Sunday, February 22, 2009
News, In this Issue...
Should we risk it?
Developers propose a casino for Downtown. But it would come at a cost.
Michelle Milano
By Stephanie Ramage
Underground Atlanta used to be the place you could go to get something you couldn’t get at most other places.
Its establishments served mixed drinks in the 1960s, when every Georgia county outside Fulton prohibited them. In the ’70s, it became a notorious haven for drug dealers and prostitutes.
Then it became just another galleria.
Now, Dan O’Leary and John Aderhold, who acquired a 50-year lease on the city-owned facility in 1999, want to return some of the naughtiness to Underground in a cleaner, more luxurious package: a gambling resort with a $450 million hotel, upscale restaurants and Vegas-style shows.
“It will be a destination site for people who want to go enjoy nice restaurants and a show and maybe bet a few hundred dollars,” says O’Leary, “and then come back to their hotel room and say ‘I had a nice time.’”
He claims the casino, which would be operated in partnership with Delaware-based horse track and casino company Dover Downs Gaming & Entertainment Inc., would bring 3,000 jobs to Atlanta, and $2.8 billion in tourism dollars each year.
The casino’s 5,500 video lottery terminals (VLTs) would be run by the Georgia Lottery. Georgia voters legalized the state-run lottery in 1992, so there should be no question of the legality of using such machines, he says. The casino, he estimates, would generate about $150 million annually for the Georgia Lottery’s cash-strapped HOPE scholarship and pre-K programs during its first phase, and double that afterward.
O’Leary says that his research shows he need only get approval from the Georgia Lottery board for the VLT casino. By having the state lottery running the machines and by allowing only VLTs, he believes he can avoid a vote on casino gambling by the state legislature.
Significantly, however, Gov. Sonny Perdue isn’t so sure about O'Leary's proposal.
The governor may not have the final say on the casino, but he appoints the state lottery board. His spokesman, Bert Brantley, says the governor stays in close contact with the board, particularly since it recently became apparent that the lottery’s current pool of ticket purchasers won’t be able to support the demand for HOPE scholarships next year.
Brantley reminds me that Perdue inherited the state lottery, which was created under Gov. Zell Miller. Furthermore, Georgia banned video poker machines—very close kin of VLTs—in the summer of 2001, after they came flooding in from South Carolina.
South Carolina banned video poker terminals in 2000.
When Nova Scotians were considering a similar ban in 2005, the Toronto Globe and Mail paid South Carolina a visit to see why the state had dropped the game.
"It was everywhere," State Sen. Wes Hayes told the paper. "It's the crack cocaine of gambling. We had bankruptcies, we had suicides … It was out of control, and the people of South Carolina were sick of it.”
(It didn’t help that in 1997, a Georgia woman left her baby daughter in a hot car while she played the machines for seven hours. The child died of heat exhaustion.)
In 2002, a Fulton County judge tried to overturn Georgia’s video poker ban, saying it was unconstitutional, but the state Supreme Court upheld it. So there is some precedent for keeping VLTs out of the state.
“Gov. Perdue is a man of faith,” says Brantley. “And there are a lot of concerns about the casino from the governor’s perspective.”
O’Leary believes that the casino would keep more of Georgia’s money in Georgia. Already, he says, people are traveling to Vegas and Biloxi to gamble. He says that when he held the lease on South DeKalb Mall, every Saturday, buses would shuttle people from the mall to Harrah’s in North Carolina.
“And when they would come home, they would go in the mall and shop,” he says.
Besides, he doesn’t see how a VLT is so different from the Georgia Lottery itself.
“When my wife and I go shopping at Publix, just as we are leaving the store, there is this machine that you put money into and it will dispense lottery tickets,” he says. “How is that different from a VLT?”
The Web site Slot Machine Blog (www.slotmachineblog.com), which purports to provide information about everything from odds to machine repair, says VLTs are known in the industry as Class II gambling devices, whereas the slots people see in Las Vegas are Class III. The basic difference between those two types of slots is in where their random number generator, or RNG, is located. “Both Class II and Class III machines rely on a random number generator, except with a Class II machine, that RNG is running inside of a central computer, located at the casino.”
Video slots are more like playing Bingo than anything else. Video poker, the game Georgia banned eight years ago, involves a video-image hand of cards. Regardless of the specifics, both belong to a genre of electronic gambling devices known as “the crack cocaine of gambling.”
VLTs: The “crack cocaine of gambling”
The VLT-casino set-up proposed for Underground is a lot like that used in Rhode Island, and the first thing that turns up on a Google search for “Rhode Island video lottery terminal” is a link to the Rhode Island Gambling Treatment Program. There, one is welcomed with this statement: “In the last 10 to 20 years, legalized gambling has literally ‘exploded’ across the United States. State governments have become increasingly dependent on the revenue they collect from gamblers. The single most important reason legal gambling has become so incredibly profitable and popular during that time is computerized video technology. This technology has produced the most addictive form of gambling in history: video gambling. For this reason, some people call video lottery terminals (VLTs)—video slots, poker, keno, and other games—the ‘crack cocaine’ of gambling.”
In 2002, a study of compulsive gamblers conducted by the program’s director, Bob Breen, showed that they tend to focus on one particular type of gambling. “We found out that the men and women who got hooked on video gambling became compulsive gamblers in about one year,” Breen states on the site. “Those who got hooked on other kinds of gambling (such as horses, sports betting, blackjack, etc.) became compulsive gamblers after about three and a half years.”
Two out of three addicted gamblers interviewed by Breen said video machines caused their gambling problems.
