Environmentalists for Casinos?

Maybe the solution to the controversy surrounding the possibility of a new casino near the Columbia Riverbottom conservation area is as simple as lifting the restrictions on where casinos can be built.  What if Missouri changed its gaming laws so that casinos didn’t need to be located on or near a river?  Such a change might benefit lots of Missourians.

First, consider the environmentalists.  Many people are concerned about bringing any kind of industry (casino or otherwise) into nature preservation areas.  Some contend that the Harrah’s and Ameristar Casinos are already eyesores in the midst of otherwise pristine nature areas.  A casino near the Great Confluence wildlife area would surely garner the ire of environmentalists.  Some environmentalist groups have been reported to be gearing up for a fight at this location near the Chain of Rocks bridge.  Maybe they should aim their weapons not at casinos, but at legislature that requires casinos to build on waterfront property.

If casinos didn’t have to build on the river, I wonder if they would choose to build elsewhere.  With so many factories recently closed down, I suspect real estate might be cheaper at a closed factory than along a riverfront.  Plus, if a casino had the freedom to locate anywhere, maybe they would choose to locate somewhere that’s not so close to another casino (e.g. Pinnacle’s Lumiere Place and President Casino).

Why do casinos in Missouri need to be on a river anyway?  Originally, they had to be on riverboats that traveled up and down the rifer.  I presume this restriction was a way to limit the total number of casinos or as a way for casino operators to float between jurisdictions of neighboring states.  But then they were allowed to be docked, so long as they floated (like the President Casino or the Alton Belle).  Then, they just had to be located within a prescribed proximity to a river, so long as the casino’s gaming floor still floated on water.  (Many casino patrons might be surprised to learn that the seat at their slot machine is actually sitting on top of what essentially amounts to an overgrown swimming pool.)

Have these water-based restrictions outlived their usefulness?  Maybe it’s time to revisit this limitation.  The number of casinos is already strictly controlled by law, so releasing the water restriction won’t result in a proliferation of casinos.  Zoning laws and city planners can keep casinos out of residential areas the same way they keep out factories and other industrial businesses.  Owners of empty factories could enjoy revenue from sale or lease of their vacant property.  Environmentalists would have an alternative to offer in stead of sacrificing natural resources.  And casinos could enjoy the freedom to choose location based on business reasons, rather than geologic factors.

Of course, we all know that change does not come without great effort.  Sure, the casino industry is strong (they managed to lift the $500 loss limit last year and garner an exception from the smoking ban this year, right?) but if environmental groups like the Audubon Society and the Sierra Club along with local groups like Missouri Coalition for the Environment and the residents of Spanish Lake who oppose the new proposed casino all joined with St Louis gaming industry – maybe all together they could enact legal change that would make everyone happy.

Reports: Casinos can be Good for Local Property Values, Businesses

Maybe casinos aren’t as bad as some people seem to think. Two reports published within the past few years have documented that casinos actually have a positive impact on property values and businesses. (Both studies cited below with links to the original reports.)

In one study, Casino Revenues and Retail Property Values: The Detroit Case, by Douglas Walker, a professor of economics at Charleston College in South Carolina, data indicates that casinos increase commercial property values within a 5-mile radius. The report says that casinos have the ability to draw in additional consumers who will then patronize restaurants, stores and other businesses in the area. True, today’s casinos often have their own shopping and dining on site, but this report seems to imply that casinos offer a kind of halo effect that spreads to businesses not located on the casino’s property. An interesting approach on “share the wealth.”

The other report I came across The Impact of Casino Gambling on Housing Markets: A Hedonic Approach by Michael Wenz from the Department of Economics at Northeastern Illinois University focused on the impact of casinos on residential property values. This study found a correlation between casinos and a subsequent increase of about 2% in local property values. The paper also notes that the increase in property values depends on the population density of the area, with less dense areas realizing an increase while more densely populated areas (i.e. downtown urban areas) actually see a decrease in property values.

These reports shed an interesting perspective on two controversial casino issues in St. Louis: The President Casino in downtown St. Louis and the proposed casino in the Spanish Lake area. The President Casino, which may be in danger of losing its license, is located in an urban area. One might argue that a casino would be better for the Missouri economy if it were located in a less densely populated area, such as Spanish Lake, a possible location where the population density is about half that of St. Louis (2900 people per sq mi versus 5800 people per sq mi). It provides a possible rationalization to relocate the President Casino up-river (or maybe just its license). Still the residents of the North County area may take little solace in the knowledge that local businesses may prosper and local housing markets may improve if a casino is built in their area, regardless of who builds and operates it.

So NIMBY notwithstanding, maybe a casino is a good thing for the Missouri economy, depending on where it is.

Sources:
Casino Revenues and Retail Property Values: The Detroit Case
Douglas Walker
http://www.springerlink.com/content/k7034476xhk32628/

The Impact of Casino Gambling on Housing Markets: A Hedonic Approach
Michael Wenz
http://ideas.repec.org/a/buc/jgbeco/v1y2007i2p101-120.html

Population Density of Spanish Lake, Missouri: 2,900.4/sq mi
(According to http://en.wikipedia.org/wiki/Spanish_Lake,_Missouri)

Population Density of St. Louis, Missouri: 5724.7/sq mi
(According to http://en.wikipedia.org/wiki/St._Louis,_Missouri)

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St Louis Casino Revenue: a bust for IL but a win for MO – possible reason?

