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Should Richmond Gamble on a Casino?
January 12, 2003

The first shoe to drop in the future of casino type gambling in Richmond will fall at next Tuesday's City Council meeting. Item P-2 on the January 14, 2003, Richmond City Council Agenda is to "Authorize the City Manager to send a Request for Qualifications (RFQ) to hire a consultant to assist the City in evaluating the economic benefits of an adult entertainment and gaming enterprise."

This vote is pursuant to an inquiry made in September of 2002 by the Scotts Valley Band of Pomo Indians and their representatives regarding possible sites that might be feasible for a casino within the City of Richmond. Since that time, the tribe has submitted a written proposal (November 5, 2002) to purchase Terminal 3, portions of South Harbour Way, Hall Avenue, Marina Way, and the property currently known as Marina Center for the purpose of developing a Las Vegas style casino complex that would include one or more casinos, one or more hotels and several restaurants.

Because City staff does not have the experience or expertise to evaluate this type of project, and if pursued, negotiate an agreement, the ad hoc committee consisting of Councilmembers Bates, Griffin, Penn and alternate Rogers, has recommended hiring a consultant to assist the City. It is thought the cost may be around $100,000.

Although the true economic benefits to Richmond would depend on the details of any deal struck, and even then would be at least partially speculative, the general magnitude has been projected by some advocates as including:

          A destination gaming center with 2,000 gaming machines, bingo and table games.

          Several restaurants.

          A hotel with conference facilities.

          1,800 jobs with an annual payroll of $40 million.

          Generation of $40 - $50 million in goods and services from local vendors.

          Annual rent and in-lieu payments for lost property taxes of several million dollars per year.

I am inclined to believe that hiring a consultant is premature. There are a number of recent comprehensive studies on the subject that provide sufficient background for the City Council to make the initial decision of whether or not to even pursue such the matter further. One such study is: Chadbourne, Christopher; Philip Walker, and Mark Wolfe. Gambling, Economic Development, and Historic Preservation. PAS Report No. 469, Chicago, Il: American Planning Association, 1997). The study can be purchased from http://www.mainst.org/bookstore/specialdeals.htm. The study was commissioned by the American Planning Association with assistance from the National Trust for historic preservation and addressed the following questions:

          What is the net economic impact of gambling on local economies?

          Who are the winners and losers?

          How can potential benefits be maximized?

          How can potential costs to the community be minimized?

The 56-page study provides an exhaustive examination of the pros and cons of gambling to communities. One particular passage that caught my eye in the 10-page "Summaries and Conclusions" chapter, under the heading "Opinions on gambling depend primarily on the perspective of those asked," included the following:

"Public officials generally supported gambling in the first instance. They have a vested interest in its success. Economic development directors and city planners suddenly have money to support long-delayed capital projects, and elected officials can point to direct jobs and their use of revenues to support community projects and/or lower taxes. Those who initially opposed gambling on moral or social grounds continue to do so. Businesses that sell goods and services to the casinos are happy; those that sell goods that are dependent on available discretionary income and are experiencing a reduction in sales are not."

"One group that should carefully consider whether gambling is an effective strategy to boost a community's economic development and improve the quality of life is politicians. A surprising number of mayors have lost reelection in their first campaigns during or after the advent of gambling, including those in Natchez and Vicksburg, Mississippi, Shreveport, Louisiana and Lawrenceburg, Indiana."

Some other wisdom I gleaned from the study includes:

          An entertainment complex, which seems to be favored by some over a stand-alone casino, has downsides. Casino-controlled lodging, eating and entertainment faculties tend to compete against local establishments rather than leveraging benefits to them. A casino's objective is to attract and hold the customer until all discretionary income has been left with the casino.

          Making projections about gambling visitation, revenues, and leveraging capacity is an inexact science, whether done by casinos or consultants.

          If more than half the customers are not external, gambling is a net economic drain on the community.

          General retailing is often displaced, and retail sales can decrease across a broad spectrum of sectors. Businesses that directly serve casinos, however, can prosper markedly.

