Casinos are a rapidly growing form of investment that cities intending to expand their capital base are opting for. The industry is expanding rapidly and forecasts show that this expansion will continue in the near future. This has trigger rapidly increasing debates pertaining to the real benefit of casinos. This paper determines how a casino can actually benefit a city. The paper will look into the economic and social prospects of this objective so as to show that a casino can benefit a city. The method employed will include a keen analysis of past studies, including those conducted in various cities in United States among other countries. The paper has established that a casino can benefit a city by helping to redistribute the available wealth, creating jobs, increasing tax revenue and expanding the tourism industry. The paper has also outlined various downsides linked to casinos, which include promoting crime, revenue displacement and biased economic development. Despite these shortcomings, the benefits associated with a casino outweigh the level of harm. The paper thus concludes that casino benefits rather than harms a city.
A casino describes a certain type of facility that accommodates some forms of gambling activities. Operated under the gaming industry, Casinos are normally integrated with or constructed near hotels, restaurants, shopping malls as well as sailing ships among other tourist attraction locations. A huge variety of casino games are usually played in these facilities where participants gamble on various casino chips with the expectation of winning when certain random outcomes are realized. Some casinos, in addition to the casino games, are also known to host a huge variety of live events, which include concerts, comedies as well as various forms of sporting events. As explained by Hermann (34), most states experiencing high unemployment particularly in United States have legalized casinos as a way of generating income.
Similarly, the American Gaming Association has entitled commercial casino as a type of private-segment establishment that does not only engage players in games of chance but it as well contributes to the national economy by being taxed and controlled by the state wherever it may be situated. Most of such casinos are usually owned as well as operated by individuals, corporations, states as well as municipalities. As such, the casino industry has reportedly played a critical role in enhancing the American economy especially because they tend to be labor extensive thereby supporting millions of individuals that would otherwise be jobless. Despite these achievements, there is a growing debate pertaining to the real benefit of a casino (183). This paper aims to establish how a casino can benefit a city.
A casino can render significant benefits to a city
The casino gambling industry has experienced tremendous growth in different parts of the world in the recent past. For instance, United States has, during the last decade, experienced an annual growth rate estimated at 9% and annual revenues averaged at ten billion dollars. This growth, which tends to be both intensive as well as extensive, has seen the traditional casino gambling expanding in lead and bound thereby evolving into a multifaceted recreational venture. As a result, most native communities have realized that investing in casinos particularly on reservations as well as communally owned land can promote an aspect of economic independence (David 128). On the other hand, number of states that have continued to legalize different types of private casinos has continued to grow. With such growth expected to continue in the near future, analysts are increasingly investigating whether this new form of investment can benefit a city. This follows the thought that most local markets are yet to be saturated, the older generation has increasingly more disposable income, state authorities are looking for additional ways to generate more revenue and the level of competition in the gaming industry is continually spreading (Sallaz 187).
Sufficient evidence indicates that a casino can significantly benefit a city by perpetuating wealth redistribution, which would in return narrow the gap prevailing between the rich and the poor. A study conducted in Minnesota City in United States provides an important reference point pertaining to how a casino can benefit a city in this prospect. According to Hermann (39), Minnesota ranks as the leading gaming center with more than thirteen casinos that help to generate a huge amount of disposable income. Casino gambling in this city tends to be most popular among the older and wealthy people that are usually drawn from within the city. On the other hand, most employees serving in these casinos are mostly drawn from the poor rural regions on the city. As such casino gaming ensures that wealth is evenly redistributed between the wealthy clients and poor individuals serving in the industry (Sallaz 191). This is especially because employees are able to reap a significant amount of income as well as tips from generous clients. Statistical evidence shows that most people working in casinos in this city are on full-time basis where they earn health benefits, wages as well as tips estimated at between five and eight dollars hourly. As a result, this has improved the local economies in the city, enhanced job creation as well as increased rural wages (David 132).
Casinos can further benefit a city by providing an effective strategy for economic development. As established from the study conducted in Minnesota, casinos draw a huge array of their clients from wealthy individuals particularly in middle and upper class society within the casino community. Clients may also be drawn from wealthy individuals outside the casino community, either regionally or internationally and these may as well contribute to a significant amount of state revenue that can be used to develop certain aspects of the city. The rural regions of that city may also benefit from casino establishments by ensuring that poor residents are able to secure decent non-seasonal employment opportunities (Sallaz 195). Such developments can perpetuate a positive economic effect within a city by ensuring that the local authorities are able to secure additional tax revenues, which may in return be employed in addressing various infrastructural and social needs. In most of these respects, casinos in Minnesota have proven to offer greater economic benefits compared to tourism sectors, which tend to offer low paying seasonal jobs as well as enhance environmental pollution (Hermann 45).
