Casino Gaming in Buffalo: Bad Odds?
Most everyone has an opinion on the proposed Seneca Buffalo Creek casino. Many opponents base their beliefs on social impacts or moral issues while proponents point to nearby casinos and say, â€śtoo late.â€ť Others look at it from an economic development perspective. New jobs and more money into the region make a casino a no-brainer, right? Not so fast says a story in Tuesdayâ€™s Wall Street Journal .
Bad Odds As more states look to win the economic jackpot with casinos, evidence suggests they are playing a losing hand
Out on the Great Plains, an experiment is under way: Under a new state law legalizing gambling, Kansas City, Kan., could soon be lit up by the first full-blown casino resort in its 135-year history.
If the plans come to fruition, Kansas will be the 13th U.S. state to bet that commercial casinos will prove to be a win-win game, reaping profits for the casino owners and boosting development for their hosts at the same time. "We'll see a big economic benefit," Kansas Gov. Kathleen Sebelius said when she signed the enabling legislation in April.
A growing body of research and experience, however, suggests the odds are not stacked in the state's favor. Some economists go so far as to call casinos a sort of global zero-sum game, in which the outcome for a host city depends on the casino's ability to attract out-of-state tourists and separate them from their money -- a feat that becomes increasingly hard to achieve as more states install casinos of their own.
"There are two simple questions: Where does the money come from, and where does the money go?" says William Thomson, a professor of public administration at the University of Nevada in Las Vegas. "If the customers live in the local area, there's no way you can have economic development."
More blackjack dealers and gaming taxes, though, don't necessarily add up to growth in economic well-being. For one, casinos often take business from other entertainment venues, such as theaters or sports bars. As a result, some economists -- such as Earl Grinols, a former senior economist on the president's Council of Economic Advisers who now teaches at Baylor University in Texas -- contend that, on average, casinos actually make no net tax contribution. The effect on jobs could actually be negative, because many modern casinos -- replete with slots and video-poker machines -- need fewer employees per customer than the businesses they tend to replace.
"The problem with cities is that they only look at the positive side," says Ricardo Gazel, who is an economist at the Washington, D.C.-based Inter-American Development Bank, and who authored a paper on casinos and economic development while at the Federal Reserve Bank of Kansas City. "They look at revenues and the creation of jobs, but they don't look at the destruction of other jobs."
A few communities, such as Las Vegas, and to a lesser extent smaller gambling centers like Biloxi, Miss., come out ahead because they also are successful as tourist destinations, drawing most of their gamblers from afar. That keeps the benefits at home and distributes the costs elsewhere, because people take their losses and problems back to the places from whence they came. "Because they're drawing such huge volumes of money from other areas, you can argue that's enough to outweigh the local negatives," says Prof. Grinols. "You're imposing the social costs on some other place."
But with more and more places trying to become the next Las Vegas, the greater competition lowers the chances that any will succeed. A city aiming to install a casino "is very unlikely to become anything more than a regional player, and its major customers are likely to become its own residents," says Bill Eadington, a professor of economics at the University of Nevada in Reno.
The pitfalls are evident in places like Gary, Ind., and Detroit, which both introduced casino gambling in the hopes of stimulating moribund local economies. The three casinos in Detroit, built in part to compete with casinos across the border in Canada, cater largely to a local clientele, says Fred Wacker, an avid gambler and professor of interdisciplinary studies at Wayne State University in the city. Revenue from the three casinos has grown steadily, and they contributed about $158 million in gaming taxes to the state budget in 2006. But Prof. Wacker, who initially favored bringing in casinos, sees little positive impact on the area.
"Casinos always make money, but how much good they're doing for Detroit's economy is another question completely," he says. "I don't see much community development."
The full story is available free until Monday here.