Episode 23: What will new casinos mean for Virginia?

As we step away from national politics and the presidential election, it's worth looking at other referendums and ballot initiatives that passed on a state and local level. In their most recent election, Bristol, Danville, Norfolk, and Portsmouth approved casinos entering their cities in landslide votes. What might an influx of casinos mean for Virginia's economy? To find out, we sat down with Ryan Murphy, a reporter at the Virginian-Pilot, and James V. Koch, an economist and former president of the Board of Visitors of Old Dominion University.

Episode Transcript

Nathan Moore: This is Bold Dominion, an explainer for state politics in a changing Virginia. I’m Nathan Moore. 

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So this podcast started back in January, which feels like a really long time ago. Pretty much all year long, we’ve been talking about a General Assembly session or that interminably long special session. Or we’ve been knee deep in national politics, with the presidential and congressional elections that just took place.

Now that those are all over, the Bold Dominion crew took a breath and looked around. We noticed that four different Virginia cities each approved ballot measures this month to build new casinos in Virginia. You know casinos -- the card games, slots, the whole nine yards. The appeal of possibly winning a bunch of money without really working for it. It turns out, a bunch of cities really want casinos for basic ally the same reason: hitting it big and winning some quick gains.

James Koch: I'm not down on casinos necessarily because I think they're completely sinful and we ought not have them. Rather, I'm viewing this as an economist and saying: "Gee, maybe the net economic impact with ease is very small or even zero." What they are, however, is an efficient way--a less objectionable way--for cities and states to collect tax revenue.

NM: That’s James V Koch. He’s an economist and former president of the Board of Visitors of Old Dominion University. We’ll hear more from him later in the show. In this week’s Bold Dominion, guest producer Charlie Bruce explores what’s coming next for new casinos in the Old Dominion. 

Charlie Bruce: So I was really curious about the ballot referendum passed in four cities this most recent election. Bristol, Danville, Norfolk and Portsmouth approved casinos entering their cities by landslides. The deals between local city councils and the casino developers varied by locality: in Danville the national chain Caesars will operate, while in Norfolk, the Pamunkey Tribe will operate. But they all present similar kinds of economic opportunities and challenges. I talked to two people this week who researched the impact of casinos locally and statewide. Ryan Murphy is a reporter at The Virginian-Pilot in Hampton Roads.

Ryan Murphy: So last year, I did my best as a sort of layman to sort through the scholarship on economic impacts. And, you know, the backers of these casinos have their own explanations of what the economic impacts will be and the cities and the state have all done their individual studies and stuff like that. When a politician is lined up to support the casino, you know, state delegates--Jay Jones was a big booster of the casino in Norfolk. But there been a handful who have sort of been against it. Andria McClellan, who is a councilwoman in Norfolk and who has announced that she's sort of exploring a run for Lieutenant Governor, she has been probably the sort of most visible opponent of the whole deal on a lot of different axes. You know, criticizing the actual deal that the city made, the process of the deal. You know, the hiring standards that were built into the deal with variable enforcement from the city about how, you know, basically the Pamunkey Indian Tribe, which will operate the Norfolk's casino, has sort of committed to hiring as many local and minority staff as possible, but there's no enforcement mechanism in the contract or anything like that. So it's sort of at their word, and at their best effort.

CB: For a moment put on your politician hat, and you’re selling the positives, the pros of the casinos. What are you telling the voters before they go to the polls?

RM: Right, so if I'm a pro-casino politician, my pitch is: look, this is going to be thousands of new jobs, millions of new dollars for your schools, your roads, you know, your police your fire. You know, it's going to be a big new centerpiece for--in Norfolk at least it's sort of at the tail end of an area that's expected to be majorly redeveloped in the next decade. So it's sort of ties into that whole thing. You know, it's a big pitch for a huge brand new shiny project, that it's going to revitalize stuff.

CB: Right. And if you are the anti-casino politician--put on that hat for a moment--what are you telling the voters before they go to the polls?

RM: What the opposition here was saying was, you know, the way the deal was made was sketchy. The, you know, promises that the operators are supposed to be keeping are not really enforceable by the contract, the hiring stuff primarily. You know, there are issues with some of the history of the--the Pamunkey Indian Tribe has a history of segregationist laws. And some people have alleged that that segregation has continued. So there were sort of a lot of axes on which they were arguing. I didn't hear a lot of argument about the economics, saying it's not going to be good for us. You know, I think everybody sort of acknowledged that it would be a net positive economically. But, you know, how much is a good question.

