What Are You Betting On?
Here we go again. Another election, another ballot initiative on casino gambling. While I wasn’t alive during prohibition, this has to be what the final years of that experiment felt like. The whole country was drinking, everyone knew it, and the lawmakers finally had to admit that it’s next to impossible to legislate morality. Maybe if they had some other angle, or some sort of Al Gore-esque, feature-length documentary on the evils of alcohol, perhaps the 18th Amendment to the Constitution would have had a chance. Or, maybe not.
This time, it’s Issue 3, a proposed change that will allow the construction of four casino properties in Cleveland, Columbus, Cincinnati and Toledo. Similar to how the last few attempts were worded, this change would essentially grant limited monopolies to private investors to operate the casinos. Unlike previous attempts, there is a lot more language defining the tax structure and placing such things as minimums on the amounts each owner must invest in construction.
If you haven’t had the chance to review the bill yourself, here’s the rundown. The exact location of each facility is already determined (with the exception of Cleveland, which still has to pick a final site) and the owners are required to spend at least $250 million each on the construction. After that, each owner would pay an upfront license fee of $50 million and then kick in an estimated $470 to $643 million a year from the 33% tax rate on gross casino revenues.
The reason for such a wide range for the estimated tax revenue is due to an impressive list of variables that the reviewing agency (the Ohio Department of Taxation) could not account for. First and foremost is the uncertainty as to what the possible addition of slot machines at Ohio’s racetracks will do to the overall business model. After that, it becomes more complicated, as it gets into a statistical analysis of where people live, how far they’re going to drive, and how much they’re willing to lose.
Although there are quite a bit of variables to consider and no guarantees, there are a few certainties. First and foremost, Ohioans gamble, they always have, and they apparently always will. Second, having casinos within the state boundaries will recapture some of that money. Third, regardless of the final number, voting yes on Issue 3 will indeed bring thousands of new jobs to the state.
However, with that said, I still have more than a few reservations. First of all, there is the question as to how fast and how well the state of Ohio can build the Casino Control Commission that’s called for in the bill. The startup will take an estimated $5 million outlay from the state and $14 million a year to run. Yes, those costs are accounted for in the predetermined split of tax revenue, but when was the last time that the government did anything at or below the initial cost estimate?
Another concern is whether or not the estimated $10 million a year allocated for police is enough to stem the tide of any increase in criminal activity. Then, there are the questions regarding secondary business opportunities. While we’ve been flooded with research on jobs and taxes, where are the studies that show whether or not this proposal will be good for the neighborhoods closest to the action? What happens to bar traffic when the casinos can stay open 24 hours a day?
There are a lot of unanswered questions regarding this legislation, but there’s only one real issue: Do you believe that casinos in Ohio will do more damage than good? Once again, this is not a referendum about gambling. We already have horseracing, lotto, charity poker, and church bingo, so this isn’t about opening Pandora’s box, it’s about whether or not to open the floodgates and try to harness whatever benefits can be found.
Personally, I like casinos and I think they are fun destinations. But, as I think I’ve made painfully clear, I’m not very trusting of the state and local governments, so my level of suspicion makes a yes vote on Issue 3 a hard call to make. After all, opening the casinos is the easy part; regulating the casinos is what will either make or break this as a successful enterprise for Ohio.