All of this is woefully familiar to Earl Grinols, an economist at Baylor University who has devoted a substantial portion of his career to assessing those costs associated with commercial gambling that few communities take into consideration before allowing a casino in: the cost to individuals and families.
Grinols studied all 3,165 counties in the United States for a 20-year period to establish statistical links between casinos and FBI Index I crime. What he found was published in "Casinos, Crime, and Community Costs," which he co-authored with David Mustard. In 2004, Grinols’ book “Gambling in America: Costs and Benefits” was published by Cambridge University Press.
Because of Underground’s unique entertainment district designation and the involvement of the state lottery, says Grinols, a casino at Underground would present what amounts to a government monopoly being awarded to Underground’s operators.
“It’s like a dispensation of the crown,” says Grinols, which puts the opportunity to gamble in a very concentrated area. Add to that the most lucrative form of gambling—80 percent of casino revenues come from slots, a form that also happens to be the most addictive—and he sees a scheme that will make O’Leary and Aderhold “very, very rich at the expense of whoever it takes to do so.
“They have selected the most damaging form of gambling that brings in the most money, and they are telling the state that by making it VLTs that it’s somehow more palatable. That is just not the case,” he continues. “You see this every time. Casinos will start out with some safeguards, maybe in terms of hours of operation and self-policing of problem gamblers. They may say that they want it to be a nice, wholesome environment. Don’t believe a word of it. Eventually, they all go down the same path. What you’re going to have is 24/7 gambling at slot machines that take money from problem gamblers.”
What about Vegas?
“Nevada consistently ranks at the top of the list for social ills like child abuse, divorce and suicide,” he replies. “They may miss being No. 1 in some years, but they’re always near the top. This stuff isn’t obvious. Putting a casino in Downtown Atlanta won’t be like dropping an atom bomb there. These things won’t immediately happen.”
Instead, it will take about three years to see the effects, he says. As customers flock to the casino, they will become problem gamblers. And, he says, they will be local, for while every casino starts out wanting to be a “destination,” they all end up pulling in local people. They will run through credit cards, then they will dip into mortgages, then college funds for their kids, and eventually, some of them will hock their family possessions.
He recalls a man who was greeted by a sheriff’s deputy who’d found his wife’s suicide note. The deputy had come to serve a foreclosure notice. The man’s wife had committed suicide because the foreclosure revealed the gambling problem she’d kept hidden from him.
Grinols says that VLTs, just like video poker, derive their addictive quality from the speed with which the game is played.
“Electronic gaming devices produce pathological, problem gamblers,” he says.
The American Gaming Association says less than 4 percent of the general population, and possibly even as little as 1 percent, are problem gamblers. Grinols points out that it’s more accurate to look at the
gambling population, and says that between 30 percent and 50 percent of all casino revenue comes from problem gamblers. For VLTs, the proportion is even greater—as much as 60 percent.
“If they introduce this into Atlanta, everything will look perfectly fine. It might even be that crime is cleaned up right there on the casino’s doorstep, but there will be crime associated with it. It’s the nature of the industry that it spins off this detritus,” he says, explaining that when problem gamblers have exhausted their resources, they begin to steal and embezzle. Some commit suicide. Some commit crime.
“It is almost certainly the case that if this is introduced into Atlanta, someone will die because of it,” says Grinols.
Economic impact is “generally positive”
Richard McGowan, a professor of economics at Boston College, takes a more circumspect view of the proposed VLT casino. McGowan, who is also a Jesuit priest, says the overall economic impact of a casino is “generally positive.” The biggest obstacle is promoters promising too much of an economic payoff. Casinos are not the solution to an ailing economy, but they do produce revenue for the state.
“Atlanta’s a pretty big convention town, so they’re probably saying this will attract more conventioneers,” he says. “And to be a successful gambling operation, you don’t want your own people gambling. You don’t want locals there. You want outsiders. If you have a lot of locals, you’re going to be cannibalizing your own local economy, because they’re spending money at the casino that would otherwise go into other types of local businesses.”
McGowan, author of 2008’s “The Gambling Debate,” has looked at the economic multiplier effect of casinos—how many jobs and how much revenue they spin off indirectly—as well as their ability to attract money from out of town. With that in mind, he makes a pronouncement about Atlanta: “I don’t think you’re going to get more conventions because you have gambling.”
Why not? Because lots of places have gambling now. In fact, only two states, Utah and Hawaii, have no form of legalized gambling. According to StopPredatoryGambling.org, there are about 900 casinos spread across America.
McGowan balks at saying VLTs are more addictive than any other kind of gambling. ( “If you’re addicted to gambling, you’re addicted to gambling,” he says.) He also notes that the odds of winning at VLTs is considerably better than the odds of winning the Georgia Lottery.
And he shrugs off the shop-of-horrors predictions of doom associated with casinos. Instead, he cautions that communities should know what they’re getting into. States tend to actively compete with neighboring states for gamblers. He points to Alabama and North Carolina’s casinos.
“If Georgia does this,” he says. “I wouldn’t be at all surprised if the neighboring states up the ante, if you’ll pardon the pun.”
Upping the ante, in this case, means bringing in new types of gambling. That would force Georgia to ante up, as well, or fold.
Georgia shouldn’t worry too much about the casino folding, though. Although casinos are not recession-proof, they’re pretty sturdy.
“The only person who’s managed to bankrupt a casino is Donald Trump,” chuckles McGowan. “That should tell you how bad of a businessman he is. He should be fired.”
SP