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Riverboat Gambling Essay, Research Paper

Introduction

Policy-makers are assessing the advice from Kenny Rogers, “You got to know when to hold ‘um, know when to fold ‘um, know when to walk away and when to run.” They are trying their hand at new and old forms of gambling in the hopes of generating additional revenues. One of the revitalized ideas of the past is to legalize gambling on historic riverboat replicas. Yet riverboat gambling won’t be restricted to the Mississippi, but will appear in towns like Gary, Indiana and even our own Jefferson City. Even New Mexico has explored a proposal to float a casino on a dammed section of the Rio Grande. These ideas demonstrate policy-makers attempts to satisfy taxpayers revolt while maintaining the need for increased revenues.

Riverboat casinos are on the minds of policy-makers and citizens alike. This policy has passed through the Missouri legislature; and voters passed the idea by a large margin in a statewide referendum. Soon people will be boarding these vessels resembling historic steamboats of the past in the hopes of winning a return on their investment. By state statute this could mean as many as 20 riverboat casinos floating Missouri’s waters. At least seven riverboats licensed to operate gambling are expected to hit the water early this year. We will have to wait and see what affects this policy will have on revenues and Missouri residents. However, we can look to other states that have already implemented riverboat gambling to see what promises have been fulfilled and what problems have transpired.

xxx

There is little debate that these riverboats, floating casinos as they are sometimes referred, will produce some revenues without relying on higher taxes. A large majority of Missouri voters support the idea of riverboat gambling. In fact, voters all across the Midwest seem to support the notion that gambling is fun entertainment and comes at a cost they are quite willing to pay. Staggering economies brought on by the recession have pressured policy-makers to find a means of stimulating growth in towns all across the nation. Iowa legislatures, prompted by the farm crisis of the 1980s, were first in discovering riverboat gambling as a resource to stimulate growth, (Greenberg, 1991).

I admit it is tempting to support such a means of generating revenues, after all, the majority supports it. But policy-makers must ask, “Can we depend on riverboat gambling as a stable source of revenues and is it really painless revenues we will be generating?”. Of course, the answer is a resounding no! Clearly, states should not be in the business of operating casinos. Even though the amount of revenue generated by state sponsored gambling is small it is foolhardy to rely on unstable sources of income in place of taxes. There are many other reasons I can not support this policy and I will discuss each in detail. I do not support state-sponsored casino gambling, but there are some compelling arguments for its establishment. I will attempt to point out both sides of the argument while ultimately showing the costs will not outweigh the benefits.

First, it is important to discuss the origins of casino gambling and how it gained its recent acceptance among the public. Lotteries were the driving force in changing the attitudes of the public about gambling. New Hampshire instituted the first state lottery in 1964. Many other states quickly followed suit. In the late 1970s New Jersey approved casino gambling in Atlantic City, mostly to bring in tourism and lift the tax burden. The mood was set for other states to pass similar legislation, but repeatedly states voted down proposals for casino gambling. It was not until 1989 when South Dakota voters approved a measure to bring casinos into the landlocked town of Deadwood that other states began to consider casino gambling. Even though Deadwood now operates casinos, the idea of state sponsored casinos on dry land has not gained the wide approval of gambling on water.

Some experts believe gambling is cyclical, (Hansen, Seacord, 1991). Professor of law at Whittier College, I. Nelson Rose, predicts state operated gambling will encounter a mass of scandal. Public dismay will then mandate outlawing gambling once again. If history repeats itself, gambling will once again be viewed by the public as an unacceptable act. The state will then have to find a new source of revenue or hope people will support paying higher taxes in place of the loss in gambling revenues.

Revenues from gambling are variable, meaning one year revenues may be up, but the next year revenues might be down. One reason for its variability is that it is not recession-proof. Riverboat gambling could suffer significant loses in revenue during economic downturns. In the down years states may have to cut spending to make up the difference. More importantly, this shows that states can not depend on this money when they need it the most, during hard times.

