Gambling economic development

Casinos and riverboats can put a charge in local economies. But their reputation as a panacea for poverty is exaggerated, and a number of cities and counties are finding that their promise is no sure bet.

The two-lane road south out of Memphis, Tenn., to Tunica, Miss., can be a scary drive at night when there isn’t much more than moonlight to illuminate the narrow highway. Infrastructure is not a big issue here; there wasn’t much of it in place to support Tunica’s casinos when they were first built, and not much has been added since they opened. It is a half-hour drive for people traveling from Memphis, where most of the casinos’ employees live. Most of the customers come from metropolitan Memphis, too, which has no legalized gambling. The clientele patronizing Tunica’s full-service casinos is a cross section of ages and educational backgrounds. The casinos are called riverboats, but not all jurisdictions require a ship to be a certain distance from the shoreline — or even underway — before patrons can gamble. So some of the casinos aren’t boats at all; they are more like floating convention halls.

As recently as 20 years ago, gambling was confined to Las Vegas. Then, the residents of New Jersey, hoping to revive the crumbling beach resort, voted to allow gambling in Atlantic City. Eight years ago, Nevada and New Jersey were the only two states to sanction gambling. Today, 24 states have legalized gambling in some form, mostly state lotteries. Casinos, though — both land-and water-based — are a different matter. With lotteries, the state gets the profits. Private-enterprise casinos — whose owners/share-holders reap the benefits — have been more heavily regulated than lotteries.

That works only as long as there is no other game in town — literally.

In 1992, one gambling boat (with the too-adorable name of Splash) was docked at the Tunica landing site. Today, more than two dozen casinos line the Mississippi River from Iowa to the Gulf Coast.

If one jurisdiction is more liberal with hours of operation, for instance, or offers better payouts, it siphons gamblers from jurisdictions with stricter regulations, like betting and loss limits. In Iowa, notably, slot machines have popped up at dog tracks, drawing business from the riverboat casino Silver Eagle out of East Dubuque, Ill.

Exclusivity counts for a lot. Gambling is big business for the Mashantuckey Pequot tribe at its Foxwoods casinos in Ledyard, Conn., because there is no competition in the northeast. No competition means lower wages for casino employees, who have few employment alternatives, and lower payouts for patrons, who have nowhere else to go to gamble. Still, Foxwoods accounts for 10,000 jobs in the state’s southeastern counties, an area hit hard by the loss of defense contracts. And profits are so good — again, the monopoly — that there are plans to use some of the money to resuscitate the state’s long-closed shipyards.

From a tax standpoint, then, the economic news for cities and counties with gambling facilities is all positive. The most dramatic economic turnaround spawned by riverboat gambling with the debut of the Casino Queen riverboat. Its revenues generated $10 million in taxes to the city in the first year of the boat’s operation, allowing property taxes to be reduced by 77 percent. The Casino Queen has meant that the city, once so poor it could not pay to have its trash removed, has been able to balance its budget since 1992. Last year, local taxes amounted to 1.3 million.

Clearly, gambling can be a good thing for a city’s economic development. Just as clearly, whether it is depends on whether a city has something to lose. Tunica and Ledyard and East St. Louis did not.

New Orleans does.

Already one of the most popular tourist destinations in the country — to the tune of 10 million visitors a year — New Orleans would seem not to need an attraction designed to keep customers indoors, away from the city’s lively street scene and its legendary restaurants and night life. Nevertheless, Memphis-based Harrah’s Entertainmentpursued and won an exemption from Louisiana’s riverboat-gambling-only law for a single, land-based casino, which was itself an exemption from the state’s long-standing gambling prohibition. Legislators beholden to the casino industry, which like every other industry, tends to freely pass out campaign contributions around election time, got around that first hurdle by calling wagering that takes place on boats “gaming,” not gambling. The difference? “Gaming” emphasizes playing; “gambling” emphasizes betting, risking and, especially, losing.

Not to mention the unsavory connotations associated with the word.

The plan of Harrah’s Jazz Company, the partnership formed to own the casino, was to open in temporary quarters in the old municipal auditorium — across the street from a housing project — while building a new, 200,000-square-foot casino on the site of the Rivergate Convention Center next to the French Quarter.

