Why Cities Shouldn’t Want Casinos

A recent article by David Frum in the Atlantic magazine spelled out several reasons why cities shouldn't want to welcome casinos. Frum said casinos have reached the saturation point, they're closing right and left, the ones still open are losing revenue, they lead to problem gambling, they wreck property values, they prey on old people and so on and so forth.

You don’t have to read the Atlantic magazine’s recent article bashing cities for wanting casinos.  Basically what the author, David Frum, said was casinos have reached the saturation point in the U.S. And communities that host casinos as an economic solution “may discover that they have accepted a sucker’s bet.” That is, local economies have not improved and more residents have gambling problems. If you want to know about Frum’s conclusions, which are heavy on gloom-and-doom and light on proof, read on.

“Outside of Las Vegas—now home to only 20 percent of the nation’s casino industry—casino gambling has evolved into a downscale business,” he wrote. “Affluent and educated people visit casinos less often than poorer people do for the same reasons that they smoke less and drink less and weigh less.”

“Downscale America,” as he called it, have less money now than they did when the recession began in 2007 and they have not shared in the post-recession recovery, Frum said. He said Ameet Patel, general manager at Hollywood Casino in Columbus, Ohio, noted the “weak recovery” has been drive by women age 50 and older “who used to bet $50 to $75 per visit,” resulting in decreasing casino revenue, and it’s not just limited to Ohio. “Casino revenues had still not recovered their 2007 peaks as of the spring of 2014, when again they went into reverse in most jurisdictions,” Frum wrote.

Still, new casinos are opening. Frum said that’s because casinos “promise a new and easy flow of revenues to hard pressed local governments.” But that’s just wrong, he said, because the casino market is almost saturated if it isn’t already. Frum cited the closure of Harrah’s in Tunica and Margaritaville in Mississippi, plus closures in Atlantic City.

Frum cited a Moody’s forecast that casino revenues will drop through the rest of 2014 and all of 2015, “slicing industry earnings by as much as 7.5 percent.”  Cherry-picking struggling casinos, he mentioned Hollywood Casino in Perryville, Maryland’s, the first in the state, which has experienced revenue drops of 30 percent from its 2008 peak, Frum said, and it’s “expected to decline even more rapidly in future as competitors proliferate.”

But declining revenues are not the really terrible news, he said. The worst is “casinos’ economic and social impact on the towns that welcome them,” he said. Quoting “the economists at the National Association of Realtors,” Frum said, “The impact of casinos on neighboring property values is ‘unambiguously negative.’” Casinos do not want businesses to open nearby, “because the people who most often visit casinos do not wander out to visit other shops and businesses. A casino is not like a movie theater or a sports stadium, offering a time-limited amusement. It is designed to be an all-absorbing environment that does not release its customers until they have exhausted their money,” Frum wrote.

He also said the Institute for American Values “has gathered the best evidence on the social consequences of casinos. That evidence should worry any responsible city government.” For example, the IAV said people who live less than 10 miles from a casino are twice as likely to become problem gamblers than those who live beyond that distance. In some states, “the evidence suggests a tripling or even quadrupling of the number of problem gamblers,” according to the IAV, which also said 4060 percent of casino revenues come from “problem gamblers, increasingly drawn from the ranks of the vulnerable elderly.” Frum also tossed in “one Canadian study” that said “75 percent of casino customers who gamble most casually provide only 4 percent of casino revenues.”

Frum also quoted “the project manager for a new Wynn casino rising near Philadelphia” (in reality that project was cancelled last November), who said no one should expect casinos to revive cities “because that’s not what casinos do.” Frum said, “He’s right, but it has taken a surprisingly long time for city governments to acknowledge a fact that was well understood by the 19th-century Americans who suppressed gambling in the decades after the Civil War.” 

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