However, the picture drawn from the case of Minnesota pertaining to the economic benefits that a casino can render to a city may be too simplistic thereby raising questions on whether such benefits are viable for various cities that choose to invest in this new venture. According to David (137), although economically straining communities may opt to invest in casinos to enhance their economic development, not everyone within such communities can expect to benefit. When other factors are held constant, only less urbanized cities can reap significant benefits from casino development while more urbanized cities cannot. This is especially the case in large urban cities that rarely attract tourists as most clients are bound to be drawn locally. As explained by Walker (7), a common rule within the casino gaming industry is that when less than half of the clients are drawn from outside the casino community, the industry is only likely to perpetuate a redistributive rather than an expansionary effect that is associated with exporting tourist-related products and services.
Large casinos may fail to succeed in such highly urbanized cities especially because they cannot solely depend on marketing their services to local residents (Younhee 821). This indicates that any attempt to invest on casinos in highly urbanized cities may prove to be less beneficial particularly because they cannot generate sufficient revenue that can be used to address infrastructural as well as social needs. Although this situation may not exist in a more rural setting, some rural communities may have a lower proximity to urban settings, which lowers their ability to offer casino services.
According to Hermann (49), only cities with close proximity to urban centers are bound to be more accessible to possible tourists that are likely to make significant contributions to the success of casinos. Similarly, rural cities with suitable infrastructural facilities such as transport may as well be attractive for the same reason. This indicates that cities with lower proximity to urban areas or have poor infrastructures may be less attractive to tourists, which shows that casinos established in such communities may not be beneficial to the cities because they cannot generate viable revenue to contribute towards various developmental aspects. On this note, cities should be forewarned that investing in casinos may not always translate into viable benefits to meet the needs of various residents as well as the city authorities (Younhee 827).
Despite these limitations, a casino can benefit a city by intensifying the relationship prevailing between various gambling industries, which in return increase overall state revenue. According to David (142), a number of studies have looked into the type of relationship that prevails between one gambling industry with another or between gambling and non-gambling industries. Overall, such studies establish the fact that one industry may either harm or not at all affect the other. This means that the relationship prevailing between industries may impact state revenues in distinct ways.
The type of relationship prevailing between two gambling industries or between a gambling and non-gambling industry can either increase or decrease the total tax revenue that the state authority can generate from the particular city in which they operate. For instance, a city that has horse racing may wish to legalize lottery as a new type of casino gambling and not grey hound (Sallaz 204). This is because lotteries and horse racing tend to complement each other while horse racing and grey hound tend to substitute each other. Cities that consider legalizing a type of casino gambling that would complement rather than substitute the other can thus increase state revenue, which would in return contribute to viable resources needed towards economic, infrastructural as well as social needs. The positive outcomes that a city can reap from legalizing a certain type of casino gambling is perpetuated by the fact that casinos tend to pay a higher level of tax revenue compared to non-gambling industries. For instance the average tax charged on state sales in United States is averaged at 5%, which often apply to consumer products (Hermann 53).
However, state lottery typically generates about 30% of tax charged on total state sales. As such, a positive relationship between two complementary casino gambling industries can significantly increase the total tax revenue generated, which is not the case with the relationship between a gambling and non-gambling industry. With the minimum average tax applied on casinos in Nevada estimated at 6% and a maximum average of 55% in Pennsylvania, it is safe to assume that taxes charged on casinos in any given city are higher than other non-gambling industries. On this note, it is arguable that even if 100% of all casino revenues are generated at the expense of other costs incurred through other non-gambling activities, casinos should increase the overall state revenue generated with the city in which they prevail (Walker 12).
Despite the significant contributions that a casino can render in generating additional state revenue, a popular downside associated with this factor is that it can contribute to revenue displacement, which can negatively impact a city. According to David (149), a casino displaces a huge variety of other potential economic activities and the subsequent tax revenues that would otherwise be generated from such activities. Sufficient evidence further indicates that tax revenues collected from casinos displace revenues that would otherwise be generated from other types of gambling activities including lotteries. A study by Younhee (834), showed that a city can lose up to 0.83 US dollars in lottery revenue for every single US dollar of revenue it generates from a casino. Although this represents overall positive outcome, the loss associated with this revenue displacement represents a critical net offset. This shows that the decision to legalize a casino in a particular city can be a serious policy decision that may require careful considerations.
