Pixel Tracker

Monday, March 18 , 2019, 7:42 pm | Fair 59º


Froma Harrop: Casinos Take Money From States

Odds are that voter-approved casinos in Ohio will be a drain — not a plug — on the local economy

In Las Vegas, home prices have dropped 55 percent since peaking in August 2006, and the foreclosure rate is seven times the national average. Gigantic new condo towers sit nearly empty (real-estate pros call them “see-through buildings”), and unemployment tops 13 percent. The recession has sent casino revenues plunging 20 percent from two years ago.

Froma Harrop
Froma Harrop

“Up until the ‘90s, we never suffered with the downturn of the economy,” said William Thompson, a University of Nevada-Las Vegas professor and an expert on the casino business.

The sad plight of Sin City is a morality tale for other municipalities seeking economic salvation through gambling. And it is against this dark vision that Ohio voters just approved casinos in their state.

Thompson thinks that the money will again roll into Las Vegas as the economy improves. But the prospects are not as bright for nonresort cities without a large tourism infrastructure — and never were.

“Half the gamblers have to be from outside the state for it to work” as economic development, Thompson says. The only people who will definitely make money are the casino operators.

Ohio’s decision to put casinos in Cincinnati, Cleveland, Columbus and Toledo is largely a response to the gaming palaces in Michigan to the north, Indiana to the west and Pennsylvania to the east. (Kentucky to the south still doesn’t have casinos.)

What’s going to happen, Thompson predicts, is that about 10 percent of Ohio’s casino revenues will reflect gamblers returning home from the surrounding states. But the presence of casinos near population centers will simply mint new gamblers, and that will be a drain on the economy.

Compulsive gamblers steal, lose jobs, have debts and go on welfare. The economic rule of thumb on problem gamblers is as follows: A casino within 50 miles of a community doubles the rate of compulsive gambling, and those troubled individuals exact a social cost of about $10,000 each.

About 90 percent of Ohio’s population soon will be within 50 miles of a casino. If Ohio follows the expected pattern, the four gaming halls will create 80,000 more compulsive gamblers, siphoning about $800 million a year from the economy.

For gambling to become an economic engine, you have to bring money from elsewhere. In Las Vegas, out-of-state tourists account for nearly 90 percent of the gamblers. The visitors come for the big-time entertainment, shopping and mild winter weather, as well as for the games.

Oddly, casino expansion in other states can help the Nevada economy. The slot machines, for example, are made in Las Vegas and Reno. Ohio casinos will probably buy 20,000 slot machines at $15,000 each. That comes to $300 million being sent to Nevada.

After riverboat casinos opened in Joliet, Ill., local businesses were asked how they were affected. Half said they lost revenues. Only two gained, and one was a travel agency that found itself booking many more trips to Las Vegas for the new gamblers. The other business bought used cars for cash.

Thompson predicts that as Ohio builds its gambling establishments, casinos in neighboring states will prepare themselves for the increased competition. They may improve customer service and up the payout rate on their slot machines. (Outside of Nevada, the slots give back 92 cents to 94 cents on the dollar. Vegas is the most liberal, at 97 cents.)

In all, the odds of casinos in wanna-be “sin cities” filling state budget holes are not great. The desperation in recession-racked regions is understandable, but the reality is this: If large numbers of high rollers aren’t jetting in, casinos tend to take more from local economies than they give.

Froma Harrop is an independent voice on politics, economics and culture, and blogs on RealClearPolitics.com. She is also a member of the editorial board at The Providence (R.I.) Journal. Click here to contact her at Creators.com.

Support Noozhawk Today!

Our professional journalists work tirelessly to report on local news so you can be more informed and engaged in your community. This quality, local reporting is free for you to read and share, but it's not free to produce.

You count on us to deliver timely, relevant local news, 24/7. Can we count on you to invest in our newsroom and help secure its future?

We provide special member benefits to show how much we appreciate your support.

I would like give...
Great! You're joining as a Red-Tailed Hawk!
  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.