Psst, buddy. Forget about the Brooklyn Bridge, want to buy a casino in Iowa?
Governments have long been partners in the casino rackets. But in Davenport, Iowa, city officials are getting to ready to go all in and buy the Rhythm City casino outright for $46 million. Here’s the best part, the city has spun the deal to make it sound like it will not cost taxpayers anything. One story claimed the casino lowered the city’s risk.
Memo to Davenport taxpayers: watch your wallets.
Let’s start with the obvious, the $46 million purchase price has to come from somewhere. So to claim the casino is not going to cost taxpayers anything is bogus. It appears the city plans to float bonds to pay for the casino and use the winnings to finance the debt payments over 20 years. In other words, the casino purchase is going on the taxpayers’ credit card.
The bond payments are expected to be $3.5 million a year and the casino supposedly made $10.48 million in fiscal 2012 – before interest, taxes, depreciation and amortization. In order for the financing to work, the casino must clear at least $3.5 million a year. (Recall the old adage about if a deal sounds too good to be true.)
More to the point, there is no guarantee the casino will be profitable for 20 years. Gambling markets are becoming saturated as more states legalize casinos. If states or the federal government legalizes online gambling, many bricks and mortar casinos may suffer. Even if the Rhythm City casino is so profitable why are no private operators lining up to buy it? Not to mention, governments are not too efficient when it comes to running things.
But even if the casino does make enough to cover the bond payments for the next 20 years, all of the revenue will still come from taxpayers in the form of losing bets. In effect, that is a tax. In fact, studies show gambling is one of the most regressive taxes. That means the poorest residents in Davenport will largely fund the casino.
More broadly, what is the government doing in any private business, let alone the casino business? Studies show casinos lead to increases in crime, bankruptcy, divorce and suicide – all costs to taxpayers. Many convenience casinos like Rhythm City depend on local repeat and problem gamblers in order to survive. There are certainly no tourists jetting in to Davenport.
At a minimum, generating revenue from the losing bets of taxpayers sucks money out of the economy that would have been spent elsewhere in the local economy, such as a restaurants, movies and the mall. Floating bonds to pay for the casino creates other lost opportunity costs. Since casinos don’t produce anything but mainly gambling losers, it is hard for the city to argue this is about economic development.
To argue the casino is not going to cost taxpayers anything is pure folly. Any taxpayer who wants to bet otherwise, I have a bridge to sell you in Brooklyn and a casino in Davenport.