THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, January 8, 1995 TAG: 9501080095
SECTION: FRONT PAGE: A6 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Long : 132 lines
Riverboat gambling holds the promise of having a profound impact the economy of Virginia. The question is how.
Proponents of legalizing gambling say it would create jobs, bolster tourism, add work for the state's shipyards and construction firms and increase tax revenues.
Opponents concede there will be a short-term boom, but warn of gambling's long-term affects on a region's economy. Look at Mississippi, they say, where overbuilding has pushed several casinos into bankruptcy and led one to close last week.
The debate partly hinges on whether gambling is a benign activity. The casino industry argues that gambling is simply a form of entertainment and no more threatening than going to a movie. Opponents counter that gambling is a compulsive activity that can be addictive.
While that's a question for sociologists, the answer has economic implications.
There's no question that should the General Assembly approve riverboat gambling in its upcoming session, Virginia's economy will enjoy near-term benefits.
With no public investment, riverboat gambling would create thousands of jobs and provide work for the region's starving shipyards. Operators will spend tens of millions of dollars building boats and shoreside facilities.
A study last year for the Virginia Riverboat Council by Richard Cook, an economist at the University of Richmond, projected riverboat gaming interests would invest $200 million in the state, generating nearly $124 million in annual tax revenues and 24,000 jobs. Those figures are now considered low.
Some operators are promising to pay for infrastructure improvements needed to support their proposed facilities, and none is seeking tax breaks. Indeed, all seem willing to contribute generously to tax coffers.
Spirit Cruises Inc., which runs the Spirit of Norfolk, signed a contract with Norfolk for exclusive rights to use the city's berths near Waterside to dock riverboats, promising the city 8 percent of the operation's projected gross revenues of between $50 million and $100 million a year.
But some question whether those contributions will cover the additional future economic and social costs associated with gambling.
``It's a classic boom-and-bust economic cycle,'' said John W. Kindt, an economics professor at the University of Illinois. ``There's a big boom at the beginning, but there's an equally big bust later on.''
Proponents cite job-creation as a key benefit. Spirit Cruises said it ultimately will employ between 1,000 and 1,200 people in its proposed riverboat operation. Hollywood Casino Corp. has said its planned $194 million project in Hampton will employ between 2,000 and 2,500 in jobs such as dealers, food service, telemarketing, clerical and management.
The average annual wage for employees in the casino industry is $24,000, including tips, according to Hollywood Casino. That's well above the $20,540 average income for service workers in Hampton Roads, according to the Hampton Roads Planning District Commission.
Hollywood Casino has said it can hire workers with no more than a high school diploma and give them the training to work effectively in its waterfront pavilion and cruise vessels.
Riverboat gambling would also help the region's shipyards. ``If riverboat gambling is approved, Hampton Roads shipyards can expect an immediate shot in the arm from new construction,'' said Doug Forrest, vice president at Colonna's Shipyard Inc., a small operation on the Elizabeth River in Norfolk.
Hollywood Casino has said it will ask Newport News Shipbuilding to build its boats in a project that could be worth up to $62 million for the giant Peninsula yard. Spirit Cruises President Robert Shaw said his company would probably build its vessels locally at a cost of $20 million each.
Both projects would also have substantial shoreside facilities that could give business to local builders.
Spirit is proposing a $20 million ticketing and waiting area that would rely on the bars, restaurants and stores of Waterside and downtown Norfolk to meet its customers' other needs.
Hollywood Casino is proposing a full-scale resort with a pavilion offering food service and shopping, a large amphitheater and a hotel.
``I think on a net basis this will turn out to be a positive for Hampton Roads,'' said John Whaley, economist for the Hampton Roads Planning District Commission.
Riverboat gambling also could attract people to visit other tourist attractions in the region, Whaley said.
``It might be a valuable addition to the mix, to keeping our edge as a tourist destination,'' said David Garraty, an economics professor at Virginia Wesleyan College.
Garraty doesn't expect riverboat gambling to be a major boon, though.
``I wouldn't expect tremendous net gains,'' he said. ``They seem to tend to be somewhat disappointing in the long run.''
Kindt made a case against riverboat gambling Thursday at breakfast meeting of the Norfolk Federation of Business Districts. Expenses for his trip to Virginia were paid by Virginians Deserve Better, an anti-gambling lobbying group.
Gambling takes money out of a region's pre-existing economy and out of its pre-existing tourism, Kindt said. ``It's often been described as a black hole,'' he added.
The tax revenues casinos generate don't cover future costs, including increased law enforcement expenses, unexpected infrastructure needs, the costs of government regulation and increased demands on the social welfare system, according to Kindt.
Those costs can ultimately detract from a region's quality of life, he said.
A study on the impact of casino gambling by the Florida Department of Commerce, released in the fall, broadly condemned gambling's potential impact on that state's economy. In November, Florida voters defeated a referendum that would have allowed casino and riverboat gambling throughout the state.
That study concluded that ``a reasonable concern exists that perceptions of the less desirable aspects of casino gambling might diminish Florida's overall image for tourism and economic development. Instead of drawing additional economic activity to the state, casino gambling would bring about shifts in where and how discretionary income is spent within the state.''
Like Florida, southeastern Virginia has a strong tourism base that has carefully cultivated an image as a family vacation destination. However, the proposed Virginia law calls for more limited gambling venues than the failed Florida referendum.
Another long-term downside could come from overbuilding. With Norfolk, Portsmouth, Newport News and Hampton all vying for riverboat operations, there may end up being too much capacity for the market to bear - as has happened in Mississippi. That could result in downsized projects and possibly even some operators' projects failing.
Gambling in some form is present or allowable in 24 states, and many others are considering it. As gambling operations become more pervasive nationwide, gambling could lose its luster as a tourism draw.
For now, though, the casino companies are painting a rosy image of Virginia's future with riverboat gambling, and the lawmakers and communities that stand to benefit are already carving up the anticipated tax revenues.
Del. Jerrauld Jones, D-Norfolk, the bill's sponsor, says the added state income could be used to finance Gov. George Allen's parole reform and prison building program. Others see it as a potential source of money for education.
Those tax windfalls are at least a couple of years off and could be unattainable if opponents of riverboat gambling are correct.
``It's not a panacea,'' said Bill Kincaid, a lobbyist working work Virginians Deserve Better. ``It's a recipe for destruction.'' by CNB