As messed-up as things have been in South Carolina lately (see here: http://www.wistv.com/Global/story.asp?S=11398030), I’m going to avoid the easy target and meander to a discussion of importance in my home state of Ohio.
Tuesday is Election Day in Ohio. One of the big issues up for referendum this year is Issue 3, which would allow four gaming casinos in the four largest cities in the state: Cleveland, Columbus, Cincinnati, and Toledo. For sure, all of these cities have been economically hard-hit in the past several decades, with decreases in population (except for the ever-annexing Columbus), continuing decline of central cities, and an exodus of young, educated workers like Yours Truly. Issue 3 is proposed as a means of recapturing “lost” revenue to existing legal gaming operations in the neighboring states of Michigan, Indiana, Pennsylvania, and West Virginia. Let’s take a decidedly objective and rational look at this issue, and what it means for Ohio.
What Issue 3 will do: This issue made it onto the ballot thanks to two entities: Penn National Gaming, based in Wyomissing, Pennsylvania, and Dan Gilbert, chief bullgoose looney of Michigan-based Rock Financial and Quicken Loans and owner of the Cleveland Cavaliers. Mr. Gilbert resides in Michigan with his family. These two parties convinced the General Assembly to allow a casino question to be put to referendum. Penn National would own the casinos in Columbus and Toledo. Mr. Gilbert would own the casinos in Cleveland and Cincinnati.
Proponents of the issue argue that Ohioans gamble in other states anyway, and thus, neighboring states are getting money that should stay in Ohio, what with its faltering economy, high unemployment, and continued brain drain. They argue that there will be new jobs created, and because the casinos will be located in urban areas, there will be “spinoff” development, creating “entertainment districts” that will serve as economic engines. Casino revenues would be taxed by the State of Ohio and distributed to the 88 counties. Sounds pretty good, right?
Wrong. Completely fucking wrong. Allow me to reiterate, using unemotional numerical bullet points:
1. Proponents who argue that there should be a “free market” for gaming (i.e. legalized gaming in Ohio, in competition with other states) are misunderstood. This is NOT a free market proposition. This is a proposal intended to boost earnings for two pre-designated entities. A free market solution would have opened the owner selection process to competition, as Michigan did in the late 1990s.
2. Ohio would charge a $50 million licensing fee per casino. This is ridiculous. Illinois is subjecting a new casino to a fee of $400 million. Massachusetts is entertaining fees of $250 million for two new casinos. By comparison, Ohio’s seven horse-racing tracks will have to pay $65 million each to install slot machines, i.e. no table gaming.
3. Ohio would tax gross revenues of the casinos at 33%. This is less than casinos are taxed in Nevada, Atlantic City, Detroit, and Pennsylvania. The casino in Pittsburgh is taxed at 55%. The rest goes to the IRS, and into the pockets of Penn National and Dan Gilbert.
4. The money would NOT stay in Ohio. First, the four casinos would be located in the four largest cities, with metropolitan populations of (my estimate) 6 million+ people. The money would be distributed to all 88 counties. For example, Cuyahoga County, where Cleveland is located, is the state’s largest county by population. It would receive an estimated $29.5 million per year IF casino revenues meet projections. That’s a whopping 23 bucks for each resident of Cuyahoga County.
5. Which brings to question the revenue projections. Greektown Casino in Detroit is in bankruptcy. Gambling revenues are down all over the country. What makes anyone think that revenues will fall in line with the rosy forecasts? Any idiot knows that this is not an economically optimum time to start taxing people who are bad at math.
6. People have finite incomes. Every dollar they lose in a casino is one dollar less they are not spending at a locally-owned restaurant, theatre, club, museum, gallery, or store–ALL of which are already hurting thanks to the economy.
7. Casinos do NOT create spinoff development. Casinos are designed to be self-contained entertainment venues, where one does not need to leave the building. Ever wonder why casinos in Vegas have hotels, restaurants, clubs, theatres, and stores enclosed in the same building as the casino? They don’t want you to leave to spend your money elsewhere, for the same reason there are no clocks and no windows in casinos. Very little, if any, of the much-ballyhooed-and-hyped spinoff development has occurred in the ten years that Detroit has had legalized gaming.
8. The money would NOT stay in the State of Ohio, regardless. As I stated, Penn National is headquarted in Pennsylvania and Dan Gilbert resides in Michigan. These two entities pay income taxes to their home states. The money would go out of state, anyway. Besides, there is not one single company based in Ohio that is qualified to operate a casino. Harrah’s, Trump, Caesar’s, and the like are all headquartered out-of-state.
9. I have read economic studies that show that every dollar spent at a locally-owned business cycles through the local economy seven times. This is known as a multiplier effect. You go to a concert. The band takes its earnings and gets a bite to eat. The chef buys his produce from a local farmer. The farmer repays his loan to the local bank. The local bank extends a loan to an entrepreneur to start a business, and so on. Issue 3 takes your dollar, lops 33% off the top, redistributes that 33% to 87 other counties, and the rest gets shuttled off to Michigan of Pennsylvania. Multiplier: 1, which is far less than 7.
10. The jobs issue. The Ohio casinos are proposed to create 15,800 jobs, or about 0.2% of the state’s workforce. This is hardly an incredible change. Furthermore, three-quarters of these jobs would pay less than $28,000 per year. The average income for each job would be $26,500, or two-thirds of the state’s median income. This is progress? These jobs are supposed to replace jobs lost when Office Max and BP merged and relocated corporate headquarters to Chicago? Dealing blackjack is supposed to replace a good-paying job on the floor of a steel mill or factory, where actual goods of value are produced? These jobs would all be in large cities, to boot. This does nothing to create jobs in the perennially hard-hit Applachian part of the state.
I think I’ve made it clear that passage of Issue 3 would do a lot to enrich Dan Gilbert and Penn National, and not a whole lot for Ohioans. This is a bad deal, top-to-bottom. What Ohio really needs is a boost in its educational and income levels, something only attained by (first) retaining and (then) attracting young people with college degrees. And I don’t know about you, but a lot of these people can be found in places like New York, Boston, DC, Chicago, and San Francisco–none of which have casino gaming, yet have very educated, very well-paid populaces.
Maybe Ohio is in the position it’s in because they keep making bad decisions like this that, on the surface, might sound terrific, but require some easy brainwork to think through to the end. Of course, if there were any people with half a fucking brain left in Ohio, Issue 3 wouldn’t have made it onto the ballot in the first place. Laissez les bon temps roulez.


