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Chicago Thu Jun 02 2011

Crap[s]: A Chicago Casino

Should we bring casino gambling to Chicago, as Mayor Emanuel is aggressively pushing for? I've never been able to come to a solid decision on this issue, whether to oppose or not. Casinos are regularly trotted out as solutions to sagging tax revenues, particularly in declining urban areas like Providence, Hartford, Detroit and Cleveland. And while there is some initial surge in revenues, if Providence and Detroit are our glimmering examples of the wonders of casino gaming development, I'm not certain we should be encouraging their development here in Chicago.

Of course, Chicago is much different from Providence and Detroit. Chicago is a major convention city, the third largest city in the country, and the capital of the Midwest. We already draw huge numbers of tourists and conventioneers. Given that, the social ills that accompany casinos may not manifest; and perhaps their main function of merely sucking more money from low-income workers to enrich the casino developers and provide a trickle of extra tax revenue will be substituted for actually making money from tourists.

One thing does seem safe to say: if a casino attracts new tourists, it will make the casino operators very wealthy, which will have an attendant (small) impact on tax revenue. But it will not have any appreciable effect on other businesses. The Boston Federal Reserve Bank released a paper evaluating a proposed casino in Rhode Island and included this:

In general, whether a casino will benefit or harm a local economy hinges on whether the casino is likely to attract tourists to the region. Destination casinos, such as those in Las Vegas, essentially export casino services to tourists, bringing in new dollars to the local economy. A dollar spent by a tourist in a destination casino may fund a local supplier providing food and beverages to the casino, which then spends that income on other goods and services in the local economy, thus multiplying the effect of the first dollar spent. The tourist, however, does not generally spend much in the communities surrounding a resort-style casino. Steve Wynn, a major casino operator, expressed this point to local businessmen in Bridgeport which also considered a casino, in the 1990s: "There is no reason on earth for any of you to expect for more than a second that just because there are people here, they're going to run into your restaurants and stores just because we build this building [casino] here." Therefore, the main ancillary benefits are from indirect spending in the local economy spurred by tourists to a casino, rather than direct spending by tourists at local restaurants or shops.

(emphasis added).

In other words, the economic impact is strictly trickle down, and rests on some pretty big assumptions. So, in that way it is certainly a risk.

I have to believe however that Chicago given its existing reputation and infrastructure and steady convention business would be able to benefit from an appropriate casino (i.e., something a little classy). Most cities that pursue casino development do so to bring in the tourists; Chicago's casino would be another way for our extant tourists to spend money. If--if--we know that most of the casino's customers would be tourists, it's a good idea. If not, it's just another massive trickle-down project done out of terror of spooking away fragile mega-corporations who flee at the scent of any taxes that prompt a fair share.

Whet Moser of Chicago Magazine, as is his wont, has delved more deeply into the policy questions of the casino idea, and provides excellent background on those questions.

From his post:

I'm particularly interested in the intersection of gambling and public policy because presents important questions about politics in a pure, nearly abstract form: What's the role of government in protecting its citizens from themselves and each other, versus allowing us personal and economic freedoms? Where does a regressive tax end and a progressive one begin? What's the difference between one economic luxury and another? How do we combine politics, ethics, and data to answer these questions?

For instance: gambling is almost literally everywhere in Chicago. You can do it in almost any convenience or grocery store by buying a lottery ticket. Practically every block in Chicago offers an opportunity to blow money on a game of chance, as is the case throughout the country. As a result, way more people play the lottery than go to casinos. According to a 1999 National Opinion Research Center study from the University of Chicago, 63 percent of the population had played the lottery in the last year, and 26 percent gambled in a casino.

So that's more of a scourge, right? Well, according to a 2002 report from the Journal of Gambling Studies (referenced here: PDF) that tracks with some other numbers I've seen, lottery players won or lost an average of $11 on their last play; casino players won or lost an average of $143.

With casinos, you're talking about more volatile, and hence more risky, amounts of money. With lottery tickets, the figures are considerably more modest. It's much, much easier to go deep in a hole at a casino than it is at a 7-11.

Gambling is certainly regressive--but before the lottery, there were massive policy rackets--and in fact, even with the lottery, these policy games exist, sufficiently wide that in college I was able to bet on numbers at a White Hen near my apartment.

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Jon Nelson / June 2, 2011 11:35 AM

Chicago is already a major tourist destination. So, the success or failure of a casino (or many) in Chicago I think would largely be based on where it is located. If it is in the Loop/Mag Mile area I would bet that it would be a success, though the start up cost is much higher in those areas. If the casino area ends up around 80th on the South Side, I doubt that there will be a lot of tourist flocking there and it will likely damage the area more than help it.

Mike / June 7, 2011 10:26 AM

Hey, if you can't beat Hammond, join 'em! It's pretty sad that this is one of Emanuel's first big messages. That and teachers suck and are responsible for failing schools. This is gonna be a fun ride.

raj / June 8, 2011 2:54 AM


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