Arthur W. Wright

English

Research Papers in Economics

8 THE CONNECTICUT ECONOMY SUMMER 2006
BY ARTHUR W. WRIGHT
What denizen of Connecticut in 1986
would have suspected that, in just
two decades, New London County
would be weaning itself off sub-
marines, but still flexing labor market
muscle, buoyed along by two world-
class gaming casinos?*  Unlikely it
may be, but the underlying process is
transforming southeastern Connec-
ticut from the Submarine Capital of
the World into a potential New
England Las Vegas East.
Of course, The Fates are still
rolling the dice: Will the Town of
Preston opt for the Utopia theme park?
What will Rhode Island and
Massachusetts decide to do on their
proposed casinos?  Will other Indian
tribes in the region gain Federal recog-
nition? And will the vaunted
Foxwoods-MGM Mirage partnership
prove … well, a mirage?  Stay tuned to
the never-ending saga of Indian gam-
ing in Connecticut.
Civilization and its discontents.
The Soviet Union collapsed in 1989—
and undercut the U.S.’s strategic need
for submarines.  The U.S. Supreme
Court decided an obscure dispute in
favor of the Cabazon Indians and
against the State of California—which
led to Congress’s passing the Indian
Gaming Regulatory Act (IGRA) of
1988.  In Connecticut, a handful of
entrepreneurial Mashantucket Pequot
and Mohegan Indians—whose tribal
reservations just happened to lie near
I-95, I-395, and Connecticut Routes 2
and 2A—proceeded to build a pair of
destination-resort casinos beyond the
wildest imaginings of Jill Q.
Nutmegger.
A key non-Indian player was then-
Governor Lowell Weicker.  The former
Senator fought the Mashantucket
Pequots’ casino project at every turn
until he lost, then struck a deal that
allowed them (exclusively) to add slot
machines—highly profitable but not
covered by IGRA in Connecticut—in
return for a State royalty of 25% of
their slots “win” (total handle less pay-
outs).  The two sides added another
seat at the table when the Mohegans
opened their casino in 1996.  Barring
another economic slump, the State of
Connecticut is in danger of earning
half a billion dollars from its casino
royalties in FY 2007.
The improbable meteoric rise of
Foxwoods and Mohegan Sun has had
huge impacts, for good and ill, on the
Norwich-New London metro area.
Other tourist ventures like Mystic
Seaport have lucked into some of the
backwash from the casinos.  And with-
out the casinos, it’d be crazy to propose
building “Utopia”—an entertainment
perplex akin to the Paramount/MGM-
style theme parks—on the site of a for-
mer State mental hospital in the Town
of Preston. 
WAS IT REALLY GOOD LUCK?
For some, the advent of high-
stakes casino gaming in Connecticut
has been anything but a boon.
Gambling opponents argue that the
new casino jobs are not as “good” as
the old ones at Electric Boat.  The sil-
ver linings in the cloud are that the
casinos have created thousands of new
jobs in the region; both pay and bene-
fits at the casinos can be pretty darned
good; and, while the new jobs do entail
enticing people to bet money at house
As the Wheel of Fortune Turns:
Casinos Revisited
The improbable meteoric
rise of Foxwoods and 
Mohegan Sun has had
huge impacts, for 
good and ill, on the 
Norwich-New London
metro area. SUMMER 2006  THE CONNECTICUT ECONOMY 9
odds (don’t forget the State’s portion),
the old jobs entailed building sub-
marines with the sole purpose of mak-
ing war.
Actually, compared with the rest
of the state, the steady shrinkage of
jobs at Electric Boat has not unduly
depressed manufacturing employment
in southeastern Connecticut.  (Things
will get worse, of course, as EB relo-
cates southward much of its submarine
maintenance and repair work.)  Over
the past fifteen years, the Norwich-
New London Labor Market Area
(LMA) has lost about a third of its
manufacturing employment, accord-
ing to U.S. Bureau of Labor Statistics
(BLS) data for 1990-2005.  But so has
Connecticut as a whole, along with the
Danbury and Hartford LMAs.  New
Haven has lost only a quarter of its
jobs in the sector, but Waterbury and
Fairfield County have taken hits of
40% and 44%, respectively.
Meanwhile, casino job growth has
been on a tear.  According to the BLS,
employment in “local government”
(where the casino jobs are found—the
tribes are sovereign entities) in the
Norwich-New London LMA grew
3.75 times—that is, by 275%, with
some 24,500 additional jobs—in
1990-2005.  In contrast, New Haven
saw a slight decline, while the other
four major LMAs realized gains of 18-
29%.  Of course, some of the New
London County growth in local gov-
ernment jobs came from area towns
trying to cope with the economic surge
spawned by the casinos. 
Adding tens of thousands of jobs
in a small region often creates addi-
tional “supporting” employment there.
A rule-of-thumb is one new support-
ing job for each new post at “export”
firms like the casinos.  (They “export”
their services to customers from
Massachusetts, Rhode Island, and even
