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ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA

ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA. William N. (Bauschard) Thompson Professor of Public Administration University of Nevada, Las Vegas 89154 wthompson@ccmail.nevada.edu 702-895-3319 Pennsylvania State University, Erie Erie, Pennsylvania August 23, 2005 Top Line:

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ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA

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  1. ECONOMIC IMPACTS OF SLOTMACHINES FOR THE ERIE COUNTY AREA William N. (Bauschard) Thompson Professor of Public Administration University of Nevada, Las Vegas 89154 wthompson@ccmail.nevada.edu 702-895-3319 Pennsylvania State University, Erie Erie, Pennsylvania August 23, 2005 Top Line: Annual Economic loss of $104,929,356 Bottom Line

  2. ECONOMIC IMPACTS OF SLOTMACHINES FOR THE ERIE COUNTY AREA • 1. It is About Trees. NOT! • 2. A Frank Sinatra Story • 3. Stonehenge, Rocket Science, Brain Surgery, Bath Tubs • 4. Las Vegas is Economically Successful • a. Inputs: History, Synergy • b. Outputs: Eyes on the Prize • 5. No Such Luck: South Dakota • 6. Will the Erie Bathtub Hold Water? • 7. The Mathematics • a. How Much Money? • b. Whose Money? Where Do They Live? • c. Where the Money Goes: Taxes, Labor and Expenses, Profits • d. Externalities: Crime/Compulsives • Bottom Line: A Negative Number • Annual Economic Loss: -$104,929,356

  3. IT’S ABOUT TREES. NOT!!!!!!!!!!

  4. THE SOURCE

  5. PHD IN SCIENCE NOT REQUIRED

  6. EVERYONE UNDERSTANDS HOW A BATHTUB WORKS

  7. LAS VEGAS: ONE MODEL OF CASINO GAMBLING

  8. THE SOUTH DAKOTA MODEL OF CASINO GAMBLING

  9. WILL THE ERIE BATHTUB HOLD WATER? • How much money? • Gambling (only) revenues 4000 machines @75,000 = $300,000,000 • Five Million Visits@ $60 Per Visit

  10. WHERE THE MONEY COMES FROM: • *Base population Adult • Erie County 280,000 196,000 • Crawford/Warren 133,000 93,000 • Ashtabula 103,000 72,000 • Chautauqua 138,000 97,000 • TOTAL 654,000 458,000

  11. WHERE THE MONEY COMES FROM: • Casino Visits: 6 for base= 2,748,000 1 for surrounding area= 2,252,000 • Play per visit: $60 • Revenue Source Base Area 458T x 6 x 60=$164,880,000Surrounding 2,252 x 60 =$135,880,000

  12. WHERE THE MONEY COMES FROM: • TOTAL 5 mil visits x 60= $300,000,000 • LOCAL DIRECT Discount 10% replacing current gambling = $148,392,000 (49.7%) • EFFECTIVE NEW MONEY= $151,608,000 (50.3%)

  13. WHERE THE MONEY GOES • Expenditures Stays/Area Leaves/Area • Tax-State 34% $0 $102,000,000 • Local Tax 17% $51,000,000 $0 • Labor 16.8% $34,632,000 $15,768,000 • Machines 6.7% $0 $20,000,000 • Other Supl 5% $7,500,000 $7,500,000 • Building 4% $12,000,000 $0 • Admin/adv 4% 8,000,000 4,000,000 • TOTAL EXP 87.8% $113,132,000 $150,268,000

  14. WHERE THE MONEY GOES • Total Expenses 263,400,000 (87.8%) • Profits 36,600,000 (12.2%) LEAVES Stays Leaves • Distrib 100% $113,132,000 $186,868,000 (37.7%) (62.3%) • Local Money IN $148,392,000 (49.7%) • Money RETAINED Local $113,132,000 (37.7%) • LOCAL LOSS (-$35,260,000) • New Money OUT/IN $151,608,000 (50.3%) • Money LEAVING $186,868,000 • LOSS TO OUTSIDE +$35,260,000

  15. LABOR EXPENSE (NOTE) • (Explanation Labor 16.8% 50,400,000) 1200 jobs salary 30,000, fringes (include social security 12,000) minus 5,040,000 social security minus 3,600,000 1/2 of fringe 20% minus 1,728,000 96% of 5% state tax minus 5,400,000 15% federal tax MINUS 15,768,000 • STAYS 34,632,000 LEAVES 15,768,000

  16. EXTERNALITIES • The Proposed Slot Machines represent a DIRECT economic loss of • $35,260,000 to a local area of Erie County and four surrounding counties. • But It’s Worse--There are Indirect Losses Too

  17. EXTERNALITIES • Social Costs* • Crime @$17x 458T= $7,786,000 (Casino related crime costs local residents $17 per year) • ----------------------- • Pathological (.006--x 458T=2748 x $10,053) =$27,625,644 • Problem (.007--x 458T=3206 X 4926) =$15,792,756 • ------------------------ • TOTAL............$51,204,400 • (Econ.Loss 33.6% = $17,204,678; Govt.Loss 7.2% = $3,686,717) • *A "Social" Cost represents a loss that a gambler imposes on an unwilling (non-gambling) fellow citizen. Some of the loss becomes a loss to governments, and some of the loss (33.6% of the social cost) becomes a loss for the entire society.

  18. DIRECT AND INDIRECT ECONOMIC LOSS • -35,260,000 • -17,204,678 • LOSS to ECONOMY DIRECT $52,464,678 • But It’s Worse, Isn't it? Proponents LOVE to talk about the multiplier effect of dollars as they spin around in the economy. • Guess what? The economic loss represents money THAT WOULD HAVE SPUN AROUND if it would have remained in the Erie Area. A conservative multiplier of 2 tells us that by having a slot machine casino (again considering only the gambling revenue) in the Erie Area represents an annual economic loss of $104,929,356 • Economic Impact Loss -$104,929,356

  19. IF THE BATHTUB DOESN’T WORK, IT’S “FAREWELL CRUEL WORLD.”

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