Irregular Times Diaries: Unfit Discussion
In a time of the spring, old paths are obscured and new growth begins.
Irregular Times Diaries: Unfit DiscussionIn a time of the spring, old paths are obscured and new growth begins.
Forget the talk about the tenth Illinois casino. Proposed legislation now before the Illinois house would triple Illinois gambling, including the creation of a downtown Chicago casino.
While casinos can be very profitable, they are harmful to economic development. Restaurants are the hardest hit when a new casino opens, although expenditures in other sectors decrease also. Casinos can make more than half of their income from non-gaming revenues, including hotel and restaurant facilities on the premises. According to a study by E L Grinols and J D Omorov reported in the Spring 1996 Illinois Business Review:
Restaurants in many states, including Illinois, have reported that their revenues dropped as much as 50 percent in response to the opening of a nearby casino, and many restaurants have closed.
The social costs from gambling to the surrounding community can also be high. Costs associated with bankruptcy, debt, criminal justice costs, and other consequences of gambling problems can cost the community somewhere between four to eleven times the amount of tax revenue they bring in, depending on which study you look at. Gambling impoverishes whole communities.
And once a gambling enterprise is let into the state, it doesn’t go away. Although the racing business ceased being profitable long ago, the taxpayers of Illinois are still subsidizing that industry to keep it from going out of business.
Gambling is not good for business and it’s not good for Illinois.
The bill is being discussed in the Illinois house this week. This is the time to contact your representative. You can find the contact information for your Illinois state representative here. If you don’t know your district you can find it here.
(186 votes, average: 3.13 out of 5)
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June 11th, 2007 at 8:34 am
Restaurants strike me as a bad example. If people are choosing to spend their money in the casino’s restaurant instead, that’s just ordinary competition. Can you find an example of businesses that suffer even though they’re not direct competitors?
June 11th, 2007 at 11:24 pm
Yes, but can you wait for the long answer until my work schedule mellows a little? The short answer is that gas stations from 0-5 miles of a casino benefit and everything else does not, particularly in the 5-10 miles away range.
July 4th, 2007 at 8:57 pm
Sorry for the delay, pesky details like working 7 days a week to make up for no June paycheck in the break before summer session. I DO have the fourth of July off, so will try a longer answer to both questions.
So is a casino ordinary competition?
No. Since casinos are licensed by the state and the state controls every facet of their operation from how much they can charge in fees to how much in fines they pay for infractions, the casino is basically a monopoly.
How businesses can suffer even though they’re not direct competitors (from Grinois and Omorov’s “Who loses when casinos win?”:
-When casinos bring in new money from outside the immediate area, the immediate area can benefit by new money being spent locally in the form of payroll, and the spending of the owners’ profits locally. This happens when the casino is a tourist destination or internationally known.
-The casino can also act to redistribute money in the local area. Money that would be spent for other things is spent at the casino instead. This restructuring of the market benefits casino owners at the expense of existing firms.
-The money collected at the casinos can have no effect on the local economy if the money leaves the area. In this case the casino is just a tollhouse or collection booth for owners outside the area and may actually damage the economy if it takes more out of the economy than it brings in. So the casino may be hugely profitable and still have a net negative impact on the economics of the area.
That’s the mechanism, but I think it just got dark here so I’ll give you the numbers when the explosions stop.
July 4th, 2007 at 11:02 pm
Assuming someone pulls part 1 out of the spam filter, here is part 2:
Grinois and Omorov in “Who loses when casinos win?” looked at the effects of casinos on businesses by examining sales tax data. The state divides sales tax into 10 categories: general merchandise, food, drinking and eating, apparel, furniture & household & radio lumber & building & hardware, automotive & filling stations, miscellaneous retail and wholesale, other miscellaneous and manufacturers. They looked at 7 different casino locations.
Three categories showed significant effects. General merchandise, and miscellaneous retail and wholesale trade had losses of $367 per $1000 of casino revenue. This suggests casino revenues come from a range of alternative expenditures rather than one type of spending. Automotive and filling station had gain of $295 per additional $1000 of casino revenue.
Narrowing the numbers for “general merchandise and miscellaneous retail and wholesale trade” further by distance from casino: an additional $1000 in casino revenue reduces sales by $142 from 0-5 miles of casino and additional $217 for 5-10 miles away. The 0-5 mile range would include the casino itself, since data was not separated by casino and non-casino revenue.
The gambling industry between 1992 and 1997 spent $100 million in political contributions. Wonder what they got for their investment.