman Jay Smith said, “The Pamunkey Tribe has been marginalized for centuries and deserve some protections as they seek to gain financial independence and improve the lives of their members. The study recommendations do not sufficiently protect Virginia’s only tribe with federal gaming rights.”
He noted, “The Senate bill protected Virginia’s only tribe with federal gaming rights by allocating two localities for them to operate a casino,” Norfolk and Richmond.
Smith said, “We look forward to working with the General Assembly and the governor to ensure adequate protections are in place for the Pamunkey Tribe.”
Representatives for skill-machine operators Queen of Virginia said the company is willing to work with the General Assembly on regulations for its industry. Lobbyist Tom Lisk said, “We would hate to see Virginia ban a game that has been legal, that is legal so far, and take this away from the businesses and the citizens that enjoy playing them.”
The study recommended the lottery regulate casinos and other new forms of gaming. In response, Family Foundation President Victoria Cobb said using the lottery “would only ensure that state government has a vested interest in promoting harmful and irresponsible gambling in perpetuity.”
The study did note problem gambling would increase with casinos and other new forms of gaming, and the state has few resources to pay for problem gambling prevention and treatment. It said the state could use gaming revenue to pay for services offered by the Department of Behavioral Health and Developmental Services.
The report recommends requiring a competitive selection process for awarding casino licenses to maximize the revenue benefits and minimize risks. It also suggests that the state hire an independent consultant to evaluate the fiscal and economic benefits of casino proposals before developers are selected.
Republican Minority Leader State Senator Thomas Norment said with Democrats assuming power in the state, the legislature may not be capable of resolving the issue of gambling. “That’s not a partisan comment, that is based on institutional history,” Norment said. State Rep. Mark Herring, who will become House Majority Leader in January, also was unsure of the next steps for expanded gambling. He said the Democratic caucus “has not explored that in-depth yet.”
Whatever happens next is not likely to happen fast. The JLARC report recommends legislation that would require a competitive selection process for awarding casino licenses to maximize the revenue benefits and minimize risks and the retention of an independent consultant to evaluate the fiscal and economic benefits of each proposal.
“I think the state would be remiss if it did not include local input,” said JLARC Associate Director Tracey Smith.
The study recommends the lottery as the best way to regulate casinos, but Family Foundation President Victoria Cobb said that “would only ensure that state government has a vested interest in promoting harmful and irresponsible gambling in perpetuity.”
The study recommends that the state “establish a dedicated, stable funding source for problem gambling prevention and treatment, even if additional forms of gaming are not authorized.”
The casinos would require a minimum $200 million capital investment, and the five cities cited in the legislation are not guaranteed to be selected. As Smith said, they are not “necessarily the best localities.”
Norment added, “Just because we specified some locations within the legislation, there should not be an assumption that we really had the expertise to know what we were doing.”
