We Are Never Ever Ever Ever Getting an Independent Casino Economic Impact Study

For about two years, my friend and former colleague Isaiah Thompson drove himself to near neurosis over casinos in the city.

During his time at City Paper, he covered casinos more than any other subject. He examined how slot machines were designed to be as addictive as scientifically possible; the backroom deals that allowed them to pour onto the waterfront; the surge of anti-casino agitation in response, and the anti-anti-casino sentiment that followed.

In April 2009, Thompson’s fixation reached an apex when he described the fixation itself, the unique grip in which casinos held him despite his focus becoming increasingly esoteric. “[It’s] not awe that fuels my obsession with the casinos. It’s the source of all that money that keeps my eyelids twitching at night,” he wrote. “In my reporting, I read studies about who those patrons are, how that money is extracted and what the consequences can be for communities. It was all pretty hard to swallow.”

The article linked above includes an exchange between Thompson and Terry Gillen, the deputy mayor who at the time was the mayor’s point person on casinos. By that point in their relationship, the dynamic between Thompson and Gillen had become almost perfunctory, a foregone point-counterpoint the conclusion of which both parties knew in advance—Thompson would launch a pointed question about the casinos’ impact and externalities, Gillen would parry, rinse and repeat. But when it came to an economic impact study slated to be completed by the city, the exchange was a little different.

When I called Gillen last December, she said there was a contract out for the city to conduct its own study. But when I called her again last week to ask if the impact study was complete, her tone had changed.

“We’re not doing one,” Gillen said. “There is no economic impact study.” The contract, Gillen said, was merely to study the financial particulars of the city’s leasing arrangement.

I spoke to Gillen about this a few months ago and she told me she didn’t remember the study at all and handed me off to Alan Greenberger, who has since taken over as the administration’s casino flak. Greenberger said he would look into it. When I followed up, his chief of staff, Luke Butler, said the city had recently commissioned a study to inform its recommendation of the second casino. I asked Butler again what happened to the casino impact study Thompson mentioned.

In an email, Butler dispatched the issue and said Greenberger wasn’t Deputy Mayor at the time and so his focus has been on the second casino.

Thompson doesn’t recall the particulars of a four-year-old conversation, either. Either Gillen had misunderstood what the city was doing with the study, or the city had once intended to actually determine the impact of SugarHouse, and for some reason, it never did.

***
From the time the casino-enabling legislation was signed in Harrisburg to the painting of the last line in SugarHouse’s parking lot to today—as the Pennsylvania Gaming Control Board processes the input and ire of lobbyists and communities to select the winner of the city’s remaining casino license—the economic impact of casinos on Philly has remained a complete abstraction, a cloud floating above the casinos’ opponents and advocates who each see in it unequivocal evidence for their position. The advocates see net growth and jobs and market share captured from Atlantic City; the opponents see an insatiable cannibalizer of existing businesses that burdens the entire local economy.

It’s easy for each side to argue their point because no post hoc study of SugarHouse has ever been done. The only studies conducted took place in 2007: one by casino hopeful Foxwoods through Econsult, the other by Fred Murphy, then a professor at Temple University School of Business. The Econsult study predicted that Foxwoods would bring growth; Murphy’s study said the opposite.

“I was totally neutral on casinos until I did this study,” Murphy told me from Riyadh, where he currently works as a consultant. “I thought that if someone was stupid enough to gamble, that’s their problem. But I had no idea about the addiction thing.”

In addition to “the addiction thing,” Murphy factored in the waterfront thing, the crime thing, and a few other things. The result was a PowerPoint of gloom. His study concluded that 27.6 cents of every dollar spent on casinos would leave Philly and that casinos would ultimately net a loss of more than $29 million for the city.

But no one has ever verified the accuracy of either study, which is ostensibly what the independent study reported by Thompson was supposed to do—to finally put to bed the argument of whether or not casinos resulted in a net benefit.

