The Week in Public Finance: On Eve of Super Bowl, Sports Betting Heats Up in 7 States
For the first time in some states, people can bet on the football championship game. Will it result in the revenue boost officials are hoping for?
The NFL’s Rams are making their first Super Bowl appearance in nearly 40 years as a Los Angeles-based team this Sunday, but the event also marks a first for people in more than half a dozen states: They can legally put money down on the outcome.
Since the U.S. Supreme Court overturned a law last May that banned sports betting, seven states have established or expanded sports betting operations, siezing on the opportunity to add revenue. Delaware and New Jersey were the first to start taking bets in June. Since then, Mississippi, New Mexico, Rhode Island, Pennsylvania and West Virginia have also legalized sports betting.
Leading up to the Super Bowl this Sunday, those states are reporting an uptick in betting -- much as they did during the College Football playoffs in December. But an analysis released this month by S&P Global Ratings says that “no state is likely to see a significant revenue windfall” even when sports betting is fully implemented.
Nevada may provide a glimpse of what states can expect.
Sports betting has been legal there since the 1950s. In 2017, it took in nearly $4.9 billion in total bets, which translated into a record $250 million in revenue for the state. That accounts for just 2 percent of statewide gambling revenue.
So far, no state has made as much in sports betting as Nevada. New Jersey has seen the most revenue, handling more than $1.2 billion in sports bets placed over just six months. The state’s total sports betting revenue for last year was a little more than $94 million. Delaware made $8.9 million in revenue over six months; Pennsylvania saw $2.5 million over two months; Mississippi has reported about $1 million over four months; and Rhode Island has reported about $1 million for one month of betting. (New Mexico and West Virginia have not started reporting sports betting revenues.)
A handful of other states -- Arkansas, Connecticut, Massachusetts and New York -- are expected to legalize sports betting in 2019.
While the initial revenues have been minor, the states that have legalized sports betting will have a significant advantage as their operations mature. That’s the main reason, says West Virginia Lottery Director John Myers, that the state rushed to adopt sports betting after the Supreme Court decision.
“We were early adopters in allowing video lottery and saw the benefits of being early to market,” Myers writes in an email. "The Lottery and the leadership agreed that there was incremental revenue for the state to gain and the opportunity to move some of the illegal wagering that was occurring into a legal market."
S&P analysts Timothy Litte and David Hitchcock agree. “While not a cure-all for slower revenue growth,” they write in this week's analysis, “legalized sports betting may prove helpful to some states.”
In other public finance news this week:
Foxconn Misses the Mark
Foxconn, the global electronics maker whose Wisconsin-based plant snagged one of the biggest tax incentives packages in history, missed the jobs target it needs to be eligible for a portion of state tax credits this year. The company created only 178 of the minimum 260 jobs required to receive the first round of state tax credits, worth about $9.5 million.
Foxconn was awarded up to $4 billion in giveaways -- including nearly $3 billion in tax credits -- for opening a manufacturing plant in Racine County last year. The company can still earn credit for job creation by making up the shortfall in future years.
On the surface, the news seems like a positive: the state is not paying out incentives for something it’s not getting. But it shows that Foxconn may not ultimately be able to deliver on the economic growth and job creation it promised the region in the first place. Already, the company has cautioned it may not fill the promised 13,000 jobs at the plant.
That’s ultimately bad news for Mount Pleasant and Racine County, which both are making substantial upfront investment in infrastructure and land acquisition. Without the economic growth to support the investment, the localities could struggle to meet their obligations.
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