A casino can as well benefit a city by becoming a useful tool for tourism development. Historical evidence shows that casinos in prominent cities such as Las Vegas, Monte Carlos as well as Baden were primarily constructed to add to the glamorous affect associated with these tourist destinations. Although not all casinos in such destinations rely on tourists, their establishment in such localities is said to have enhanced significant growth in tourism markets. According to Hermann (59), most casinos particularly in United States and Australia have been legalized with the sole purpose of enhancing tourism development. For instance, most casinos in major cities of Gold Coast in Australia were established with the aim of drawing a huge number of outsiders into the region, which would generate an additional level of wealth to the local economy. This objective has been achieved in most cases especially in areas where certain characteristics as well as considerations, such as location, level of competition and type of development have been favorable.
In terms of location, casinos in United States and Australia have been successful in attractive a huge number of tourists in instances where they have been concentrated in one place as other ancillary facilities (Sallaz 212). For instance, Las Vegas, which started as a destination resort, expanded its main investment on casino gaming. This converted the city into a multi-faceted entertainment destination with gambling constituting to its main theme. As a result, Las Vegas has become a major tourist destination that attracts a huge number of foreign visitors that are usually hosted in more than 133,000 hotel rooms every night (David 150).
In Nevada, casinos have proven to attract a huge number of tourists especially in cases where they are integrated with other non-core income ventures including hotels, restaurants and entertainment activities. This explains the fact that establishing a casino in a favorable location can enhance significant expansion in tourism market, which can in return promote significant benefits associated with tourism in a given city. For instance, growth in tourism in a given city can promote foreign trade, introduction of foreign currency, promotion of cultural values, increased state revenue, infrastructural and economic development. A city can further benefit from a casino when neighboring jurisdictions restrict such establishments. According to Walker (17), restrictions to gamble in certain jurisdictions can dictate the need travel in destinations where gambling is permitted. This means that a city that may have invested in a casino can attract tourists from neighboring jurisdictions, whose single-most purpose is gaming. The economic benefit that a city can reap from tourists coming for a single-purpose such as gaming is significantly higher compared to what it reaps from tourists aiming for various activities in a given destination.
Literature indicates that a casino, despite the fact that it has significant economic benefits that include greater economic growth and higher tax revenues, has potential downside that can negatively impact a city within which it prevails. According to David (154), an estimated 1% of the wider population in any given city is believed to comprise of pathological gamblers, who are mostly believed to cause serious social costs that can offset any economic benefits reaped from a casino. A growing debate shows that the growing tendency for cities in various jurisdictions to invest in casinos has continued to attract wealthy tourists. This has in return proven to act as a catalyst for crime particularly because such tourists flock into casinos carrying cash that they would use when gambling.
A study by Sallaz (217) was conducted through a city-level analysis in United States and it showed that casinos have greatly contributed to a high crime level in the country. Findings of this study showed that the total social cost perpetuated by each pathological gambler through crimes in casinos is estimated at 9,469 US dollars annually. This may negatively affect city authorities through perpetuating unnecessary costs linked to reprising as well as catering for the needs of the affected victims. Crime in casinos may as well lower the reputation of the city, which can affect other economic and developmental prospects of that city (Hermann 69).
Casinos are becoming a common form of investment for most cities intending to increase their economic base. This is particularly because the industry has become a multi-faceted venture that attracts clients from high class society. As such, casinos have become a favorable industry that state authorities can employ to meet the growing need to increase their revenue base. Investing in a casino can benefit a city in different ways, which include enhancing wealth redistribution, job creation, revenue generation, economic development and growth in tourism industry. Despite these benefits, a casino is associated with increased crime rates, biased developmental benefits for varying cities and revenue displacement. However, it is obvious that the overall benefits associated with casinos outweigh the shortcomings, which explains that investing in a casino can overly benefit rather than harm a city.
David, Borges. “Gravity Models and Casino Gaming: A Review, Critique and Modification,” UNLV Gaming Research & Review Journal, 18.1(2014):127-179.
Hermann, Denise. The Big Gamble: The Politics of Lottery and Casino Expansion, West Port CT: Praeger, 2002.
Sallaz, Jeffrey. The Labor of Luck: Casino Capitalism in the United States and South Africa, California: University of California Press, 2009.
Walker, Douglas. Overview of the Economic and Social Impacts of Gambling in the United States. Viewed on 3rd April, 2016 from http://walkerd.people.cofc.edu/pubs/2012/OxfordCh_dist.pdf
Younhee, Kim. “Determining the Revenue-Maximization Tax Rate for States with Legalized Corporate Casino Gambling,” Journal of Public Budgeting, Accounting & Financial Management, 21.2(2009):819-1021.