CB: So what you're saying is that the pro-argument is, generally: "this will create new jobs, this will increase the tax base." And the con-argument is: "there's no accountability mechanism that these things are actually going to happen." So in other words, it's kind of like a toss-up. Like, we don't really know what is going to happen if we bring in the casino. It could be a net positive, or it could be a net negative.

RM: Sure. I mean, I don't I don't want to pretend like I know for sure. I'm not an economist. But yeah, I mean, the research that I did sort of indicated that the places that enjoyed the most success and prosperity from a casino like this are places where there's not a lot of casino competition. They're typically more rural areas with fewer sort of job options, and places where a casino like this wouldn't make up a much larger share of the, you know, economic landscape there. And so, you know, it's an open question in Norfolk with a competing casino right next door, you know, an already pretty substantial job market in this region, although there can always be more jobs, I guess. And a pretty, you know, strong middling economy, you know, how much it'll benefit.

The story that I wrote last year, but it really seems like, you know, the bulk of the credible stuff that I was reading says it's generally a wash. You know, if you're, if you're going to net several million dollars, you're going to end up putting out several million dollars for, you know, increased police staffing, increased treatment of gambling addiction, you know, whatever else. The projections from the city and the politicians and the developers themselves obviously has been nothing but roses and sunshine. You know, there's been very little discussion of the worst-case scenarios, where, and this is something again, that Andria McClellan brought up several times was like" "So what if they, what if they operate for a couple of years and then go bust and we're left with sort of an empty casino building or, you know, a really underperforming casino?" And that didn't really get a whole lot of discussion.

NM: Ryan Murphy is a reporter at the Virginian-Pilot in Hampton Roads. We’re going to take a short break, but we’re back in just a moment with more about the possible economic impacts of casinos in Virginia.

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NM: You’re listening to Bold Dominion, a state politics explainer for a changing Virginia. Visit us online at BoldDominion.org. Have a friend who’s trying to figure out Virginia state politics? Tell them about this show. And then subscribe in Spotify, Apple Podcasts, and wherever fine podcasts are served up.

Bold Dominion is a member of the Virginia Audio Collective, online at Virginia Audio dot org. Check out all the podcasts from the collective, including Intersections in Public Service. The Weldon Cooper Center at UVA takes a look at the most pressing issues facing our community, how public servants of all kinds are trying to address them, and what you can do to help. That’s Intersections in Public Service, available at VirginiaAudio.org.

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NM: So let’s get down to the brass tacks… how will four new casinos in Virginia all make money? Will their cities see much economic benefit? Bold Dominion guest producer Charlie Bruce has more.

CB: Developers and politicians focus a lot on the positives of casinos, the jobs it'll will bring in, the potential for revitalizing a neighborhood. But when it comes to sober research and analysis, you're not going to find a lot of people, except for one Virginia expert. James V. Koch is an economist and former President of the Board of Visitors at Old Dominion University.

JK: Casinos have been a live topic in Virginia for several decades. We do a State of the Region report and a State of the Commonwealth report. And so it was really natural that we picked this up because so many people were talking about it. And there was then and is now quite a bit of popular support for casinos. So it seemed a natural topic that we would spend some time on.

CB: And why is there so much popular support for casinos?

JK: Well, I think a significant proportion of the population likes to gamble. I've been known to appear in a casino myself. So I'm not down on casinos necessarily because I think they're completely sinful and we ought not to have them. Rather, I'm viewing this as an economist and saying: "Gee, maybe the net economic impact of these is very small or even zero." What they are, however, is an efficient way, a less objectionable way for cities and states to collect tax revenue. It's a way that people pay taxes, more taxes than they were before. And they don't complain about it. So this is the best of all worlds for a city, even if some people have gambling addiction problems, even if there are law enforcement problems connected to casinos. And even if their net economic impact is zero. If, let's say a city such as Norfolk, starts a casino, it's going to collect more tax revenues. And so the city fathers who are making budgets, they like that.

