Monday, May 31, 1999
More states bet futures on gaming
But are social costs too high?
BY FREDREKA SCHOUTEN
Gannett News Service
Before the riverboat came, East St. Louis, Ill., was a decaying city on the Mississippi River.
Weeds 10-feet high sprouted on the riverfront. Rat-infested trash littered streets. Violent crime spiraled, but police cars sat unused because the city couldn't afford the repairs.
Today, fueled by the Casino Queen and the 1,100 jobs the four-story riverboat brought to the town six years ago, this city of 40,000 is slowly re-awakening: A $15 million waterfront hotel is under construction, a Walgreens pharmacy opens in two weeks, and there's even talk of riverfront condos.
“I think the boat has just been a positive, welcome shot in the arm here,” said Mayor Debra Powell.
The southeastern Indiana communities of Lawrenceburg and Rising Sun are enjoying a similar resurgence, thanks to Argosy and Grand Victoria casinos, respectively.
In Dearborn County alone, visitors spent more than $452 million last year, and the tourism industry generated 3,308 jobs.
The three cities' success is emblematic of the growing willingness of communities to stake their economic future on gambling.
As a federal gambling commission concludes a two-year, $5 million study of the industry, it finds a country awash in casinos, bingo halls and lotteries.
Even southern “Bible Belt” states that traditionally eschewed legal gambling have made the leap. Mississippi — with $2 billion in annual casino revenue — has emerged as the nation's third-largest gambling mecca, behind Nevada and Atlantic City, N.J. Lotteries are being advocated in South Carolina, Alabama and Tennessee.
In the report it will issue June 18 to Congress, the National Gambling Impact Study Commission will acknowledge the financial benefits gambling offers — particularly to economically depressed communities like East St. Louis.
But the commission, which has no enforcement power and is split between gambling advocates and foes, is sharply divided over whether gambling should spread. By a 5-4 vote, the nine-member group recently suggested that communities across the nation consider a moratorium before opening new gambling operations.
Commissioner Richard Leone, a former New Jersey state treasurer, said he was shocked to learn how deeply embedded gambling became in American culture the last two decades.
Mr. Leone, who pushed the commission to endorse a moratorium, doesn't like what he sees.
“Governments use gambling as a trick,” he said, “a painless way to raise money, a way of avoiding hard decisions about taxes and spending.
“I think whenever government operates by trickery, it erodes confidence over time, and that's the worst thing that can happen to a democracy.”
The U.S. pastime
Americans plunked down almost $51 billion on gambling in 1997, more than they spent on movie tickets, cruises, tickets for sporting events and recorded music combined.
In 1976, the last time the government studied gambling, only Nevada had casinos. Today, casinos operate in 26 states. And 37 states and the District of Columbia offer lotteries — while new states and Indian tribes clamor for the easy revenue gambling provides.
By summer's end, the first of three Las Vegas-style casinos will open in Detroit in an attempt to revive the inner city.
More than 60 Indian tribes in California recently launched talks with Gov. Gray Davis in hopes of expanding casino-style gambling.
And in Kentucky, pro-gambling forces are trying to figure out how to recapture money being lost to Indiana riverboat casinos.
The state lottery is considering video-poker games in retail outlets and at race tracks. Others, including Gov. Paul Patton, are proposing casinos be built near convention centers, with some of the revenue pledged to faltering thoroughbred racing.
In Massachusetts, state Sen. James Jajuga is pushing legislation that would authorize three casinos to compete against Foxwoods Resort Casino and the Mohegan Sun, two Indian casinos flourishing in neighboring Connecticut.
Mr. Jajuga, like many government officials, has decided the economic benefits of casinos outweigh social costs, such as pathological gambling.
“We have a lot of folks who like to gamble for entertainment, and a small percentage will have a problem,” Mr. Jajuga said. “They abuse alcohol. They abuse food. There's a small percentage of people with addictive personalities.”
Most experts agree that seriously addicted gamblers account for a slim portion of the population.