New York, as well as the rest of
Connecticut).
The full measure of the casinos’
employment impact on New London
and environs, then, likely tops 40,000
new jobs since early 1993, when
Foxwoods opened its doors.
Part of the indirect effects should
show up as above-average job growth
in the private service-providing sector.
Measuring from the nadir year of
Connecticut’s Great Recession of
1989-1993, statewide growth through
2005 came in at 16.3%, but the
Norwich-New London LMA logged a
21.2% gain, trailed closely by
Danbury (20.0%) and Fairfield
(19.1%) with their ties to metro New
York City.  New Haven and Waterbury
both saw 15.2% increases, while
Hartford brought up the rear at only
7.3%.  
ROLLING THE DICE IN
CONNECTICUT
High-stakes Indian gaming casi-
nos were not Connecticut’s first brush
with licit gambling.  In colonial times,
my fellow-editor Dennis Heffley
reminded me, local governments regu-
larly used lotteries to finance their
operations.  (Go to http://www.colo-
nialct.uconn.edu, and search under
‘L’.)
In modern times, the era of legal-
ized gambling began in the mid-
1960s, when state lotteries caught on
(again).  The Connecticut State
Lottery drew its first reluctant breath
in 1972, fully eight years after New
Hampshire sold the first state lottery
The full measure
of the casinos’
employment impact on
New London and 
environs likely tops 
40,000 new posts 
since early 1993.10 THE CONNECTICUT ECONOMY SUMMER 2006
ticket in the land.  Pari-mutuel betting
(at race tracks and frontons) and then
off-track betting (OTB) soon fol-
lowed, in 1976 and 1977.  More than
a decade passed before the State sanc-
tioned “charitable games” (bingo,
sealed tickets, raffles and bazaars, and
Las Vegas nights) in 1988—the same
year Congress passed the IGRA.
Foxwoods Resort Casino, succes-
sor to a high-stakes bingo parlor dating
to 1986, opened in early 1993, with
one shift and some back-up employees,
expecting to grow into the market if it
proved big enough.  In fact, the casino
has never closed its doors since open-
ing.  A big enough market?  The tribes
had chanced on a mother lode of
repressed (and suppressed) demand in
New England and New York State for
Las Vegas-style, destination-resort casi-
no entertainment.
How did the Mashantucket
Pequots ever raise the capital they
needed to build the first stage of
Foxwoods?  The tribe struck out in
conventional financial markets, but a
Malaysian casino developer lent them
the money.  In the early 1990s, private
financing of resort-casinos was still in
its toddlerhood, apart from the experi-
ences of Las Vegas (with its roots in
organized crime) and Atlantic City
(developed mostly by Las Vegas casino
interests).  Malaysian casino experience
fit the Foxwoods prospectus much bet-
ter: a brand-new resort in a remote
location.
The growth of legalized gambling
in Connecticut over its first two
decades doubtless piqued the Asian
investor’s interest. (Refer to the graph.)
Between 1973 and 1993, the State’s
“special revenues” from gaming grew
by an average of better than 15% per
year.  Even slots royalty growth could
not match that—“only” 12.6% per
year, 1994-2005.  In their first full
year, though, the slots accounted for
fully a third of State special revenue,
and by 2005, the share had reached
60%.  The Malaysian investor’s confi-
dence was justified.  The arrival of
Mohegan Sun in 1996 put a ding in
Foxwoods’ growth, but combined casi-
no business in southeastern
Connecticut leapt in 1996-1998, judg-
ing by State special revenue data.  
Did the entry of the casinos cut
into other forms of gambling in the
state?  Not likely.  Lottery special rev-
enues jumped by nearly 21% between
1994 and 1996—immediately follow-
ing the opening of Foxwoods.
Arguably, State Lottery revenues these
days are governed mainly by forces
internal to the lottery business, such as
the introduction and maturation of
new games (e.g., multi-state
Powerball).  And the decline of pari-
mutuel betting preceded the casino
era. 
CONNECTICUT APPRECIATES
YOUR BUSINESS
Governments in democracies like
raising revenue from non-residents,
who can’t vote the bums out in retalia-
tion.  Whence the speed trap in the
sleepy small town, or New Hamp-
shire’s siting of State-owned, cut-price
liquor stores along its borders.
Connecticut may not have been so
cunning as New Hampshire, but casi-
no slots players from New York, Rhode
Island and Massachusetts have been
helping to fund State services in
Connecticut since 1993.  This all-too-
obvious fact accounts for the constant
rumblings about permitting casinos in
those states.  New York State is push-
ing modest-sized casinos, though to
date only one (in the Catskills) is near
the Connecticut border.  Rhode Island
The tribes had chanced 
on a mother lode 
of repressed 
(and suppressed) 
demand for 
Las-Vegas style, 
destination-resort 
casino entertainment.
“SPECIAL REVENUES” FROM GAMING TRANSFERRED TO GENERAL FUND
M
i
l
l
i
o
n
s
 
