Not Bullish on Bear Stearns

Here’s one left-over thought from Wednesday’s casino revenue hearing at the State House: It’s unfortunate that the Globe decided to run a story on the front of its Metro section reporting on an investment banker’s forecast of how much money a Boston casino could generate.

The numbers quoted in the story are at best, wildly optimistic, and at worst, posturing by a group with a vested interest in getting the casino legislation passed. Despite the fact that the Globe’s Matt Viser dutifully reported skeptical views of Bear Stearns banker Kenneth Shea’s prognostications, Gov. Deval Patrick and his cabinet members were still smitten enough with the numbers to reference the story in the hearing.

The story quoted Shea, the chief gaming investment banker at Bear Stearns—a firm the story acknowledges in the lead is looking to invest in a casino at Suffolk Downs—as saying that a Boston casino would churn out $1.5 billion in annual gaming proceeds.

“If you can do $1.7 billion in the middle of the Connecticut woods, you should be able to do $1.7 billion in Boston with your eyes closed,” Shea told the Globe in an interview.

This isn’t the first time the Patrick administration has embraced numbers of questionable origin.

To get a sense of just how out of left field the investment banker’s numbers are, I called UMass Dartmouth Professor Clyde Barrow. Keep in mind that Barrow, a man so bullish on the economic impact of casinos that some consider him a biased source, estimated that the three proposed Massachusetts casinos would bring in a combined $1.5 billion in revenue.

“I think it’s at the high end of anybody’s estimates,” Barrow said of Shea’s projection. “I’d be very surprised to see it actually reach that level, but it’s conceivable…Basically it would mean that the Boston casino would have to become a national and international destination.”

So essentially, Barrow is saying that Boston would have to achieve the cache of Vegas to reach those numbers. Good luck with that.

Dartmouth professor Bruce Sacerdote, who co-authored a 2005 study called “The Casino Gamble in Massachusetts” for Harvard’s Rappaport Institute, is even more skeptical of the investment banker’s figures. He said Shea’s statement comparing Boston to making $1.7 billion in the Connecticut woods was particularly misleading.

“Foxwoods is drawing from New York City, Connecticut AND Boston,” he wrote to me in an email. “If the Boston casino were creating that much additional local traffic (in part from people who don’t own cars and can’t plan a trip to Foxwoods), I would be more worried about who is losing money than I would be excited about additional state revenue.”

According to Sacerdote, Shea’s numbers are so over the top that he thinks a Boston casino making that much money would be draining more from the economy than it’d be contributing.

The purpose of Wednesday’s hearing was supposed to be untangling what the actual financial impact of the governor’s casino proposal on the state would be. Overly rosy numbers from admittedly interested parties like Bear Stearns don’t advance that discussion.