Researchers hired by the federal commission have concluded that 2.5 million adults are pathological gamblers, meeting the psychological cri teria for the most seriously addicted.
Howard Shaffer, a Harvard Medical School gambling-addictions expert, said that at just 1 percent of the adult population, pathological gamblers “will seemingly be invisible to the general population.
“However,” he said, “when they strike, just like an F-5 tornado, the swath they cut can be quite wide and costly.”
Addicted gamblers, the commission's researchers concluded, cost society about $5 billion a year — far less than other social problems, such as drug abuse, which has a $110 billion price tag.
But a state-by-state survey by The National Council on Problem Gambling shows money spent on research, treatment and prevention lags far behind the revenue that gambling generates. In 1998, less than $20 million was spent nationwide on problem-gambling programs.
Nevada alone saw gambling revenue of almost $8 billion in 1997. But last year, just $345,000 was allocated for problem gamblers.
The need for more problem-gambling research and treatment is one of the areas on which the commission strongly agrees.
The commission, which has its final meetings Wednesday and Thursday in San Francisco, will recommend that state and tribal governments set aside a portion of their proceeds to research and prevent addiction and to subsidize treatment costs for gambling addicts and their families.
The commissioners also will urge all gambling operations — from lottery-ticket vendors to big resort casinos — to post warnings about gambling's risks and odds, and to remove cash-dispensing machines from areas where people gamble.
Gambling's growth
Legal gambling long has been part of the American landscape. Colonial lotteries, for instance, paved roads and constructed buildings at Harvard and Yale.
But its modern resurgence began in 1963, when New Hampshire decided to start a lottery.
“People thought, "How can gambling be bad or evil or a sin when government is involved in running it?'” said Frank Fahrenkopf, who heads the casino industry's American Gaming Association and is the industry's most visible Washington lobbyist.
In 1976, New Jersey officials opened the door to casinos in Atlantic City.
And by the late 1980s, more states — struggling with shrinking federal assistance and a rising anti-tax sentiment — began to eye gambling as an option.
At the same time, corporate involvement in Nevada and Atlantic City, N.J., casinos burnished gambling with a mainstream image.
“Gambling was sort of an easy one, once you got over the hurdle that it wasn't all mobbed up and wouldn't run into significant moral opposition from the voters,” said William Eadington, a professor and gambling expert at the University of Nevada in Reno.
The floodgates opened soon after 1988, when Congress passed legislation that paved the way for casinos on reservations as an economic tool for impoverished Indians. And when the early 1990s recession hit, Rust Belt communities in the Midwest were ready to take a gamble on riverboat casinos.
Once there, it sticks
Once gambling takes hold, few communities back its repeal.
In South Dakota, for instance, when the state Supreme Court deemed video lottery machines unconstitutional, the Legislature and voters moved with lightning speed. In just four months they voted to keep the machines and the $90 million they contribute each year to the state treasury.
And just last year, voters in Missouri changed the definition of rivers to include “artificial spaces that contain water and that are within 1,000” feet of a river to maintain casinos in man-made ponds along the Missouri and Mississippi rivers.
In East St. Louis, struggling to lift itself out of bankruptcy, life would be “very difficult” without the tax revenue from the Casino Queen, said Mayor Powell.
Casino taxes have boosted the city's annual budget from $9 million to $19 million. The riverboat now ranks as the second-largest employer behind the hospital. With improvements in basic city services, East St. Louis has begun to lure commercial development.
Koman Properties, a private development company, soon will complete a $10 million shopping mall in the heart of the city, with the Walgreens pharmacy, supermarket and video store.
The mall is modest, but it represents the first major retail development in the city since the early 1950s, said company president James Koman, whose family owns a 20-percent interest in the Casino Queen.
Mr. Koman scoffed at the federal commission's suggestion that communities consider a moratorium on new gambling operations to allow for more study.
“Let's not kid ourselves about gambling,” he said. “Whether I have a casino or not, there's gambling going on. People like to be entertained, and it's a form of entertainment.”
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