Skip to content
Link copied to clipboard

Rolling the dice on slots: Bad bet or easy money?

Simple tax-revenue numbers can be dazzling, but opponents say that the economic and social costs are equally spectacular.

Depending on who's doing the talking, the arrival of slot-machine gambling in Philadelphia is either the biggest economic development opportunity in recent history, or a scourge that will destroy neighborhoods, families, and local businesses.

Amid all the hyperbole, the real numbers are often lost. The simple tax-revenue numbers can be dazzling: The city would get about 28 percent of the more than $700 million in projected slots revenues, or about $200 million a year to pay for city services, fund tax cuts, and expand the Pennsylvania Convention Center.

Casino Free Philadelphia, the city's leading anti-casino organization, argues that the economic and social costs, including gambling addiction and revenues diverted from other entertainment businesses, are equally spectacular, approaching hundreds of millions of dollars annually.

On Tuesday, Casino Free Philadelphia will be outside polling places offering an unofficial ballot with a referendum question that would ban casinos from within 1,500 feet of residential neighborhoods. It is the same question the Pennsylvania Supreme Court removed from the official ballot.

Meanwhile, the casinos and their allies in the construction and hospitality industries rallied last week, claiming that the city can't afford to lose more than $1 billion in construction contracts and the projected 2,000 permanent casino jobs.

Here is a look at some of those numbers, based on fiscal year 2010, when the casinos will be operating full-tilt and generating a projected $1 billion in taxes statewide, if construction begins on schedule in Philadelphia and Pittsburgh this summer:

Tax Revenue: Industry experts generally agree that Foxwoods and SugarHouse casinos in Philadelphia can easily generate the $715 million in slots dollars needed to meet projections over the city's five-year plan. As a host community, the city will get 4 percent, or $28.6 million annually by 2010, according to the five-year plan. The first $5 million each year goes to the Philadelphia School District.

The remaining $23.6 million that the city will get represents less than 1 percent of a the city's projected 2010 operating budget of $4 billion.

Tax Relief: Casinos will pay 34 percent of their revenues for statewide tax relief. Of that, about 14 percent, or $140 million if the state meets its projections, will come back to the city in the form of wage-tax breaks for most residents, according to the office of State Sen. Vincent Fumo, who engineered the 2004 law that authorized slots gambling at 14 sites.

In the year 2010, gaming revenue would reduce the earned-income tax from 4.0 percent to 3.6 percent for city residents, a savings of $195 annually for a household making $50,000, or $389 for a household making $100,000, according to an Inquirer analysis.

Seniors with incomes below $30,000, who won't benefit from wage-tax reductions in the city, will see their property taxes reduced by $325 for a household with less than $8,000 in income, to $125 for households making between $18,000 and $30,000.

Convention Center: The slots law dictates that 5 percent of all slots revenues - $150 million in 2010 - will go to a state economic-development fund, with the $700 million expansion of the Pennsylvania Convention Center as the target of the funding in Philadelphia. The law doesn't say what percentage of the money the Convention Center is due, but legislators agreed at the time of the law that about 25 percent of the fund would go to Philadelphia for the next 10 years, Fumo spokesman Gary Tuma said.

The state and Convention Center Authority are still negotiating over how the expansion will be funded, but about $36 million annually in gambling revenues would go to the center expansion under Tuma's scenario. The city's hospitality industry says that the Convention Center will generate additional benefits.

Tuma said that scenario could change if two casinos aren't built in Philadelphia.

"It's fair to say that if there are not two facilities in Philadelphia, the General Assembly is not going to look favorably on spending a quarter of the economic-development money in Philadelphia," Tuma said.

In addition to these tax benefits, there are the other advantages that would come from new property and wage taxes, and the spillover effects to businesses supplying the casinos.

But opponents say casino advocates underplay the costs. Some of these numbers are hard to pin down, such as how many new gambling addicts will be created, and what they will cost the city. And for each job created in gambling, some experts say other businesses in the city will suffer.

William Thompson, professor of public administration at the University of Nevada at Las Vegas, told legislators in 2003 that gambling will only help the city's economy if it brings in new dollars without the resulting costs of addiction.

Las Vegas works because tourists come to the city, spend their money, then take their costly addictions home. In Philadelphia, Thompson says, a horde of new gamblers - not Atlantic City converts - will lose money on slot machines that they would otherwise spend on other entertainment or restaurants in the city. People generally stick to their entertainment budgets, Thompson says, so anything locals spend on casinos will be lost to city restaurants, theaters, or other attractions.

Finally, he argues, much of a casino's profits will go to out-of-state owners, and new slot machines will be bought from companies in Nevada.

"Almost all the gamblers will be local people, and they'll only be shifting their allegiance, and the gambling money will go to outside interests," Thompson said in an interview.

Of all the costs the casinos will incur in Philadelphia, the most difficult to pin down is the cost of addiction.

Gov. Rendell has argued that city gambling addicts, who feed their habit in Atlantic City and Delaware, are already costing the state millions without the tax benefits.

But it remains unclear how many more gambling addicts the casinos would create.

According to the city's Gaming Advisory Task Force, the city's new casinos will create 20 percent more gamblers. The task force's study calculated the current number of problem and pathological gamblers in Philadelphia at 30,740, and said additional costs from new addicts would be $2.3 million.

Casino opponents have estimated the costs of new gambling addicts as high as $518 million, based on the National Gambling Impact Study Commission's 1999 report that stated that people living within 50 miles of casinos were twice as likely to become problem gamblers.

What that means for Philadelphia is hard to calculate, because Philadelphia's new casinos won't be the area's first.

Before Philadelphia Park and Harrah's Chester arrived this year, most Philadelphians were already living within 50 miles of Delaware Park in northern Delaware, and City Hall is just 62 miles from Atlantic City.