State Lottery officials dispute a report that says Twin River, at left, and Newport Grand have the lowest slot payouts in New England.

The Providence Journal Bob Thayer

PROVIDENCE — A report alleging that Rhode Island’s slot machine payouts are the lowest in New England — and among the lowest in the nation — was sharply disputed by state officials and the owners of Newport Grand and Twin River yesterday.

In a report titled “Rhode Island Gambling A Bad Bet For Players,” Clyde W. Barrow, director of the Center for Policy Analysis at the University of Massachusetts/Dartmouth, said Rhode Island’s Lottery-run video-slots returned only “72 to 73 cents of each dollar wagered,” compared with an industrywide average of 92 cents.

“This is a surprisingly low payout rate,” said Barrow in a statement embargoed for release today. “While Twin River and Newport Grand management may find such a low payout percentage beneficial to their bottom line, it is puzzling that Rhode Island state regulators allow local patrons — mostly from their own state — to be subject to such a low payout rate.”

Gary Sasse, the head of the agency that oversees the state Lottery, labeled the Barrow report “completely inaccurate.”

“It is clear he does not understand the payout structure at Rhode Island’s video-slot machine venues,” said Sasse, who heads the state Department of Revenue. “Rhode Island’s slot machine payouts average 92 percent, in line with other gaming venues Barrows studies, and is considered the industry standard.”

Newport Grand also denounced the report as “completely false, factually inaccurate and misleading,” while a spokeswoman for Twin River called the author “irresponsible.”

“It looks like he simply went to the Web sites of lotteries/jurisdictions and pulled info from there,” Twin River spokeswoman Patti Doyle said in an e-mail. But, “the Rhode Island Lottery doesn’t present [information] on their site in same way other jurisdictions do. He just never called the Lottery for clarification. Either he got lazy, or doesn’t understand the terminology,” she said.

Barrow did not respond to a request for an interview yesterday. But he stood by his findings in an e-mail in which he said: “We obtained the financial data used in our review of slot machine and VLT payout rates directly from the lottery commissions, gaming control boards, and casino control commissions that oversee gaming in each state from West Virginia to Maine, including the Rhode Island Lottery Commission.

“The payout rates to customers are calculated using the same formula in each state, which is the amount returned to customers as prizes (cash out) divided by the amount wagered in slot machines or VLTs (cash in).”

Beyond that, “Mr. Gary Sasse simply asserts a different payout rate from the one we report, but he does not indicate how he arrives at those numbers … I can understand why a gubernatorial administration that is presiding over the highest state unemployment rate in the nation, and is facing a significant state budget deficit, would not want Rhode Island and Massachusetts residents to know how low the payout rate is at Twin River and Newport Grand.”

Barrow also alleged that Twin River “inflates” its payout rate by including amounts paid to GTECH and others, which Twin River and the Lot deny.

State Lottery director Gerald Aubin was unavailable for comment, but the Lottery’s Web site contains a column that says shows “payouts” ranging from 77.6 percent to 80.14 percent during the year that ended on June 30. It shows, for example: cash-in of $171 million, cash-out of $1.494 million in June 2008.

But Twin River’s owners said the Rhode Island Lottery has opted to present its numbers in a different manner than every other operator in the industry, and that Barrow should have called for clarification after seeing such a large disparity between the Rhode Island “payouts” and the industry standard.

“Of course, his math works because he is not looking at it the right way. He is looking at the drop, not the handle,” said Joe Malnerich, Twin River’s vice president of marketing. He explained the difference this way: one measure counts only once the $100 the gambler “drops” into a slot machine, the other, how many times that initial $100 circulates through the machine before the player calls it a night. By that standard, he said, Twin River’s payouts are in line.

“A gaming facility paying out in the neighborhood of 72 percent would be in business for about 30 seconds!” said spokeswoman Doyle.

Barrow is no stranger to Rhode Island, having produced a series of reports that bolstered the financial arguments made by proponents of the proposed Harrah’s-financed Narragansett Indian Casino in West Warwick that voters rejected in 2006. More recently, he co-authored a report that seeks to debunk the “pseudo facts” proffered by casino opponents in Massachusetts.

In his newest report, Barrow’s criticism of Twin River’s owners goes well beyond an arm’s-length analysis of payouts. He said they overpaid when they bought the former Lincoln Park and then miscalculated when they borrowed $220 million for renovations in the “mistaken” belief that “a greyhound track racino could compete against the resort casinos in Connecticut … They were wrong.”

“The result of these poor business decisions is that UTGR Inc. — Twin River’s parent company — is the subject of several law suits and liens; its stock rating has been downgraded; some of Twin River’s centerpiece restaurants are closed, or open with reduced hours of operation; and many employees have been, and are being, terminated.”

He also questioned the logic behind “more than $2 million in tax breaks” from the Carcieri administration, a possible reference to waived sales taxes on construction materials.

Twin River executives say their credit rating on the bond market dropped, not their “stock rating”; that they are unaware of any lawsuits related to their financial situation, and have no idea what “tax break” Barrow is citing unless that is his way of describing the state’s approval of $2.6 million in free play between June 26 and Nov. 30, 2008 in an effort to boost business. They added they couldn’t say how much their employee numbers had dropped because their human-resources director was out.

But Doyle questioned why Barrow “singled out Twin River” for his barbs, when the casino industry nationwide is suffering financially and retrenching. She said his “motivation absolutely is questionable.”

kgregg@projo.com