NEW YORK--(BUSINESS WIRE)--Fitch believes the increasing authorization of casino gaming operations could introduce revenue volatility to some local government budgets. In our view, new casinos (particularly those concentrated in the Northeast and Midwest) may draw customers from other areas in the region, which may lead to revenue losses for those states or municipalities and force them to further expand their offerings or seek alternate revenue sources. Davenport, IA recently announced it plans to issue $48 million of general obligation bonds to purchase a privately owned riverboat casino operating in the city and move its operations to a new and expanded land-based facility. Iowa currently has 18 casinos, riverboats, and racetracks. We see the region, including Iowa, Missouri, Illinois, and Indiana, as a commercial casino competitive hot spot.
For strategic and political reasons, gaming expansion has often been focused on state borders, seeking to draw consumers from beyond state boundaries. This has created fierce competition for gaming profits and forced existing gaming markets to adjust their business strategies to maintain market share.
While the risks to gaming operations are increasing, the payback could be large. In fiscal 2011, we estimate states' recorded combined direct gaming revenue at approximately $7.5 billion. This includes licensing fees, gaming taxes, and other allocations.
More details on Fitch's views of this expansionary trend and how it will produce winners and losers are available on in the special report titled "States and Locals Turn to Gaming," available at www.fitchratings.com.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.