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Zapp: Casino economics don’t add up for Savannah

Representative Ron Stephens, R-Savannah, and others introduced a bill in the state legislature which, if passed, could lead to a state approved gambling casino in Savannah. The bill was pulled from consideration before Crossover Day, but sponsors plan to bring it back next session.

The bill calls for a state referendum to amend the state constitution to allow such gambling and specifies one facility in the Atlanta region and one more in either Savannah, Columbus or Augusta. It’s a perennial topic that’s becoming more realistic every year.

Wording in the bill would require that the Atlanta facility have an investment of at least $2 billion and the second one $450 million. The state would tax the casino at 20 percent, near the 24 percent level Gov. Nathan Dean had previously recommended. The proceeds would fund college scholarships: 70 percent towards the Hope Scholarship fund and the rest for a new needs-based scholarship.

As chair of the Economic Impact Committee of the Downtown Neighborhood Association, I was asked prepare a recommendation on a proposed gambling casino in Savannah for the DNA Board.

Our committee offered two considerations, one social and the other economic.

Social analysis: Our members find the business of gambling casinos not morally acceptable. One of our members described his visit to a casino as the most depressing experience of his life. The negative social consequences are substantial. People with few if any hopes of improvement risk their limited resources in games of chance in which the outcomes are stacked against them. Gambling addiction leads to child and spousal abuse, suicide, bankruptcy, and divorce. One study added fraud, theft, bad loans, bad checks, lost work time, unemployment and welfare benefits, medical costs, criminal justice costs, car accidents and health problems. As another member said, if the Hope Scholarship needs greater public support, it should be funded directly and honestly.

Economic analysis: The economic consequences of casino development are difficult to generalize as their results seem to differ widely across locations. Biloxi, Mississippi, a city with one third our population, has benefited from the new jobs generated by the nine casinos which opened there since the state legalized the industry. However, recently the total revenue from gambling there has dropped 7.5 percent and one casino closed in 2014. Atlantic City, N.J., on the other hand has seen four casinos close recently and is now economically divided between the glitzy boardwalk and the poverty ravaged rest of the city. Article in The Atlantic reported “Despite its gambling industry, Atlantic City still has trouble sustaining even a single grocery store.”

The National Association of Realtors found “the impact of casinos on neighboring property values is unambiguously negative.” This is because they are designed to be all absorbing environments and do not release their customers until they have spent all their money.

Another study found that casual gamblers supply only about 4 percent of casino revenue while 40 percent to 60 percent comes from problem gamblers. Half of all casino visitors are over 50 years old and much casino marketing seems to focus on people over 70, even 80 years of age.

Economists emphasize that gambling does not create economic activity; instead it transfers it from one activity to another. If all customers at a casino are local residents, there is no economic growth. Every dollar spent in a new casino is taken away from existing economic activity.

Economic analysis therefore offers three considerations: 1) casino gambling brings economic benefits only to the extent that the customers come from outside the economic region; 2) these benefits are reduced or lost if their spending in the casino takes spending away from existing tourist facilities; and 3) in order for gambling to benefit a community, the local government must be compensated for all costs including infrastructure, police, negative social impacts, and the loss of existing spending.

As these conditions are not likely to be met in Savannah, it seems clear for a casino to provide economic benefits in Georgia it should be located in another location in our state which does not already attract more than 13 million visitors annually.


Kenneth Zapp Ph.D, is professor emeritus at Metropolitan State University and a mentor for SCORE Savannah.