Non-Environmental Cost-Benefit News

MAINE VOICES: Douglas Muir
Douglas Muir of Kittery (e-mail: dwmuir@mailaps.org) is a retired federal employee who worked for over 30 years in the field of statistical analysis of scientific data. He is a leader of No Slots for ME!

In a column entitled, "Bangor slot machines will benefit that city and all of Maine" (Oct. 31), Bangor Mayor Daniel J. Tremble wrote that the project to build a racetrack casino in Bangor "represents an enormous economic development opportunity, both for our city and the state of Maine as a whole."

He went on to say "We expect that 400 to 500 new jobs will be created."

I have to disagree on both counts. The Bangor casino will have a visibly negative effect on both jobs and the economy.

The mayor's optimism may be based on the March 2003 study prepared by Prof. Jonathan Rubin and his colleagues at the University of Maine. That study was paid for by a firm with an interest in the racino at the time.

Reporter Dawn Gagnon, writing in the Bangor Daily News on May 23, 2003, stated that the Rubin study "was commissioned by Capital Seven LLC, owned by Nevada businessman Shawn Scott. A spokesman for Capital Seven said the study cost about $20,000."

A shortcoming of the Rubin study is the fact that a number of major negative impacts are simply omitted. According to the study, ". . . issues that are not addressed in the report include, among other things, the effects of a racino on the local labor market, added demand for public services and the potential social costs associated with crime and compulsive gambling. Further, the study does not assess the effect of the racino on existing state lottery revenues."

Especially important is the omission of the financial costs associated with compulsive gambling. Probably the world's leading independent expert on casino economics is Professor Earl Grinols of the University of Illinois Department of Economics.

In his recent book "Gambling in America: Costs and Benefits," published by Cambridge University Press, Grinols writes, "The costs of pathological and problem gambling are comparable to the lost output of an additional recession in the economy every four years."

So much for the "enormous economic development opportunity" of a racino.

The Rubin study does address the important question of whether or not the projected casino revenues can be considered as "new" money available for truly new job creation.

The short answer is "no." According to the authors, "A recent survey of in-state gamblers at Missouri casinos found that 64 percent of the gamblers' casino expenditures represented reduced spending that otherwise would have been made at other businesses within the state."

Because of Bangor's location, the cannibalizing of revenues from in-state business will likely be higher than in Missouri. We can safely conclude that an increase of $75 million per year in gambling revenues in Bangor will reduce revenues by at least $48 million per year in other Maine businesses.

It is crucial to consider the jobs impact of this lost revenue. A useful fact, also taken from the Rubin study, is that in 2000 the Bangor economy overall generated $3 billion in total sales and supported nearly 45,000 jobs.

In other words, in that year each $1 million in sales supported, on average, 15 jobs. Based on this figure, the loss of $48 million in revenues will result in the loss of 720 jobs in the market area of the casino.

And how many jobs will be gained? Again quoting the Rubin study, "The developers of the proposed casino estimate that the combined operations of the racetrack and casino will generate annual gross revenues of $75.3 million, employ 314 people, and pay $5.3 million in wages and salaries."

At least 720 present jobs will be eliminated by the impact of the casino, and only 314 jobs will be created. The operation of the casino in Bangor will result in a net loss of over 400 jobs!

By the developers' own figures, the casino will produce only 4.2 jobs per million dollars of sales, as compared with the Bangor-area average figure of 15 jobs per million dollars of sales.

The difference between these two figures arises from the fact that slot machine gambling is highly automated activity. The primary "service," if you want to call it that, is provided by a mechanical device, not a human employee.

In addition to a host of other negative impacts, a Bangor casino would bring a weakened economy and a net loss of jobs to the state. Our elected officials should carefully consider whether or not they really want to bet their futures on this tired horse.