Economy
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NEWBURGH, N.Y. — “This city has been up. It’s been down. It’s had lots of cycles in it, and I think the energy building in Newburgh right now is for it to get its rightful status back as the Queen City,” says Judy Kennedy, mayor of this city of 28,000, located 60 miles up the Hudson River from Manhattan.
Kennedy, who occasionally thumps the table for emphasis while she talks, is explaining why she favors the construction of a new casino in the town of Newburgh. (The town borders the city of Newburgh on the north and west and is just a short drive from City Hall, where Kennedy is sitting.) There’s a sign by the building entrance that tells passersby, “We support the Hudson Valley Casino and Resort.”
The Hudson Valley Casino is one of 17 gaming facilities angling for the four spaces that were opened up by a state law passed last year. The legislation amended the state constitution to authorize up to seven full-scale Vegas-style casinos. The first of the locations will be decided this fall by an independent board appointed by the state Gaming Commission. Newburgh’s City Council and the town of Newburgh board both voted unanimously this spring to support the location of a casino in the town — a move that the Gaming Commission’s board requires. But a decision will take into account other factors, including the likelihood of financial success.
Kennedy thinks the Newburgh area is the best spot for a casino because it desperately needs the economic stimulus. The Hudson Valley proposal calls for some 150,000 square feet of slots and table games; a 500-room hotel with a spa, a variety of restaurants, entertainment and convention and conference space; and “a broad spectrum of high-end and boutique retail offerings.”
“Casinos have their pros and cons,” the mayor acknowledges. “Nobody's blindly going down the road with this thing.”
Instead, she and state Assemblyman Frank Skartados, whose district includes Newburgh, stress the promises that Saratoga Casino and Raceway, parent company of the Hudson Valley Casino and Resort, have made to secure their support. In addition to the tax dollars the casino will bring in (“$10 million to the bottom line of our school district,” Kennedy says), they’re looking forward to the annual host fee the city and town will receive. On top of that, the company has made commitments to local hiring and training, Skartados says, both for construction jobs in the building of the resort and for permanent jobs that will be created when it is built.
“This area — the city of Poughkeepsie, the city of Newburgh, the city of Beacon, the city of Middletown, Kingston — these were the industrial cities of the Hudson Valley where we lost a tremendous amount of manufacturing, and so naturally right now they are suffering,” Skartados says. He points out that these cities — all in his district — have twice the unemployment rate of the state as a whole and that the 28 percent poverty rate in the city of Newburgh means it desperately needs the jobs.
It’s an argument that has been made before, as the United States as a whole —and the Northeast in particular — has lost manufacturing jobs over the last half-century to automation and outsourcing. Once a prosperous industrial shipping hub, Newburgh has beautiful Victorian houses, many of which are boarded up, vacant and crumbling. As businesses closed, the city began to fade, and attempts to revitalize it often did more harm than good. Kennedy says, “Newburgh has been a city that has been suffering from collective PTSD since urban renewal, when they tore down 2,000 buildings here in the late ’60s and early ’70s.”
Nothing was ever rebuilt to replace them; today, there’s a strip of grass overlooking the waterfront area where many of the buildings once stood.
It’s an argument that has been made before, as the United States as a whole, and the northeast in particular, have shed manufacturing jobs over the last half-century to automation and outsourcing. Once a prosperous industrial shipping hub, Newburgh has beautiful Victorian houses, many of which are boarded up, vacant and crumbling. As businesses closed, the city began to fade, and attempts to revitalize it often did more harm than good. Kennedy says, “Newburgh has been a city that has been suffering from collective PTSD since urban renewal, when they tore down 2,000 buildings here in the late ’60s and early ’70s.”
Nothing was ever rebuilt where those buildings were; today, there’s a strip of empty green grass overlooking the waterfront area.
Americans, according to The Economist, lost $119 billion gambling last year, most of it at casinos. And yet the casino industry itself is losing money: Moody’s Investors Service downgraded the gaming industry from “stable” to “negative” this June. It predicts a decrease in overall earnings, before interest and taxes, of 4.5 to 7.5 percent over the next year to a year and a half.
This kind of projection helped make Liz Krueger skeptical of casinos as an economic development strategy. Krueger, D-Manhattan, was one of eight in the New York state Senate to vote against the casino bill in June 2013. “I don't necessarily come from a place of ‘All gambling is inherently evil and government must stop it,’” she says. Yet when it came to a 3 a.m. vote on the bill, she says, there were two things that changed her vote to a no.
The final bill didn’t include language that enabled towns to reject a casino. The Gaming Facility Location Board has nonetheless decided to take community support into consideration, a move she supports. The other issue, though, remains: She wanted to block the gaming industry from making political donations. A 2012 report from the government-watchdog group Common Cause detailed the industry’s record spending on lobbying and campaign donations — nearly $50 million from 2005 and 2012. “Gambling contributions show no partisan preference and are channeled directly towards those in positions of power,” the report said.
