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Published: Sunday, 11/15/2009

Jackpot for Ohio gambling in doubt

In Las Vegas, house prices have dropped 55 percent since peaking in August, 2006, and the foreclosure rate is seven times the national average. Gigantic new condo towers sit nearly empty — real-estate pros call them “see-through buildings” — and unemployment tops 13 percent. The recession has sent casino revenues plunging 20 percent from two years ago.

“Up until the '90s, we never suffered with the downturn of the economy,” William Thompson, a professor at the University of Nevada-Las Vegas and an expert on the casino business, told me.

The plight of “Sin City” is a morality tale for other municipalities seeking economic salvation through gambling. It is against this dark vision that Ohio voters just approved for their state.

Mr. Thompson thinks that the money again will roll into Las Vegas as the economy improves. But the prospects are not as bright for nonresort cities without a large tourism infrastructure — and never were.

“Half the gamblers have to be from outside the state for it to work” as economic development, he says. The only people who will definitely make money are the casino operators.

Ohio's decision to put casinos in Columbus, Toledo, Cincinnati, and Cleveland is largely a response to the gaming palaces in Michigan to the north, Indiana to the west, and Pennsylvania to the east. Kentucky to the south doesn't have casinos.

Mr. Thompson predicts that about 10 percent of Ohio's casino revenues will reflect gamblers returning home from the neighboring states. But casinos near population centers will mint new gamblers, and that will be a drain on the economy.

Compulsive gamblers steal, lose jobs, have debts, and go on welfare. The economic rule of thumb on problem gamblers is this: A casino within 50 miles of a community doubles the rate of compulsive gambling, and they exact a social cost of about $10,000 each.

About 90 percent of Ohioans soon will be within 50 miles of a casino.

If Ohio follows the pattern, the four gaming halls will create 80,000 more compulsive gamblers to siphon about $800 million a year from the economy. For gambling to become an economic engine, money has to come in from elsewhere. In Las Vegas, tourists account for nearly 90 percent of the gamblers. The visitors come for the entertainment, shopping, and mild winter, as well as for the games.

Oddly, casino expansion in other states can help Nevada's economy. The slot machines, for example, are made in Reno and Las Vegas. Ohio casinos probably will buy 20,000 slot machines at $15,000 each. That's $300 million for Nevada.

After riverboat casinos opened in Joliet, Ill., businesses were asked how they were affected. Half said they lost revenues. Only two gained, and one was a travel agency that was booking many more trips to Las Vegas. The other business bought used cars for cash.

Mr. Thompson predicts that as Ohio builds its gambling establishments, those in neighboring states may improve customer service and up the payout rate on their slot machines.

In all, the odds of casinos in wannabe “sin cities” filling state budget holes are not great. The desperation in recession-ridden states is understandable, but the reality is this: If large numbers of high rollers aren't jetting in, casinos tend to take more from local economies than they give.

Froma Harrop's column is distributed by Creators Syndicate.



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