As it turned out, it was not tourists who spent their money gambling, it was the locals, who made up 60 percent of the clientele. Not only was the money they wagered less than 40 percent of the casino partnership’s projections, but it also was money that would likely have been spent in the community anyway, at local businesses and entertainment spots. In other words, the casino did not attract outside cash, and only outside cash makes casino gambling worth the investment of municipal resources in city services, infrastructure and social services.

The day before Thanksgiving this past year, Harrah’s Jazz Company filed for bankruptcy. The enormous $823 million casino at the edge of the city’s famed French Quarter sits half finished.

The effect has been far-reaching. Standard & Poor’s lowered New Orleans’ credit rating from A-minus to BBB-plus.

Now, the city has lost the construction and casino jobs and the casino tax income on which it has based its operating budget. And its lower credit rating makes it more costly to borrow money.

Gambling is never a sure bet, especially for the economies of the municipalities that stake their futures on it. Everything is volatile. Gambling as a form of amusement competes with theaters, restaurants, shops sports and its patrons’ penchant for moving on to new things.

Like real estate, it all comes down to location, location, location.

In Missouri, by and large, riverboat casino gambling has been a boon to the state’s educational system. Here is the math: In most jurisdictions, the gaming taxes on revenues run 20 percent. There are four boats in the metropolitan St. Louis area. Together, they do more than $400 million a year, which means $80 million taxes for the state off the top. The local tax take alone amounts to $1.3 million. Then there is an admissions tax charged, generally $2 per person per cruise. At an attendance rate of two million to three million visitors each year, that is an additional $4 million to $6 million. And each riverboat employs an average of 1,000 people at jobs that average in the $20,000-a-year range. Riverboat casinos have helped East St. Louis at the most basic level: Now all the police cars have windows and radios in them, rock-bottom tools that have enabled the police force to deal with the area’s infamous crime problem.

Hard by East St. Louis, the city of Alton, Ill., has shared in the revival. In its license renewal presentation two years ago, the Alton Gaming Company cited the clean-up of the drug-infested Riverside Park area near its docking facilities, increased expenditures in the state by travelers in public transportation (30.6 percent), automobile transportation (20.1 percent), lodging (15 percent), food service (22.4 percent), entertainment and recreation (5.3 percent) and general retail trade (6.7 percent). The list of charitable contributions runs to six pages; its list of vendor spending, five pages. The renewal presentation lists 13 new businesses — mostly places to eat — that opened in downtown Alton between 1991 and 1994. All in an area that had nothing before.

The opposite has occurred in communities that had a retail base, however modest, before gambling came to town. Initially it was thought that putting a riverboat in a town would increase tourism dramatically and improve the sales of retail stores around it. That has not happened. Visitors are going on the boats and staying there.

And there are social costs associated with gambling, although it is harder to get a handle on the cost of governments of social services needed to combat compulsive gambling, spousal abuse, housing foreclosures and the plain, old-fashioned crimes of theft, robbery, trespassing, damage to cars and simple battery, as well as the social disruption of divorce and suicide attributable to gambling debts. In a tacit acknowledgment of the problem of compulsive gamblers, the Alton Belle Casino will not cash payroll checks. But that does not stop the problem of abuse.

A recent article in Time magazine says that child abuse reports rose 43 percent and domestic violence 80 percent after slot machines were legalized in Deadwood, a resort in South Dakota’s Black Hills.

To date, however, there is no evidence corroborating a connection between increasing crime and gambling. In fact, in some areas, crime has gone down, since, because the last thing the casinos want to see is criminal activity around their boats, they provide additional security.

This, from the Alton presentation: “As of May 1994, 3,783,841 persons have boarded the Alton Belle Casino. None has been the victim of serious crime. Clearly, the close working relationship between the Alton Belle Casino and the Alton Police Department has resulted in a safe and secure area surrounding the entire facility.”

Meanwhile, do not call Tunica Mayor Bobby Williams on the first of the month; he’s busy getting out government checks to the citizens of Tunica.

A portion of those government checks will come right back into the slot machines of Tunica’s riverboat casinos. Before the advent of casino gambling, Tunica County was the poorest in America. Now it isn’t. As Mayor Williams booms jovially, surely in jest, “Thank goodness for [government checks! ’cause it’s casino money!”

Your tax dollars at work.