Saratoga Raceway and Casino, the company behind the Hudson Valley Casino proposal, spent $1.3 million in that period, most of it on lobbying. One of its owners, James Featherstonhaugh, is the president of the New York Gaming Association and a veteran lobbyist whose firm received nearly $3 million from the gaming industry, according to the Common Cause report. He is also close to Gov. Andrew Cuomo, who pushed hard for casino legalization. The governor has received more than $700,000 in direct campaign contributions from the gaming industry, more than any other elected official in the state. (It’s worth noting that Skartados doesn’t appear to have received significant contributions from the industry.)
Krueger worries about how much influence the industry may have bought in Albany. If the casinos struggle economically, as they have in New Jersey and Delaware in recent years, will well-connected gambling magnates show up with open hands for a bailout?
Josh Gold
political director, Hotel Trades Council
She has reason to be afraid. New Jersey poured $300 million in pension funds into Atlantic City’s Revel casino, and it’s now bankrupt. And Delaware is pumping millions into gaming bailouts — $8 million last year, $10 million this year, $11 million next year and $12 million the year after that. One state representative tried, unsuccessfully, to amend the terms of the latest bailout so that casinos that lay people off after getting state funds have to repay the money.
Las Vegas is held up as the exemplar of what casinos can create — “Tens of thousands of unionized working class jobs … sustained by a steady flow of tourist and convention dollars,” as Jake Blumgart writes in the magazine Pacific Standard. Vegas’s location and unique status as a vacation destination has allowed it to become a haven of high-wage service jobs despite being in a union-unfriendly “right to work” state. Union officials hope that the labor-friendly policies in New York will help them achieve something similar.
Josh Gold, political director at the Hotel Trades Council (HTC), a union that represents hotel workers, notes that the new state gambling law requires casino operators to sign a labor peace agreement, allowing an easier path to unionization for casino employees. Through a similar agreement at a slot parlor at the Aqueduct Racetrack in Queens, HTC was able to double the average wage for cashiers, attendants, waiters, bartenders and security guards who work there, to $20.50 per hour. Gold says similar results may be possible elsewhere. “We think that we have an opportunity here to lift up a couple thousand folks who are going to be working at these casinos out of poverty.”
Research on the economic effects of casinos has produced different results, depending on the location of the casinos and the methodology used. A 2010 study of existing literature on the subject by Alan Mallach for the Federal Reserve Bank of Philadelphia finds that “it is impossible to generalize about the economic impact of casinos.”
There are certain characteristics, though, that appear to influence a casino’s chances of producing local economic benefit. One is whether visitors to the casino spend some of their money in the surrounding city. Using local resources (like food from Hudson Valley farms, Skartados suggests) also helps the community.
Much also depends on the disbursement of tax revenues from gaming. States usually pocket most of the money, while local governments bear the costs, and New York is no different: 80 percent of state tax revenues from new casinos will be applied statewide. Casinos face the best prospects of creating benefits for the community, researchers have found, if they are located in an area with a large pool of unemployed workers and are likely to attract most of their visitors from outside the area. Gold stresses that the most important question will be whether those jobs pay a living wage.
“Those good jobs allow those local residents to shop locally, to buy from local businesses. That’s a real way to have some economic development in some of the struggling upstate areas that need it.”
Cher Vick, who writes a blog called Newburgh Restoration, remains skeptical. “A lot of people look for the next big industry that will come in and save Newburgh, whether it’s Google, Etsy or a casino,” she says. “However, the city of Newburgh has complex issues that can’t be solved with one new industry.”
At the April meeting where the town board voted to support construction of the casino, some residents argued against pie-in-the-sky promises and questioned why visitors would leave the casino to go into town and spend money.
This summer, local opposition managed to kill Saratoga Casino and Raceway’s plans to locate a full-scale casino in its home city: A City Council resolution in Saratoga Springs opposed the expansion, and the location board’s decision to take local support into account effectively ended the plan.
But Newburgh officials are lobbying hard for their preferred casino. Skartados sees it as a means of increasing tourism in the Hudson Valley, supplementing such attractions as the Walkway over the Hudson, a pedestrian bridge opened in 2009; the Dia:Beacon art center; and historic areas in Newburgh, Hyde Park and Kingston.
Judy Kennedy
mayor, city of Newburgh
Despite its beauty, the city of Newburgh is better known for its crime rate than its tourism. Casino jobs, meanwhile, require strict criminal background checks. That means many local residents will not be eligible for the jobs. (There are roughly 9,000 arrests per year in the county of about 375,000 people.)
Krueger also cautions that the union-labor requirement for construction jobs may prevent local workers from getting hired. Skartados, however, says he is in conversation with local unions to make sure that many of the 2,400 possible construction jobs go to people from Newburgh and the surrounding area.
The next step in the decision process occurs on Sept. 23, with a public hearing in Poughkeepsie before the Gaming Commission board. In the meantime, Kennedy is forging ahead with other plans to help her city prosper, including trying to attract small manufacturers away from more expensive locations in New York City.
“I think you should look at [a casino] as frosting on the cake, not the cake,” she says. “When you think about the stability of a community, it’s all those smaller businesses that provide 25 jobs, 50 jobs, 75 jobs all around the city that create the real strength of the city. A casino is great. I’m doing everything under my power to get it, but we cannot let down on these other things.”
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