[Congressional Record Volume 141, Number 171 (Wednesday, November 1, 1995)]
[Senate]
[Pages S16512-S16513]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              CASINOS NOT SURE BET, OTHER STATES DISCOVER

 Mr. LUGAR. Mr. President, I ask unanimous consent that the 
attached article be printed in the Record.
  The article follows:

                [From the Washington Post, Aug. 6, 1995]

   Casinos Not a Sure Bet, Other States Discover--Analysts Say Area 
      Officials Could Learn From Successes and Failures Elsewhere

                         (By Charles Babington)

       Anchored on the Mississippi River near downtown New Orleans 
     are two massive, double-decker casino boats with the 
     evocative names Crescent City Queen and Grand Palais.
       There's nothing grand about them now, however. Both boats 
     closed their doors last month, barely nine weeks after 
     opening amid much hoopla and hope. The closings, forced by 
     lower-than-expected revenue, left 1,800 people jobless and 
     the City of New Orleans jockeying with other creditors to 
     collect $3 million in unpaid taxes and fees.
       The turn of events has been sobering--even on Bourbon 
     Street--and may give pause to officials in Maryland, 
     Virginia, the District and elsewhere who are contemplating 
     legalizing casinos. Although some southern and midwestern 
     towns are content with their riverboat revenue, others are 
     finding that the reality does not always match the promise.
       That's especially true in New Orleans, a city that bears 
     watching by the likes of Baltimore and Washington, according 
     to several analysts. Aside from the loss of the two riverboat 
     casinos, New Orleans's ambitious land-based casino has needed 
     only a third of its projected revenue since opening in May.
       The picture is brighter in the Midwest. One reason, 
     however, is that lawmakers quickly 

[[Page S 16513]]