The only recorded mention by Gillen of an independent study—aside from in Thompson’s article—came during testimony to City Council in 2008. During that testimony, Gillen said the administration supported a burdensome bill drafted by Councilpersons Frank DiCicco and Marian Tasco that required Foxwoods to hire an independent consultant to study the casino’s economic impact within a two-mile radius of its prospective South Delaware Avenue location.

The study “may have been something my staff or I conjured up to slow this thing down,” DiCicco told me. Specifically, it was designed to displace Foxwoods from the waterfront and push it to the Eighth and Market location, which DiCicco supported and which it ultimately sought before its license was revoked. (DiCicco is now a consultant for Market East Associates, the current contender for Eighth and Market).

But it would have been difficult for Thompson or Gillen to have mixed up an ex ante study on Foxwoods with a post hoc study on SugarHouse. DiCicco, asked if he knew of anything besides the Foxwoods study, said simply, “I don’t know.”

***

Studies on casinos tend to show that unless the city becomes Atlantic City or Las Vegas, they’re revenue-sappers. Even in the case of AC, as seen in recent years, basing a town on gambling can have severe consequences once revenues take a plunge—a plunge, in this case, arguably based on increased competition from neighboring states like Pennsylvania.

“If the city hasn’t done it, it’s not because it’s too difficult,” said Roger Noll, a professor emeritus of economics at Stanford who has contributed research supporting the near unanimously held position that sports stadiums don’t create economic growth. Casinos, he told me, are relatively similar, except that they have a greater possibility of attracting tourists than the stadiums.

Primarily, there are two figures to plug into the equation: First, how many people came to Philly because of the casino who wouldn’t have come otherwise? And how many people spent money at SugarHouse who would have spent it elsewhere in the city if SugarHouse didn’t exist?

Take that data, said Noll, factor in other sources of revenue like host fees, throw it all into an equation, and you’re done. “Within a week, I would get an army of undergraduates to get the data,” he said, “and I’d finish it within a month.”

By now, the issue may be moot. But then again, it may not be. Whether SugarHouse helps or hurts the economy would inform a city council that relentlessly stalled the casino’s construction the first go-round. Without that kind of information, the decision to stall or expedite the next one rests on anecdote rather than data.

I pressed Butler, Greenberg’s spokesperson, one last time about the original study. I told him that an economics professor at Stanford estimated it would take a month to complete and asked him why a post hoc study of SugarHouse hasn’t been conducted.

“The economic impact of SugarHouse is being considered as part of the analysis we’re doing of the six proposals currently before the Gaming Control Board,” he wrote back.

“So the city is doing an independent economic study of SugarHouse now?” I replied.

“The study will discern what kind of revenue SugarHouse is generating,” he wrote back. “It won’t look at where patrons are coming from and whether they would have spent money elsewhere in the city if it didn’t exist.”

Which is to say, no, the city isn’t. It just seemed for a moment like they might.

Thompson and I spoke about his recollection of the 2009 conversation with Gillen. I asked him again if he remembered anything.

“All the questions I was asking and [that] those community activists were asking [about economic impact]—those were all good questions,” he said. “And they all seemed to deserve good answers, and the city sure doesn’t seem to have supplied any good answers. But in a sense, those questions really skirt around what seems to be the larger question, which is, there are studies and there is evidence that slot machine gambling is harmful to consumers. Not just so-called problem gamblers, but to [anyone] who use the machines. Maybe that’s true, maybe that isn’t true. But it’s worth knowing before we set up rooms full of them.”

In other words, what nagged at him, the fixation that inspired a meta-article, wasn’t potentially lost municipal revenue. It was that the entire dialogue surrounding casinos—whether they provide a net benefit, or impede waterfront development, or increase crime—is a distraction from the real, likely possibility that casinos are pernicious and sophisticated and hurt the people who live here, regardless of their impact on the city’s treasury or the regional economy. And in that consideration, the discussion of whether or not an economic impact study has been done at all seems meek and granular—a straw man that obscures a darker underlying truth about casinos themselves.

As to the study itself?

“Unfortunately,” he said, “I can’t help you there.”