ECONOMIC IMPACTS OF SLOTMACHINES FOR THE ERIE

COUNTY AREAWilliam N. (Bauschard) ThompsonProfessor of Public Administration

University of Nevada, Las Vegas 89154wthompson@ccmail.nevada.edu

702-895-3319Pennsylvania State University, Erie

Erie, PennsylvaniaAugust 23, 2005

Top Line:Annual Economic loss of $104,929,356

Bottom Line

ECONOMIC IMPACTS OF SLOTMACHINES FOR THE ERIE COUNTY

AREA• 1. It is About Trees. NOT!• 2. A Frank Sinatra Story• 3. Stonehenge, Rocket Science, Brain Surgery, Bath Tubs • 4. Las Vegas is Economically Successful

• a. Inputs: History, Synergy• b. Outputs: Eyes on the Prize

• 5. No Such Luck: South Dakota• 6. Will the Erie Bathtub Hold Water? • 7. The Mathematics

• a. How Much Money?• b. Whose Money? Where Do They Live?• c. Where the Money Goes: Taxes, Labor and Expenses, Profits • d. Externalities: Crime/Compulsives

• Bottom Line: A Negative Number • Annual Economic Loss: -$104,929,356

IT’S ABOUT TREES. NOT!!!!!!!!!!

THE SOURCE

PHD IN SCIENCE NOT REQUIRED

EVERYONE UNDERSTANDS HOW A BATHTUB WORKS

GAMBLING ECONOMICS IN A BATHTUB

WHERE THE MONEY COMES FROM AND WHERE THE MONEY GOES

1-2. Source of Gambling Funds; 3. Profits to outside owners; 4. Profits reinvested in casino location; 5.. Jobs; 6. Purchase of supplies; 7. Taxes; 8. The social cost of pathological gambling; 9. The costs of gambling-related crime, 10. The dirt ring-we don't see it if the water level is rising

From: William N. Thompson, Gambling in America: An Encyclopedia of History, Issues, and Society, Santa Barbara: ABC-Clio, 2001

8.

LAS VEGAS: ONE MODEL OF CASINO GAMBLING

THE SOUTH DAKOTA MODEL OF CASINO GAMBLING

WILL THE ERIE BATHTUB HOLD WATER?

• How much money?

• Gambling (only) revenues

4000 machines @75,000 = $300,000,000

• Five Million Visits@ $60 Per Visit

WHERE THE MONEY COMES FROM:

• *Base population Adult

• Erie County 280,000 196,000

• Crawford/Warren 133,000 93,000

• Ashtabula 103,000 72,000

• Chautauqua 138,000 97,000

• TOTAL 654,000 458,000

WHERE THE MONEY COMES FROM:

• Casino Visits: 6 for base= 2,748,000

1 for surrounding area= 2,252,000

• Play per visit: $60

• Revenue Source

Base Area 458T x 6 x 60=$164,880,000 Surrounding 2,252 x 60 =$135,880,000

WHERE THE MONEY COMES FROM:

• TOTAL 5 mil visits x 60= $300,000,000

• LOCAL DIRECT Discount 10% replacing current gambling =

$148,392,000 (49.7%)

• EFFECTIVE NEW MONEY= $151,608,000 (50.3%)

WHERE THE MONEY GOES

• Expenditures Stays/Area Leaves/Area• Tax-State 34% $0 $102,000,000• Local Tax 17% $51,000,000 $0• Labor 16.8% $34,632,000 $15,768,000• Machines 6.7% $0 $20,000,000• Other Supl 5% $7,500,000 $7,500,000• Building 4% $12,000,000 $0• Admin/adv 4% 8,000,000 4,000,000

• TOTAL EXP 87.8% $113,132,000 $150,268,000

WHERE THE MONEY GOES• Total Expenses 263,400,000 (87.8%)• Profits 36,600,000 (12.2%) LEAVES

Stays Leaves• Distrib 100% $113,132,000 $186,868,000

(37.7%) (62.3%)

• Local Money IN $148,392,000 (49.7%)• Money RETAINED Local $113,132,000 (37.7%)

• LOCAL LOSS (-$35,260,000)

• New Money OUT/IN $151,608,000 (50.3%)• Money LEAVING $186,868,000

• LOSS TO OUTSIDE +$35,260,000

LABOR EXPENSE (NOTE)

• (Explanation Labor 16.8% 50,400,000) 1200 jobs salary 30,000, fringes (include social security 12,000)minus 5,040,000 social securityminus 3,600,000 1/2 of fringe 20%minus 1,728,000 96% of 5% state taxminus 5,400,000 15% federal taxMINUS 15,768,000

• STAYS 34,632,000 LEAVES 15,768,000

EXTERNALITIES

• The Proposed Slot Machines represent a DIRECT economic loss of

• $35,260,000 to a local area of Erie County and four surrounding counties.

• But It’s Worse--There are Indirect Losses Too

EXTERNALITIES• Social Costs*• Crime @$17x 458T= $7,786,000 (Casino related crime costs local

residents $17 per year)• -----------------------• Pathological (.006--x 458T=2748 x $10,053)

=$27,625,644• Problem (.007--x 458T=3206 X 4926)

=$15,792,756• ------------------------• TOTAL............$51,204,400• (Econ.Loss 33.6% = $17,204,678; Govt.Loss 7.2% = $3,686,717)• *A "Social" Cost represents a loss that a gambler imposes on an unwilling

(non-gambling) fellow citizen. Some of the loss becomes a loss to governments, and some of the loss (33.6% of the social cost) becomes a loss for the entire society.

DIRECT AND INDIRECT ECONOMIC LOSS

• -35,260,000• -17,204,678• LOSS to ECONOMY DIRECT $52,464,678• But It’s Worse, Isn't it? Proponents LOVE to talk about

the multiplier effect of dollars as they spin around in the economy.

• Guess what? The economic loss represents money THAT WOULD HAVE SPUN AROUND if it would have remained in the Erie Area. A conservative multiplier of 2 tells us that by having a slot machine casino (again considering only the gambling revenue) in the Erie Area represents an annual economic loss of $104,929,356

• Economic Impact Loss -$104,929,356

IF THE BATHTUB DOESN’T WORK, IT’S “FAREWELL CRUEL WORLD.”