     relaxed regulations that had made casinos politically 
     palatable in the first place. In Davenport, Iowa, a riverboat 
     casino netted $14 million last year after legislators 
     increased its operating hours and dropped a rule that had 
     limited each gambler's loss to $200 a visit.
       Those changes lured thousands of gamblers from a nearby 
     casino boat in Rock Island, Ill. As a result, more than 200 
     people lost jobs there, and Rock Island now receives only a 
     fraction of the $4 million in casino tax revenue that it got 
     two years ago.
       In Missouri, six riverboat casinos poured $79 million into 
     state and local tax coffers last year. Again, looser 
     regulations helped. Slot machines--initially banned in 
     Missouri--were added to the table games.
       A political cloud is looming, however. Missouri's attorney 
     general alleges that the state House speaker broke the law by 
     accepting thousands of dollars from casino companies and 
     trying to influence licensing decisions. A grand jury is 
     investigating.
       Against this national backdrop, Maryland is preparing for a 
     legislative decision on casinos this winter, a D.C. group has 
     asked the elections board to place a casino initiative on the 
     District's 1996 ballot, and an industry-backed coalition is 
     still pushing for riverboat casinos in Virginia after three 
     consecutive legislative setbacks.
       Industry analysis conclude that under the right 
     circumstances, casinos can boost local economies and 
     government coffers, sometimes dramatically. But they say 
     casinos are not a panacea for politicians hoping to 
     revitalize a failing city or finance a state government while 
     cutting taxes.
       ``Although casinos are spreading to more states, they have 
     limited potential as a source of tax revenue,'' said Steven 
     D. Gold, director of the Center for the Study of the States, 
     in Albany, N.Y. Casinos take some money that otherwise would 
     be spent on state lotteries or taxable goods and services, he 
     said. Moreover, the growing number of casinos nationwide will 
     result in smaller potential for new ones.
       ``There will never be another Nevada,'' Gold wrote 
     recently. Nor, experts say, will there be another Atlantic 
     City, where a dozen large casinos attract bus loads of 
     betters to an otherwise blighted town.
       Since 1990, six midwestern and southern states have 
     legalized commercial, non-Indian casinos. (Federally 
     recognized Indian tribes can operate casinos without state 
     approval or tax assessments, and the casinos are highly 
     successful in Connecticut and elsewhere.)
       The six states are the guinea pigs now being scrutinized by 
     cities and states trying to decide whether casinos are a good 
     public bet. Among the groups conducting inquires are a 
     government-appointed task force in Maryland and the Greater 
     Washington Board of Trade. Casino companies are keen on the 
     Washington area because it would help them crack the untapped 
     mid-Atlantic region.
       In Maryland, proposals range from a few small casinos, 
     possibly at horse-racing tracks or in mountain counties, to 
     large betting palaces in downtown Baltimore and the Port-
     America site in Prince George's County, near the Woodrow 
     Wilson Bridge. If Baltimore and the D.C. suburbs are the 
     ultimate targets, several analysis say, then New Orleans 
     might be the most analogous site for scrutiny. Like Baltimore 
     and the District, it is a city with a well established 
     tourist trade but serious problems of crime and middle-class 
     flight.
       In 1991 and 1992, when Louisiana legislators approved 15 
     floating casinos throughout the state and one large land-
     based casino in New Orleans, boosters said gambling would be 
     a sure-fire winner.
       In the last four months, however, three of New Orlean's 
     five floating casinos have closed, eliminating the jobs of 
     hundreds of people who thought the boats would bring them a 
     better life. Meanwhile, Harrah's temporary land-based casino 
     has earned about $12 million a month, far short of the $33 
     million that was projected. The company is building a 
     mammoth, permanent casino that officials hope will draw more 
     gamblers when it opens next summer in the heart of the 
     touristy French Quarter.
       Some critics say the setbacks are the inevitable result of 
     Louisiana's greed and haste in approving casinos, a process 
     that enriched several friends of the high-stakes gambling 
     governor, Edwin Edwards.
       ``It's the same scam going on worldwide'', said New Orleans 
     lawyer C.B. Forgotson, Jr.
       Forgotson said casino companies promise the moon without 
     conducting realistic studies of who will come to gamble. 
     Eventually, he said, ``they find out the only people coming 
     to casinos are locals. So then you are cannibalizing your 
     local businesses. . . . The same thing is going to happen in 
     Detroit and Baltimore.''
       Other analysts, however, say New Orleans is temporarily 
     suffering from foolish decisions that other states can avoid.
       ``The root of the problem is that the wrong people were 
     licensed, and they were licensed for political reasons,'' 
     said Larry Pearson, publisher of the New Orleans-based 
     Riverboat Gaming Report. He noted that river boat casinos in 
     other parts of Louisiana are doing well.
       Only a few states have been willing to try a non-Indian, 
     land-based casino. In Mississippi and the four midwestern 
     states with casinos, the facilities must be on boats, even 
     though some never leave the dock.
       Many analysis say ``riverboat gambling'' is a political 
     ploy to ease the worries of some voters who associate land-
     based casinos with Las Vega's tackiness and Atlantic City's 
     grit. ``State legislators think that a little cruise with a 
     paddle wheel somehow makes it not gambling,'' said Brian 
     Ford, a Philadelphia-based casino adviser for the accounting 
     firm Ernst & Young.
       Some analysts argue that if Washington and Baltimore want 
     casinos, they should build big Vegas-like facilities that 
     could lure tourists and large conventions.
       ``Scattering some riverboats around the Washington-
     Baltimore area would be a disaster,'' said Hunter Barrier, 
     director of the Alexandria-based Gaming and Economic 
     Development Institute. Most tourists would ignore such 
     facilities, he said, ``so revenues will come from local 
     residents. And that money would come from restaurants, 
     theaters and other local businesses.''
       It is just that scenario that has prompted Maryland's 
     restaurant and thoroughbred racing industries to unite 
     against casinos. They say casinos typically support bettors 
     with cheap food and a fast-paced array of slot machines and 
     card game that make horse races seem poky.
       ``Casinos would have a devastating impact on our 
     industry,'' said Marcia Harris, of the Restaurant Association 
     of Maryland.
       Despite opposition to casinos from racing and restaurant 
     interests, politicians in Maryland and elsewhere are tempted 
     for a simple reason. Tax rates on casino earnings are 
     typically about 20 percent, four times the level of 
     Maryland's 5 percent sales tax. If a resident spends $100 in 
     a casino rather than in a clothing store, the store suffers, 
     but the state receives $20 rather than $5.
       Barrier said most governments that are contemplating 
     casinos focus on three concerns: crime, compulsive gambling 
     and ``product substitution,'' or the losses to non-casino 
     businesses when their customers gamble.
       ``I've come to the conclusion that crime is not a 
     problem,'' Barrier said, an opinion supported by several 
     studies and interviews with police officials in towns with 
     riverboat casinos. But problem gambling, he said, is 
     ``something that has to be looked at real carefully.''
       Problem gambling is hard to measure, authorities say, and 
     casino supporters note that most Americans already have ample 
     opportunities to bet on lotteries and other ventures. 
     However, a 1994 study of legalized gambling, funded by the 
     Aspen Institute, a D.C. think tank, and the Ford Foundation, 
     concluded: ``There is a direct increase in the numbers of 
     people with pathological gambling problems as a result of 
     increases in legalization.''
       As for product substitution, a debate rages. Casino 
     supporters say everyone in a community benefits if casinos 
     hire new workers, attract tourist dollars and contribute to 
     higher tax revenue.
       There's not much hard data on the subject. In South Dakota, 
     where Indian casinos operate, a 1991 state study found no 
     appreciable drop in overall taxable retail sales. However, 
     there were ``significant declines for selected activities 
     such as clothing stores, recreation services, business 
     services, auto dealers and service stations.''
       When casinos open, ``existing vendors lose,'' said Jeff 
     Finkle, executive director of the Washington-based National 
     Council of Urban Economic Development. Nonetheless, he 
     predicts that Maryland and Virginia officials will find it 
     hard to withstand the lure of casino revenue, especially if 
     Pennsylvania, West Virginia or Delaware threaten to strike 
     first.
       ``Somebody in this area is going to do it,'' Finkle told a 
     Greater Washington Board of Trade task force last week. ``It 
     is inevitable, and when it happens it will hurt D.C.'' unless 
     a revenue-sharing agreement is reached.

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