$
Source: Connecticut Division of Special RevenueSUMMER 2006  THE CONNECTICUT ECONOMY 11
sanctions slot machines at two existing
betting venues (Lincoln Park and
Newport Grand), and may hold a
statewide referendum soon on a pro-
posed Harrah’s/Naragansett Indian
casino in West Warwick (off I-95, less
than 50 miles from Foxwoods and
Mohegan Sun).  And talk continues,
without action, on a comparable proj-
ect in southeastern Massachusetts, near
I-495 or I-95.
How much money is at stake here?
Clyde Barrow at UMass-
Dartmouth has studied cross-border
casino traffic in recent years.
Combining a 2004 “patron origins”
survey at both casinos with financial
data and some behavioral assumptions,
Barrow has estimated state-by-state vis-
its, total spending, and slots-royalty
“contributions” to Connecticut’s fisc in
CY 2004 and 2005.
In 2004, about a third of
Foxwoods customers, but only a fifth
of Mohegan Sun’s, hailed from
Massachusetts.  Rhode Island account-
ed for another 15% of Foxwoods
patrons, but only 6% of Mohegan
Sun’s.  New Yorkers favored Mohegan
Sun (20%) over Foxwoods (11%), as
did Nutmeggers (44% to 27%).
Why the differences (which have
also shown up in other studies)?  My
best guess is simply location: it
depends on whether one comes from
the north and east (Foxwoods) or the
west and southwest (Mohegan Sun).
The table shows estimated out-of-
state spending (including non-gaming
sales) and slots royalties at the two casi-
nos in 2005.  Clearly, Connecticut tax-
payers ought to thank their neighbors
for providing better than half of esti-
mated total casino revenues and a yet
greater share of slots royalties to the
State treasury last year.
ENJOY IT WHILE WE CAN?
The big winners, economically,
from Connecticut’s plunge into big-
time casino gaming have been the
Manshantucket Pequots and the
Mohegans, the southeastern
Connecticut region, and the State’s
purse.  But how much longer will the
good times roll?
The answer will turn on two sepa-
rate sets of possible events.  One is
Federal certifications of Indian tribes,
enabling them to open casinos under
IGRA.  From here, this set of events
looks like a total crapshoot.  
The other set, though—involving
the barriers to entry of rival casinos in
neighboring states—could well depend
in part on decisions made in
Connecticut.  The voters of Preston,
adjacent to both Mohegan Sun and
Foxwoods, will soon vote on whether
to allow the Utopia theme park to be
built there.  And the consternated out-
cry at the recent announcement of the
partnership between Foxwoods and
MGM Mirage could morph into effec-
tive opposition.
Arguably, a Utopia in Preston and
a Foxwoods-MGM Mirage partnership
would significantly enhance the
spendor-and-glamor of Connecticut’s
already supersize casino-entertainment
cluster.  Either one, but especially
both, would make it all the more diffi-
cult to field a competitive rival in
either Rhode Island or Massachusetts.
Clyde Barrow has found that
Rhode Island’s Lincoln Park and
Newport Grand, both of which already
have banks of slot machines, attract a
clientele quite different from that now
coming to southeastern Connecticut’s
casinos.  The different kinds of gaming
do not compete much with each other.
To compete effectively—and to attract
the necessary financing—the new casi-
nos would have to match the magnifi-
cence of the Connecticut casino/enter-
tainment experience.  With each
enhancement in New London County,
that just becomes more difficult to do.
OUT-OF-STATE OUTLAYS AND
SLOTS ROYALTIES AT
FOXWOODS AND MOHEGAN SUN,
CY 2005
($ millions)
Source:  Clyde Barrow (http://www.umassd.edu/cfpa/docs/gam-
ing_update2006.pdf ).
*Disclaimer: Both Foxwoods and Mohegan Sun
Casinos are Sustaining Partners of The
Connecticut Economy.  Neither was involved in
any way in the preparation of this article, except
to check for factual accuracy prior to publication.
The author was a consultant to Foxwoods in 1993
(together with another editor, Dennis Heffley) and
to Mohegan Sun in 1995.
Casino slots players 
from New York, 
Rhode Island, and
Massachussetts have 
been helping to 
fund State services in
Connecticut since 1993.

As the Wheel of Fortune Turns: Casinos Revisited

http://cteconomy.uconn.edu/articles/AW_Su2006.pdf

As the Wheel of Fortune Turns: Casinos Revisited

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