Making a Case for Casino/Riverboat Gaming

Making a Case for Casino/Riverboat Gaming

Part 2
by Marcus E. Prater

Myths Vs Realities.

It's no secret that the rich, colorful past of gaming wouldn't be accurate without a reference to mobster Bugsy Siegel and his appearance on the Las Vegas scene in the mid-1940s. Since that time, though, the gaming industry has had to battle the stereotypical references to the mafia and other unsavory associations. Just as the belief that someone like Bugsy Siegel is still controlling the action is a myth, so are a variety of other views, opinions and so-called "facts" espoused by anti-gambling crusaders. It is important to examine the myths - and realities - of present-day casino gaming.

Myth - Casino companies are controlled or influenced by organized crime.

Reality - Public casino companies are among the most heavily regulated companies in the nation and have no connection to organized crime.

Not only do casino companies have to answer to a variety of regulatory agencies in each state, but public companies are also scrutinized by the Securities and Exchange Commission. Large, privately held casino companies have all but disappeared from the gaming landscape. Public companies have to undergo annual independent audits and their financial records are a matter of public record as part of the stringent reporting requirements. Established jurisdictions such as Nevada and New Jersey investigate the hiring of all individuals in senior management positions, and emerging jurisdictions such as Mississippi, Missouri and Indiana have adopted regulations that apply in Nevada and New Jersey and have augmented them with tough language and restrictions. It ensures the interests of the state and local governments, the residents and gaming customers and the casino companies themselves are fully protected.

Myth - The presence of riverboat casinos creates a dramatic increase in street or property crime.

Reality - There is no direct relationship between the introduction of gaming in a community and an increase in crime rates.

Casinos in emerging jurisdictions have actually contributed to a decrease in crime in some areas. Whenever an area increases foot traffic and draws tourists, simple logic suggests crime would rise. While minor increases in crime do in fact occur in some instances, two statesponsored studies - the Indiana Gambling Task Force Report and a report from the Illinois Riverboat Gaming Council - reveal crime in several areas with recently opened riverboat casinos has actually dropped. For example, Major Gary Fleming of the Alton (Illinois) Police Department reports: "We didn't know what to expect, but we haven't had any crime problem at all. We initially assigned four officers to the area, but they have been reassigned because problems were minimal. We were also able to re-hire four police officers laid off before the boat came due to increased tax revenue."

Davenport, Iowa, Natchez, Mississippi, and East St. Louis, Illinois, have all reported no increase or a slight decrease in crime since the boats opened. Larger gaming cities such as Las Vegas and Atlantic City actually have lower visitor-adjusted crime rates than so-called family tourist-draw cities such as Orlando.

The Federal Bureau of Investigation has conducted studies that show there is no clear relationship between the introduction of gaming in a community and subsequent crime rates in that community. The FBI also concluded that the legalization of casino gaming is often followed by a drop in the rate and number of crimes committed within the community. In addition, increased tax revenue is often used to improve the police force. The bottom line is the stereotype of rampant crime and other activity such as prostitution associated with casino developments is just that - a stereotype that is not based on fact.

Myth - Casino gaming drives other businesses out ofthe area.

Reality - Casino gaming stimulates the growth of new jobs and businesses.

This reality has been proven repeatedly in emerging jurisdictions, from Will County, Illinois, to Deadwood, South Dakota, and from the Mississippi Gulf Coast to the Native American casino areas of Minnesota. In nearly every instance, retail sales have experienced a sharp jump after riverboats have opened.

Many anti-gaming groups have cited figures that misstate the impact of casino developments on the local restaurant business. One such fact is that between 1977 and 1987 the number of restaurants in Atlantic City decreased from 243 to 146. What they have failed to reveal is that because of the influx of casino employees and the money they spend, the number of restaurants in the Atlantic City Metropolitan Statistical Area increased from 383 to 848 from 1977 to 1987, an increase of more than 120 percent.

In Mississippi, figures provided by the Mississippi Department of Economic and Community Development's Division of Tourism Development show restaurant sales were up 14.3 percent in 1994 compared with the previous year. And in a 1993 vs. 1992 comparison, the Mississippi Gulf Coast experienced a 60 percent increase in hotel sales tax, a 19 percent increase in total sales, a 29 percent increase in plane arrivals and departures and a 110 percent increase in new residential building permit valuations - all attributable to gaming.