The Missouri Gaming Commission,  and the Illinois Gaming Board reported today that combined casino revenues in the St Louis area were up about 10% in October versus October last year.  But that’s not the whole story. In Missouri, Ameristar was up 7% Harrah’s was up 9% and Lumiere was up 41%, while the Illinois casinos Argosy and Casino Queen were down 8% and 3% respectively. (To be fair, the President Casino in MO was also down 9%.) The point still, however, is that the Midwest casinos are still doing well in this economy relative to their neighbors across the Mississippi River.

I still think the disparity has to do with the lifting of the $500 per 2 hours loss limit in MO and the smoking ban in IL. As noted previously, independent studies have shown that the IL smoking ban had a significant impact on all casinos in IL, relative to nearby casinos in neighboring states without smoking bans.  Further underscoring this fact, The Indiana Gaming Commission reported that revenue rose 4.3 percent to $234.3 million compared to the same month last year.  With the recent passage of the smoking ban in St. Louis, and the fact that it excludes casinos, it looks like Misourri and Indiana casinos are going to continue enjoying this competitive advantage.

Still, competitive issues aside, it’s reassuring to see that the gaming industry is picking up even in the current economy. Dennis M. Farrell Jr., a gaming analyst for Wells Fargo Securities, said revenue growth reflected not only stronger demand for gambling, but also better economic conditions in the Midwest compared to other parts of the country. It certainly bodes well for Pinacle’s new casino slated to open in April 2010, and for a new casino in North County (if it should ever come to pass; but that’s another story).

Increased casino revenues may bode well for the rest of the economy too.  Farrell also reported that unemployment in both Indiana and Missouri is slightly lower than the national average and Missouri’s foreclosure rate is below the U.S. level.

Smoking Ban Responsible for Lost Casino Revenue in Oregon too

Smoking claims another casualty:  Casino Revenues in Oregon.  Apparently, smoking bans are bad for casino busiess, and there’s ample evidence to prove it.  Today, OregonLive.com reported that Oregon’s gambling revenues dropped 15.2 percent, just beating out second-place Illinois.  This data, published by the Nelson A. Rockefeller Institute of Government, follows suit with the findings from the report published by the St. Louis Federal Reserve Bank back in June 2009.   Yet another piece of evidence that smoking bans are unhealthy for casinos.

I’d like to suggest the same remedy to Oregon that I proposed previously to Illinois:  Smoking licenses.  What if State governments sold “Smoking Licenses,” similar to the way towns sell liquor licenses?  Would casinos would gladly pay for a smoking license, assuming the cost is less than the 15-20% they’re losing now.  That kind of exemption could help casinos recover their lost revenue.  If so, then the state would also get money – first from the licenses, then from the increased taxes on the casino’s revenue.

When the house loses, we all lose.  Decreased revenues in casinos mean decreased tax revenues.  And since gaming revenue taxes are often directed to schools, could the smoking ban be hurting our educational system too?

Is Pinnacle Being Treated Unfairly?

Two recent news stories make me wonder.

The Lumiere Place and President Casinos, owned by Pinnacle Entertainment Inc

First, Pinnacle’s case regarding the President casino has been delayed.  The St. Louis Business Journal reported that Missouri gaming regulators were supposed to discuss the issue at their recent meeting, according to the meeting’s agenda.  But then the commission’s Executive Director announced that no action would be taken at the meeting regarding this issue.  I would think that delaying any decision, either favorable or unfavorable, would hurt Pinnacle’s chances of retaining their license.  Why wouldn’t the commission discuss it, if it was on the agenda?

Second, Pinnacle was recently fined $60,000 for allowing 2 underage gamblers inside their Lumiere Place casino.  In and of itself, that’s not a concern.  Pinnacle was responsible for allowing underage gamblers into their facility and they deserve a fine.  The part I question is the amount.  The Gaming Commission staff recommended a $25,000 fine, but the commissioners upped it to $60,000.  Again, if the commission wants to be especially tough on underage gambling, then so be it.  But why did the commission fine Pinnacle $60,000 for 2 underage gamblers, but fined another St Louis casino (Ameristar) only $25,000 for one underage gambler?  (Note: the staff recommended fine for this instance was only $10,000 but the commissioners decided to increase the fine to $25,000.)  If the fine for allowing an underage gambler is $25,000, why is the fine for 2 underage gamblers not $50,000?

I wonder what effect, if any, Pinnacle’s suit against the Gaming Commission may have.  Pinnacle filed a suit in Kansas City to appeal the commission’s decision to make the President casino’s operators apply for a new gaming license.  Could it be that the commission doesn’t want to take any more action towards resolving the issue with Pinnacle until the suit is settled?  Are there any other rules or regulations or circumstances that explain these actions?  Is it all just a series of unfortunate circumstances?