The message state sponsored gambling sends to taxpayers can also be damaging. The lottery, for example, has provoked much controversy. The public views the lottery as a means of supporting education. In fact, eight states actually earmarked lottery profits for education, (Weiss, 1991). The public’s perception is states are growing rich from lotteries; therefore, funds from other sources to support education are not needed. Politicians have platformed on this public perception of saving money by cutting education spending. The end result for some states is that education actually receives less funds after lotteries are operating, (Weiss, 1991). If riverboat gambling is sold on the same premise as lotteries, I speculate these casinos will have the same effect. Even if the public perceives riverboat gambling as a big money maker for the state the tax revolt may be even stronger. States must then be very careful in how they sell this idea to the public. But so far it appears that states are promising increased revenues, exploding development and jobs, jobs, jobs.

There are many other ramifications of state sponsored gambling, especially riverboat casinos. Gambling is in question as being a regressive form of taxation. Much of the opposition to state sponsored gambling is due to the belief that gambling taxes the poor and uneducated more than the rich and wealthy, (Weiss, 1991).

Studies show that the middle classes and the rich do most of their risk-taking in the stock market or buying and selling bonds. This type of risk-taking offers a greater return on their investment. America’s lower classes do not have the capital to invest in such risk-taking so they gamble in state lotteries, offtrack betting and in casinos. For lower income individuals, gambling is viewed as an avenue to make it to the top, or achieving the American dream. Lower income groups are more likely to gamble on a more frequent basis than middle and upper income groups since this is perceived as their easiest way of achieving wealth. Middle and upper income groups motivation for gambling is more for entertainment rather than the hopes of achieving big bucks, (Eadington, 1972).

It is likely that lower income individuals will attend riverboat casinos more frequently. The entrance fee to get on a riverboat may curb some lower income groups from frequent visits. A lottery ticket can be purchased for as little as one buck while stopping off at the local convenience store. However, the fee is only seven dollars to get on the Alton Belle riverboat in Illinois and that comes with no limits on gambling. For many gamblers this is a small investment on their chance of winning sizable profits.

Advertising for state sponsored gambling targets the lower classes which adds to the argument that gambling is a regressive tax. The Illinois lottery was charged with targeting the poor because of a billboard imposed in one of Chicago’s poorer neighborhoods. The billboard displayed a lottery ticket and read, “Your ticket out!”. The idea sold is a quick scratch of a lottery ticket can make dreams come true. As the Illinois lottery demonstrated, state advertising of gambling operations encourages the poor to spend money they cannot afford or would be better off investing elsewhere. The odds of winning are rarely advertised to the gambler. In fact, the odds of becoming rich from simple hard work is greater than winning it big in state lotteries or on riverboat casinos. The message sold to attract gamblers to riverboats and lotteries is the same, “This is your chance to get something for nothing”.

Advertising for riverboat gambling does not seem to be as aggressively targeted to the lower classes and those prone to gamble. So far riverboat gambling targets the weekend vacationers, or the whole family. States are hoping to draw in tourists from other states for an excursion on their riverboats. Even though much of the advertising seems to be packaged as family entertainment, Illinois does not allow individuals under the age of 21 on their boats. This does not sound like great fun for the whole family. Missouri has mandated no more than 50 percent of the riverboats may be set up for gambling purposes, but this percentage does not include the wheelhouse, the engine room, or staff quarters. Those under 21 will not be allowed in this area. Again, with such a large portion of the boat set up for gambling, a family may not find these boats a great way for the family to spend time together.

States with riverboat gambling are expecting to reap benefits in two ways. The first is to gain revenues in place of raising taxes. And secondly, they want to bring some new life to economically struggling river towns. Certainly, these are enticing promises. Riverboat gambling has the allure of attracting businesses and money into poor economies. Supporters believe it will bring in millions of dollars for riverfront development and renovation, while creating new jobs and attracting tourists. In 1989, South Dakota legalized casinos on dry land in the small town of Deadwood. They have experienced between 800 and 900 new jobs due to the casinos just in Deadwood. The Illinois legislator, Denny Jacobs, estimated about 2,500 jobs will be created in his state to support the riverboat gambling industry, (Eckert, 1991). He also believes after all 10 boats authorized under the law are operating Illinois will receive $40 million in additional revenues, (Eckert, 1991). This is bound to please Illinois’ taxpayers.