Myth - Consumers will substitute gaming for purchases of necessities or other goods.

Reality - This theory is based on inaccurate assumptions.

This myth was first dispelled by a report prepared by the WEFA Group titled The Effects of Casino Gaming on Consumer Spending. The WEFA Group - formed from the merger of Wharton Econometric Forecasting Associates and Chase Econometrics - is one of the most respected forecasting and analysis organizations in the world. Their report exposed that the argument of the socalled "substitution effect" is based on at least two erroneous assumptions. First, that consumer budgets are limited or even fixed over time, and second, that a dollar spent in a casino is "sterile" or no longer an active part of the economy.
Additionally, in a report prepared by Christiansen/ Cummings Associates for the 1994 Gross Annual Wager, it was pointed out that "These consumer expenditures on commercial games pay the wages and salaries of the hundreds of thousands of employees, provide a return on the equity component of the tens of billions of dollars invested in casinos and racetracks and companies that vend computerized wagering systems, service the debt component of these investments, support the stock prices of the hundred or so publicly owned companies involved with gambling, and, in sum, are the motivating force of an economic engine that is most visible in Nevada but that less visibly drives an annually growing portion of the American leisure economy."

Myth - Casino jobs are primarily low-paying, parttime positions.

Reality - The typical casino job is a full-time position with an annual wage of between $18,000 and $25,000.

Casino operations are just like every other business, and while guest service is the most visible in the casino, the back-ot-house workforce is extensive, When the property is a destination resort with a hotel, various food and beverage outlets, retail space and other amenities, it becomes a major operation that demands a substantial, well-paid workforce.

In Minnesota, for example, total employment at tribal casinos surpassed 10,000 individuals at the close of 1992. According to the Minnesota Planning Agency: "If there had been no casinos, and the welfare rate in the 10 counties had climbed as fast as the rest of the state, the costs of AFDC (welfare) would now be $7 million per year higher, not including additional medical benefits or food stamps."

In Connecticut, the enormously successful tribal gaming enterprise in Ledyard has helped offset job losses from defense industry cutbacks by providing good-paying jobs.

Myth - Casino gaming creates problem gambling.
Reality - Problem gambling does not result from casino gaming.

Compulsive gambling exists throughout society. Experts estimate that between 2 and 5 percent of the population has the potential to become compulsive gamblers. However, compulsive gambling has never been shown to be caused by casinos. Most states already offer legalized gaming in the form of activities such as pari-mutuel betting, bingo, charity casinos and lotteries. The existence or absence of casino gaming will not determine whether gaming is available to the compulsive gambler.

Studies have proven that a compulsive gambler gambles regardless of whether it is legal or not in a particular area. As a Massachusetts Senate committee clarified, "There are no data to support the contention that expanded gambling will cause an exponential increase in problem gambling. Nor are there data showing that gaming venues 'cause' problem gambling. Three of the five most popular venues of choice for problem gamblers in Massachusetts are currently illegal. Problem gamblers gamble regardless of the legal status of a venue."

Myth - Casino companies fail to acknowledge the issue of problem gambling.

Reality - Casino companies have taken the lead in the prevention of problem gambling.

Problem gambling is certainly one of the most important issues the gaming industry faces. The actions taken by the industry over the last five years have been significant, including setting up national toll-free hotline numbers, paying for the staffing of those hotlines through a percentage of revenues, working with local officials in emerging jurisdictions to combat the problem, training employees to recognize the signs of problem gambling and taking steps to educate the public of the dangers of addictive behavior and the appropriate treatment. In addition, the recently formed American Gaming Association has made the issue of problem gambling a top priority.

Myth - Casino customers are primarily those who can least afford to lose money.

Reality - Numerous consumer profile studies have shown the typical casino customer is between the ages of 40 and 55 with a college education, a white collar job and a higher discretionary income than the national average.

Myth - The American Insurance Institute estimates that as much as 40 percent of all white collar crime is committed by individuals who have serious gambling problems.

Reality - This widely circulated statistic is patently false because the American Insurance Institute simply doesn't exist. Detailed research traces the statistic back to a March 1987 advertisement by the Tennessee Baptist Convention.