March 9, 2003            Casinos a losing bet outside Omaha BY C. DAVID KOTOK
WORLD-HERALD STAFF WRITER

 

Economists differ on whether a casino would benefit Omaha's economy. But the disagreement disappears when they analyze the impact of casinos on other Nebraska communities.

Their conclusion: Casinos in the state's smaller cities would produce low-end facilities with few amenities, and they almost certainly would be drags on the regional economy.

The two Las Vegas-based companies supporting expanded gambling in Nebraska - the Venetian and Coast Casinos - are interested only in Omaha. Officials with both companies said they can't imagine any major casino company wanting to build elsewhere in Nebraska.

The Legislature is debating a constitutional amendment that, pending voter approval, would authorize up to eight casinos, not including Indian casinos. The eight-casino provision was part of a compromise to encourage lawmakers from throughout the state to support the measure. But would Grand Island or North Platte or Scottsbluff benefit from casinos, and what kind of casinos could be financially justified beyond the Omaha area?

Nearly 1.2 million people are within 60 miles of downtown Omaha. They have a combined household income, according to the 2000 Census, of nearly $25 billion. Casino operators and economists project a gambling and hotel facility for the city worth $200 million or more.

The rule of thumb is investors build casinos at a cost equal to the anticipated annual gross revenue. In Council Bluffs, Harrah's gross revenue from gambling losses in 2002 was $110 million; Ameristar took in $138 million.

Because the North Platte and Scottsbluff areas have populations of less than 100,000 within 60 miles, casino officials say, no more than $20 million would be spent building gambling facilities in either community. If a North Platte or Scottsbluff casino could take in $20 million a year, that would be less money than the smallest of 13 Iowa casinos - the Mississippi Belle II at Clinton, which had revenue of $29.5 million last year. If Fonner Park in Grand Island became a "racino" - a facility with both horse racing and slot machines - the projection is that annual gambling revenue would be no more than $50 million, given the population of nearly 235,000 within 60 miles.

Such small-scale gambling operations probably would have to be financed by local groups. Although smaller casinos would be potentially profitable, the returns are too small to interest large or midlevel casino companies, said Harlan Braaten, president and chief operating officer of Coast Casinos.

Andy Abboud, government affairs director for the Venetian, described the casinos that might be built outside Omaha as "big boxes" that would not interest his company.

Economists with varying stances on gambling agreed that casinos outside Omaha make little economic sense.

The social costs, they said, would be much greater if a casino were introduced into a new community as opposed to Omaha, where the negative effects have already occurred from the three Council Bluffs casinos.

Ernie Goss, the Creighton University economist who has projected a positive impact for Omaha from one large casino, said casinos elsewhere in Nebraska make sense only if the objective is to grab some additional tax revenue.

Any Nebraska casino, including one in Omaha, would primarily rely on local gamblers. Goss said nongambling entertainment, particularly theaters and restaurants, would suffer.

All the economists agreed that bare-bones casinos and racinos appeal more to lower income gamblers and thus create more economic stress for families.

John Kindt, a University of Illinois business professor and leading gambling opponent, goes much further. Kindt predicted economic disruption in Omaha from expanded gambling.

"You would just be moving Chernobyl closer to the population center," said Kindt, referring to the meltdown at the former Soviet nuclear power plant.

He said the detrimental effects of casinos go well beyond how people spend their entertainment dollars.

Bank deposits decline, more checks bounce and the number of bad loans goes up. Clothing sales plummet, rent delinquencies mount and even grocery sales shrink as gamblers, having tapped out their entertainment budgets, dip into dollars set aside for necessities.

Doug Walker, a Georgia College and State University economist, said communities should consider the higher crime rates and increased costs of crime that result when gambling is made readily available.

William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno, said the positive effects of casinos can be calculated in two ways.

Some new dollars come into the community from out-of-town visitors, and some dollars stay in the community because local people no longer travel to Las Vegas or other gambling centers.

But casinos with few amenities do little to bring in visitors, and they keep more affluent potential gamblers at home, said Eadington, one of the nation's leading authorities on the economics of gambling.

Given the size of the markets, he said, any non-Omaha casinos would be Spartan. The amenities might amount to "a Burger King and a Dunkin' Donuts."

Kindt said Utah sells itself to Fortune 500 companies as a noncasino state where employers don't have to be concerned about absenteeism and other problems associated with gambling.

In his speeches and writings, he has used another economic model - Omaha.

"I tell people how Omaha closed its track, bulldozed the barns and turned (Ak-Sar-Ben) into a high-tech education and business center. That's positive economic development."

World-Herald staff writer Paul Goodsell contributed to this report.

 

 
Back to Editorials/Articles