Who will get the 13th Gaming License in MO?

Let’s assume, for the moment, that the President Casino/Admiral Riverboat is not going to pass inspection in June 2010 and their license will be up for grabs.  Who would bid on it?

I wouldn’t be surprised if Pinnacle (who currently holds the license) didn’t bid.  They already have 2 casinos in the St. Louis market.  Would they want the expense of building and promoting a 3^rd in the same area?  Admittedly, it would give them a casino in SW, NE and center of STL (assuming they stuck with their plans to locate it near the Chain of Rocks bridge.  But would having a 3^rd casino get them enough market share from the rest of the casinos to make it worthwhile?

I wonder if the owners of the Casino Queen or Penn National (Argosy) would be more likely bidders.  Depending on where they place it, the new MO casino wouldn’t necessarily cannibalize existing business.  A MO-based casino also offers these two companies a facility where gamblers can smoke.  (And as we’ve seen, smoking can have a big impact on casino revenues.)

Any other guesses?

How is a Wind Farm (or Solar Plant) like a Casino?

Answer: they both suffer from NIMBY.  (Not In My Back Yard.)  We all want the benefits.   Greener, cheaper energy from wind and solar power.  Cheaper taxes and new jobs thanks to casins.  But so many people are unwilling to host the facilities that provide these benefits.  Whether it’s for aesthetics or morals, the outcome is the same: NIMBY.

How much money would these machines raise?  How much of a tax increase would it take to make it up if the town blocked it?  Would people rather pay X% more in taxes just to keep video poker out of bars?  Does IL need to share more of the revenue with the town?  Now they share only 5%, state of IL gets 25%.  If IL increased municipality’s share, would they be more agreeable?

In the case of green energy, what is the financial impact a green energy plan could have?  How much could it reduce electric rates?  Are people willing to pay that amount for the sake of aesthetics?  And what alternatives do we have?

Smoking Licenses: Can IL Casinos Buy Back into the Game?

Apparently smoking kills more than healthy lungs – it kills healthy casinos.  A recent report by the Federal Reserve Bank of St Louis suggests that the casinos in IL lost about 20% of their revenue as soon as the state-wide ban on smoking went into effect.  The study did a good job of showing that it’s not just the economy.  They showed that casinos just across IL borders (in Iowa, Indiana and Missouri) all suffered much smaller losses, around 2%, during the down economy.  So this time, maybe it’s not the economy, stupid.  Maybe it’s smoking.

So the smoking ban is a triple whammy: it causes casinos lose revenue, which means that the state loses revenue (in the form of taxes) and then the economy loses too because the casino isn’t hiring/employing as many people.

But maybe there’s a way out for everyone.  What if the state of IL sold “Smoking Licenses,” similar to the way towns sell liquor licenses?  Would casinos would gladly pay for a smoking license, assuming the cost is less than the 20% they’re losing now.  That kind of exemption could help IL casinos recover their lost revenue.  If so, then the state would also get money – first from the licenses, then from the increased taxes on the casino’s revenue.

Fed Reserve Weighs in on Smoking and Casinos

The study published by the St. Louis Federal Reserve about Casino Revenue and the Illinois Smoking Ban is much more comprehensive than I thought.  (Here’s a link to the original report: http://bit.ly/njAWr)  I think it’s wise that they compared casino revenues from IL to casino revenues from neighboring states (MO, IA and IN).  And based on what I read, it looks to me like other states didn’t get hit as hard by the economy.  IL seems to have taken the hardest hit.  Maybe it’s not just the economy and the smoking ban had more of an impact than originally anticipated.

I do wish that the report had examined 2 more things: the impact of the new Lumiere casino and the impact of Missouri lifting the $500 loss limit.  The report seems to indicate that the President Casino (located a few hundred yards away from the Lumiere) suffered huge losses when Lumiere opened.  Could Lumiere also have impacted the losses of the 2 IL casinos that are nearby?  If so, how much did those losses contribute to the overall loss of IL revenue?  Similarly, how much of the 2009 revenue for Missouri casinos was impacted by the lifting of the $500 loss limit?  The fact that the reports uses other states’ data helps mitigate these questions, but it would have been nice to see these specific issues called out.

Now that we have this information, what can be done with it?  Maybe this report will be a large piece in the fight against the smoking ban in MO.  Could it be used to lift the smoking ban in IL, even if only for casinos?  What if casinos and anti-smoking lobbies compromised?  Remember when restaurants offered smoking and non-smoking sections?  Can casinos do something similar?  Could states that allow gambling offer an additional “smoking license” to help increase revenue and offset the healthcare costs the state has to pay for healthcare for smokers?

I also wonder if casinos can use their customer data to link smoking to revenues.  If casinos ask club-card members whether or not they smoke, that might help them produce some real data on the average gambling frequency and spending habits of smokers versus non-smokers.  Maybe they’d find something useful in that data.  What if it turned out (for the sake of discussion) that slot players smoke, but table game players don’t?  The casino could adjust its layout to provide non-smoking areas for table games, making both groups happier.  Or is it better not to know?