CB: So let's say you've been invited to a Norfolk City Council meeting to speak on your research regarding casinos. What are you going to tell the councilors before they propose adding this to the ballot for a referendum?

JK: Well, I would say to them, it's mathematically impossible for Norfolk to get any net economic gain out of a casino unless it attracts people from other cities, because it's only attracting Norfolk gamblers. And they're simply redistributing money they already have. So they need to attract people from other cities. Well, if Portsmouth also has a casino that reduces the extent to which Norfolk can succeed. But as long as Virginia Beach and other cities around don't do that, there's the possibility then that Norfolk will gain some economic development at the cost of the other cities. If you look at the region as a whole, probably the region is all Hampton Roads, that's a net zero, because I don't think many people are going to drive from Richmond to Norfolk simply to patronize a casino. There will be some, but not many.

CB: Right, and you yourself and your research have said that, basically, the most money per year a casino will ever make is in its first year. But then year by year, once the novelty wears off, they're bringing in less and less money per year. So how do you think that these localities will try and bring in more people and not fall into the same trap that so many casinos tend to?

JK: Well, the usual routine is to come up with new games, more flashy possibilities, and sometimes develop attractions next to the casino. We shouldn't downplay that possibility--that around the casino might spring up some other things that are also attractive. So it's not a complete zero in terms of possibilities. But the record does show and all the surrounding states casino revenues fall off noticeably after a few years.

CB: Right, right. And it also seems--one of the criticisms that some have made in regards to how much money these casino developers claim will bring into the area is that there's no real accountability measure to make sure that they are actually going to live up to the number of jobs they will create, or the revenue that will go into the city's coffers. So how do you imagine that the local politicians can create a mechanism of accountability to make sure that, you know, in five years, these places don't close down?

JK: While you're talking about one of the perennial problems of government. We don't have to talk about casinos, we could talk about nearly any project of significance and it's always difficult to ascertain what the actual impact is, especially if it's spread out over time. So I wouldn't predict any great results there in terms of tracking that down. But we also, again, have to come back to sort of the mathematics of this. If Norfolk gets more jobs, maybe that means fewer jobs in Virginia Beach, and if Norfolk casinos get more jobs that may mean fewer jobs inside Norfolk for restaurants and other attractions that people then don't pay for because they're going to the casino. So there are distributional effects where some people benefit and other people get hurt.

CB: Right, right. It's not--unless there are people who are coming in from outside of the locality to bring them revenue, you're just sort of moving money from one part of the city to another, or one part of the region.

JK: A positive over the longer time horizon is the Hampton Roads Bridge Tunnel is being expanded to four lanes. Now that's 2025 or 2026, but when that occurs, it is then more possible to contemplate people driving from Richmond and places farther off. By the same token, the highway connections from Hampton Roads to the South, to places like Raleigh, Durham, and so forth aren't very good at all. And so that means that there aren't going to be hordes of people coming up out of North Carolina to patronize the casinos. But improved transportation would be helpful, because you may have heard Hampton Roads referred to as being at the end of the longest cul-de-sac in the world. Well, that's an exaggeration. But it underlines the extent to which there's really only one way to get there from places north and northwest.

CB: Right, right. So there is a transportation issue that needs to be taken into account when thinking about the tourism that's going to come into the region. There's not really a lot of ways to get to the area. So next year, Richmond city is going to be putting the casino referendum on the ballot. And before that happens, what would you tell the newly elected City Council in Richmond to consider before they add this proposal?

JK: Well, foremost would be if there are already four other casinos and Virginia, the chances of Richmond really doing well have gone down substantially. The more casinos there are in Virginia, the less probability is that any single casino is really going to do well. Now, having said that, Richmond then would be the farthest north casino and does have much better highway transportation in and out than any of the other places we're talking about. So Richmond might be a little bit different, then. If Richmond gets a casino, then places like Danville and even Portsmouth and Norfolk probably are kind of suffer.

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NM: Thanks to guest producer Charlie Bruce for the coverage this week. And thanks to our guests, James V. Koch and Ryan Murphy.

My name’s Nathan Moore, and I’m the host of Bold Dominion. Huge thanks as always to our producer Aaryan Balu. Find this show online at BoldDominion.org. Go ahead and subscribe… it’s just a click away.

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