Yet with all its promises it would seem governments are promoting gambling in order to pay a insignificant portion of the bills. Iowa expects to generate $10.8 million from all her riverboat casinos this year. But that is a rather small share of the states $3.2 billion budget (Greenberg, 1991). The promise that poor rivertowns will experience a flock of new businesses and life into their economies has some unanswered questions. Some are wondering what type of businesses this new gambling will attract. And if gambling will stimulate crime along with the economy.

Atlantic City, New Jersey is a poor example for legislature when promoting state sponsored casinos. New Jersey voters approved casinos in Atlantic City in 1976, but the increased gambling revenues have not brought the prosperity they had hoped. Atlantic City’s poor reputation is due in part to its run-down business district. Many residents are still unemployed since many casino jobs went to those outside city limits, (Greenberg, 1992). The city’s residents have continued to move out because of the high cost of living and their crime rate is the highest in the state. Businesses unrelated to the gambling industry did not feel the surge of investments promoters had promised. Many of these businesses closed, leaving the city with mostly gambling related industries, (Lesieur, 1992).

Deadwood, South Dakota has also experienced its share of problems. They have had an increase in petty thefts since casinos opened for business. They have had an influx of new development, but businesses like the five and dime, grocery stores, car dealerships and the local pharmacy have closed, (Hansen, Seacord, 1991). These towns with casino gambling no longer have a diversified economy. Their economies are highly dependent on the gambling industries.

Some opponents of riverboat gambling have contended that states have produced compulsive gamblers through their enticing advertisements. Whether state sponsored gambling increases the number of compulsive gamblers is really unknown. It does not send a strong message to children and all members of society about the value of hard work to achieve your dreams. More importantly, few states are taking any responsibility to help those gamblers that have over indulged. Few states dole out any of their profits from gambling for treatment centers and education campaigns. Iowa has set aside .5 percent of lottery and riverboat gambling proceeds to help compulsive gamblers, (Greenberg, 1992). According to Missouri statute an “undisclosed” amount of profits may go to treatment centers to help addicts. If states are in the business of operating gambling then states have an obligation to provide enough profits for adequate treatment of gamblers who have risked too much.

Iowa legislatures have put in some safeguards against attracting heavy gamblers on their riverboats. They have issued a limit of $200 on losses per excursion and a $5 limit on bets, (Eckert, 1991). Illinois has not issued limits for gamblers, along with Mississippi and Louisiana. Missouri statutes do not include any limitations on wagers or losses and many other states are expected to initiate similar legislation. The “no limitations” legislation is supposed to make these states more competitive.

Riverboat gambling is spreading just like the lotteries did during the 1980s. The idea of competition from other states that have riverboat gambling has urged more conservative states to consider the policy. If neighboring states are conducting riverboat gambling they may see their residents crossing state lines to get a piece of the action. Those states with legalized gambling are reaping the benefits while the state without this attraction loses revenues. This has had a domino effect on states all across the nation.

Iowa, the first to implement riverboat gambling, now has four profitable riverboats running throughout the state. Their good fortune may soon come to an end with stiff competition from the seven new riverboats in Illinois. Illinois statutes allow as many as 10 riverboats and does not restrict its passengers betting limits. Iowa holds some cards to combat neighboring competition. One of their boats, the President, is able to carry as many as 2,500 gamblers. Presently, state regulation allows 1,600 gamblers per excursion. This could easily be changed by upping the amount of casino space to 50 percent rather than the current 30 percent, (Guskind, 1991).

Soon Missouri will find herself in the middle of the action. State officials were hopeful by late September to have riverboat casinos just outside the Gateway Arch in the St. Louis area, but the massive floods may slow things down a bit. Nevertheless, with 20 boats authorized, riverboat gambling is on its way in Missouri. Then the battle for the most painless revenues will commence for Illinois and Missouri. Legislators all across the Midwest may find themselves under a great deal of pressure to lift regulations in order to remain competitive. Iowa legislators have already experienced this with their racetracks. As legalized gambling at Iowa racetracks began to taper off, the legislature was pressured to cut taxes on them. The tracks are also receiving tax rebates and loan guarantees, (Guskind, 1991).

