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Video gambling a cash cow even for smaller states

Jan 30, 2007, 8:09 pm

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Surveying West Virginia's rural neighborhoods, where most people lack broadband access to the Internet, you would never guess the state is a lottery cash cow.

That is until you drove by the racetracks that dot major population centers.

There you would see crowds of people shoving streams of dollars into buzzing and blinking video lottery terminals — the reason this small state, with one of the country's lowest per-capita incomes — is home to one of the most lucrative lotteries in the nation.

While the New York Lottery is the largest and most profitable in the country, several other states less than half New York's size have found a way to close the gap: video lottery terminals, or VLTs.

The results of instituting the slot-like machines have been dramatic, with states that use them earning as much as five times more money per capita than New York.

Rhode Island leads the nation in lottery sales per capita, pulling in more than $1,500 for every one of its nearly 1.1 million residents, or $1.6 billion in fiscal 2005, according to the most recent data from the North American Association of State and Provincial Lotteries.

South Dakota is second with its $675 million in lottery sales, representing nearly $880 per resident.

No. 4 on the list is West Virginia, which took in $1.4 billion in lottery sales in 2005, or $772 per resident. By comparison, New York's nation-leading lottery sales of $6.3 billion amounted to just $325 per person last fiscal year.

New York has about 5,000 video lottery terminals at six upstate racetracks and another 5,500 at Yonkers Raceway. As many as 7,500 VLTs have been authorized for the Yonkers racetrack. The state is considering plans for another 5,000 machines at Aqueduct Race Track in Queens. West Virginia, which has 1.8 million residents compared with New York's 19 million, has 9,000 authorized machines in operation.

"(Our customers are) spending a lot on the lottery," said Libby White, marketing director of the West Virginia Lottery. "You have astronomical per-capita revenues simply because you have a product, VLT."

Per-capita sales are total lottery sales divided by the number of residents in a state. Since some states are larger than others and report substantially higher lottery sales, the measure is used as a way to compare performance.

On that scale, Delaware also does quite well, pulling in about $830 per person for a total of $689 million a year.

"It's the excitement to win dollars just as any other lottery, but we are are probably doing better than states that just offer Lotto products and scratch products," said Norman Lingle, director of the South Dakota Lottery, which was the first state to introduce video lottery, in 1989, a year after legislators approved the state's lottery program.

If any state knows the value of VLTs, however, it's West Virginia.

In 1994, before VLTs, the state's lottery brought in $142 million, White said. Last year, lottery sales totaled $1.4 billion. Of that, $942 million, or nearly 70 percent, came from VLTs, she said. About $283 million was spent on video gaming in 1999.

"It is a tourism industry. That is why the revenue is so high," said White, noting the state's proximity to Cleveland, Pittsburgh and other major metropolitan areas.

Still, there has been some criticism of video gaming, with some calling it the most addictive form of gambling.

Residents in many states, however, welcome VLTs. In South Dakota, video lottery revenues are deposited in the state's property-tax relief fund, and provide an annual 30 percent reduction in property taxes, Lingle said.

The popularity of the terminals has led many states to expand their operations. Pennsylvania lawmakers have authorized the use of up to 61,000 VLTs in gaming facilities.

And, taking a cue from the popular Mega Millions and Powerball multistate lotteries, Delaware, Rhode Island and West Virginia have created Cashola, the first multistate video lottery.

Jackpots start at $250,000 and grow until someone wins. It's expected that jackpots will climb to about $1 million once a month.

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