Casino Economics

SEA ISLE, N.J. – The big focus in the newspapers at the Jersey shore this week is on gambling and the impact of 25 years of casinos since Resorts International opened its doors in 1978, two years after New Jersey had voted to permit casino gambling in Atlantic City, a town that had become pretty much a slum with sand.

The Press of Atlantic City ran a quote from Bob Dylan this morning at the top of its front page editorial: "When you ain't got nothin', you got nothin' to lose." The accompanying editorial, "25 Years of Casinos: The Region Wins," pointed to how far the city had fallen before the ribbon cutting at Resorts:

"Twenty five years ago, Atlantic City had nothing to lose. The once-famed Steel Pier was nearly a ruin. The diving horses existed mostly in memories and faded postcard collections. The Miss America Pageant had to set up photo shoots of contestants in neighboring towns to avoid desolate Atlantic City backdrops. The 'World's Playround' had become a dump. An eyesore. An embarrassment."

Local leaders, said The Press, had buried their heads in the sand during the long slide: "It hadn't happened overnight." For decades, there was "an astonishing inability by local 'leaders' to see the handwriting on the wall and take action."

And did gambling work? "Absolutely," concludes The Press, citing the numbers, starting with the cars at the Jersey toll booths: "The Atlantic City Expressway, which collected $6 million in tolls from 9.8 million vehicles in 1977, ended 2002 with toll revenues of $48.5 million from 60 million vehicles."

The result was more jobs: "Approximately 72,000 people have jobs that would not exist if not for casino gambling – 45,000 folks directly employed by the industry, with an annual payroll of $1.1 billion, plus an estimated 27,000 people in positions indirectly created by the casino industry."

Not counting those 27,000 spin-off jobs, the casinos now employ one out of every two workers in Atlantic City, and one-fourth of the workforce is in Atlantic County.

The 11 casinos (soon to be 12 when the gold-plated $1.1 billion Borgata opens this July) represent an $8 billion capital investment in Atlantic City. Together, the casinos pay $60 million per year in property taxes, some 80 percent of the city's total property tax bill, plus an 8 percent state tax on casino gross revenues and a 1.25 percent tax on gross revenues to the Casino Reinvestment Development Authority.

A ride around town reveals that everything's new – an $83 million high school, a new police station, bus depot, medical center, convention center, minor league baseball stadium and 1,800 units of new housing, all built mostly with casino taxes.

True, there are still dozens of pawnshops in the shadow of the casinos offering CASH FOR GOLD, more escort services in the yellow pages, and nearly one-quarter of the city's population is still below the poverty line, over half the city's residents are renters and the head of the Atlantic City Rescue Mission says that 20 percent of his clientele have gambling-related problems.

But over all, things are getting better. Crime is down, from 70 crimes per 1,000 population in 1977 to 52 per 1,000 last year. The city's unemployment rate, 25 percent before the casinos opened, has dropped to 9 percent.

What worked is that Atlantic City pulled money into town from other places, including Pennsylvania, and that produced a dramatic jump in spending, investment and jobs.

Seeking a similar outcome, Pennsylvania Gov. Ed Rendell is pushing for the legalization of video slot machines. "Pennsylvania," he explains, "is like an ostrich, sticking its head in the ground and ignoring the fact that surrounding states like Delaware, West Virginia, New Jersey and New York have added gambling, including slots at tracks."

That sounded good until I read a report from WTAE's Paul Van Osdol about who's set to pocket the profits from the slots at the racetracks in Pittsburgh and Philadelphia.

Here in Pittsburgh: "The palatial headquarters of Magna International in Aurora, Ontario, is where you'll find founder and chairman Frank Stronach – that is, if you don't find him at his 17th century estate in Austria, where he spends about half his time. Stronach is Canada's highest-paid executive, earning $58 million last year. He stands to make more if slots come to Pennsylvania. Besides owning the Meadows, Magna is also seeking a license for a thoroughbred track in Findlay."

And in Philly: "Records show Watche and Rafi Manoukian own Philadelphia Park. The two brothers are Lebanon natives who live in London and control the track through a holding company in the Caribbean island of Curacao. They are also seeking a license for another track in Chester, Pa."

A few months back, Rendell had this to say about the money leaving Pennsylvania: "You know that whooshing sound you hear on the Walt Whitman Bridge? That's millions of dollars in Pennsylvania revenue leaving and heading to Atlantic City."

Even worse will be that whooshing sound we'll soon be hearing as millions of dollars are sucked out of Pennsylvania to be spent in Ontario, Austria, London and Lebanon.