          The gambling industry clearly creates a significant number of jobs, although generally not enough to measurably affect local unemployment rates. Studies suggest a degree of job shifting as opposed to job creation.

I propose, instead of hiring a consultant, to first conduct a poll, and possibly conduct a special election, to find out if Richmond residents want to pursue casino gambling. A poll of likely voters would cost only about $10,000, and a special election using mail-in ballots would cost about $1.00 per registered voter, or about $40,000. If the electorate wants to pursue casino gambling, and the City Council agrees, we should proceed to cut the best deal possible. If the electorate is against casino gambling, the City Council would continue this pursuit at its own peril.

An article in the November 13, 2002, Oakland tribune about a recent poll has been cited by anti-gambling forces as evidence that residents do not want casino gambling. The poll described in the article, however, was commissioned by was commissioned by Northern California card rooms battling to prevent the 253-member, Sonoma County-based Lytton Band of Pomo Indians from taking over the card room in San Pablo. The card rooms' poll -- surveying 500 likely voters in Contra Costa County from Oct. 13 to 17, with a 4.4 percent margin of error -- found 79 percent oppose Indian casinos on non-Indian lands; 77 percent oppose more casinos in large cities and urban areas; 73 percent oppose more slot machines in California; and 67 percent oppose expanding the types of gambling available in this state. Asked specifically about expanding gambling at Casino San Pablo, 58 percent said they were opposed while 31 percent support it and 11 percent didn't know. That level of opposition is 14 points higher than observed by a similar poll taken early in 2001.

The fact that the poll as commissioned by a biased party and that it included all of Contra Costa County, makes the results suspect. Richmond needs its own poll and/or its own election.

I reviewed another study, Casino Gambling as an Economic Development Strategy (http://www.equotient.net/papers/casino.pdf), by Terance Rephann, Allegany Communtiy College Margaret Dalton, Frostburg State University Anthony Stair, Frostburg State University. It concludes:

"Casino gaming is a popular strategy for local economic development in the United States, and it continues to grow in popularity as states further loosen their restrictions on gaming activities. This study focuses on the regional economic questions surrounding this issue. It confirms much of the conventional wisdom concerning casino gaming development. It is an attractive development strategy for economically lagging counties. It generally stimulates economic growth (as measured by earnings and employment) and development (as measured by per capita income). Moreover, the effects appear to be broadly expansive and to trickle down to the poor. Crime, while increased in some multi-casino counties, is not noticeably affected elsewhere. On the downside, for one reason or another, earnings in the states and local government sector are not measurably stimulated. Moreover, some of the income generated by casinos is dissipated through leakages to those who reside outside the county. Finally, not all counties are poised to benefit equally from casino development. Some casino types and locations are better than others, although these factors are not paramount at this time."

"These results suggests some cautionary advice for communities pursuing a casino economic development strategy. Since casino development may require additional infrastructure and public services, communities must be vigilant in assuring that they capture the benefits of the development in increased local expenditures. Moreover, there should be mechanisms to ensure that local labor is equipped with the skills necessary to fill the new jobs. This may entail training subsidies for local workers or the creation of targeted educational programs in hospitality management. Finally, communities should realize that the casino industry represents somewhat of an economic development gamble. Some regions are better situated for the inevitable next round of competition than others, even if it is not painfully obvious yet. As gaming activity expands and a uniform body of federal statutory law develops, casino communities will find themselves dangerously exposed to outside competition. Therefore, if a community wants to avoid the booms and busts of casino development, it should assess its prospects realistically. As part of this assessment, it should appraise the desirability of a casino within the framework of an overall long-term tourism development strategy."

 A website with substantial information can be found at http://www.casino-gambling-reports.com/.

One thing that makes the current proposal distinctive is that it would involve the sale of City-owned land to the casino developers, including land that has been previously held by many City Council members as being sacrosanct for port use. City-owned land would give the City maximum leverage in structuring the terms of the deal, but would also make the City more of a "partner" than a regulator. It is possible that the Scotts Valley Band of Pomo Indians, or even other tribes, may also consider purchasing a privately-owned site in Richmond, in which case the City's leverage, or even the right to disapprove a casino may be diminished.