The more states legalize gambling they run the risk of spreading the market for gambling too thin, (Greenberg, 1991). Atlantic City is used as an example of a saturated gambling market. The 13th casino to open in Atlantic City soon closed its doors and four others followed suit, (Gelbtuch, 1991). Riverboat gambling is hoping to attract tourists, but as more and more states legalize this type of gambling, they will bring in mostly local residents.

Iowans are hoping to revitalize needy communities in Davenport, Bettendorf and Dubuque. Downtown Davenport was promised $60 million in gambling related development by riverboat owner, John Connelly, (Guskind, 1991). It looks as if they will only receive about $25 million for development and much of that will be a floating restaurant and loading facility, (Guskind, 1991). Now Davenport residents are facing a very costly decision of choosing riverboat gambling rather than a flood wall. A flood wall could have saved their city from some of Mother Natures flood damage, but would not have generated the revenues or development of riverboat gambling.

Suggestions for Implementation of Riverboat Gambling

Policy-makers must be aware of the dangers riverboat gambling poses. In order to make it work, policy-makers will have to minimize the adverse social consequences that may result. First of all, restrictions should be placed on advertising riverboat casinos. The odds should be clearly stated and should not target poor economic classes. Secondly, states should give enough proceeds to adequately fund treatment of excessive gambling and educational campaigns about the possible pitfalls of gambling. Thirdly, legislators need to be keenly aware of the variability of gambling revenues and the effect this could have on other tax sources.

Future Evaluation Procedures

When evaluating implementation of a policy one must assess what was actually implemented, and whether that complies with the original intent of policymakers, (Dale, 1992). The implementation of riverboat gambling in Missouri is likely to bring some revenues, but it will also have some unintended effects. Policy-makers should continue to ask themselves if this policy has achieved its goals, and if it is successful.

Success can be monitored by such indicators as; static crime rates, the growth of diversified businesses (especially in riverfront areas), the public’s perception – is there continued support from constituency groups, increase in tourism and amounts of revenue generated.

Conclusion

The spread of state sponsored gambling is not stopping with riverboat gambling. With modern technology states may be able to pick the pockets of the willing electronically. Some states with lagging lotteries are looking at games enabling players with a television and touch tone phone to play lottery from their Lazyboys, (Karcher, 1992). Missouri has a bill, sponsored by Representative Jacobs, to implement video lottery terminals or VLT’s, similar to slot machines, in the state.

As Kenny Rogers would say, “its time to fold ‘um and walk away.” Gambling by riverboat casinos are not painless taxes, nor or they dependable revenue sources. They are quick fixes to our problems. It’s time for policy-makers, bureaucrats and citizens alike to find solutions that will work for the long haul.

Berkshire, Tom J., “National Lotteries: A Housing Shortage Solution?”, in Journal of Housing, (September/October 1989).

Paul M. Mason, The Economic Consequences of State Lotteries, New York, NY, 1991.

Cashen, Henry C., John C. Dill, “The Real Truth About Indian Gaming and the States”, in State Legislatures, (March, 1992).

Gelbtuch, Howard C., “The Casino Industry”, in The Appraisal Journal, (April 1991).

Greenberg, Pam, “Not Quite the Pot of Gold”, in State Legislatures, (December 1992).

Guskind, Robert, “Casino Round the Bend”, in National Journal, (September 14, 1991).

Hansen, Karen, Megan Seacord, “A 20th Century Gold Rush”, in State Legislatures, (March 1991).

Hugick, Larry, “Gambling on the Rise; Lotteries Lead the Way”, in Gallup Report, (July 1989).

Karcher, Alan J., “State Lotteries”, in Society, (May/June 1992).

Karcher, Alan J., Lotteries, New Brunswick, NJ: 1989.

Lesieur, Henry R., “Compulsive Gambling”, in Society, (May/June 1992).

Stocker, Frederick D., “State Sponsored Gambling as a Source of Public Revenue”, in Society, 1972, pp. 437-441.

Weiss, Ann E., Lotteries: Who Wins, Who Loses?, Enslow Publishers, Inc., Hillside, NJ: 1991.

Williams, Francis Emmett, Lotteries, Laws and Morals, Vantage Press, NY: 1958.

Wilson, Thomas, “Gambling: A Punt on the River”, in The Economist, (March 13, 1993), pp. 37.

Footnotes


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