Casinos as Economic Development: A Review

As a part of GCI’s Real Time Chicago lecture series, GCI welcomed assistant professors Michael Wenz and Ryan Gallagher from the Department of Economics at Northeastern Illinois University to discuss the increasingly popular proposal of using casinos and gaming expansion as a strategy for economic development in suburban Chicago.  Gaming expansion has been an ongoing conversation in the Illinois General Assembly and in suburbs across the region for the past few years and as the state and local jurisdictions continue to face declining tax revenues from other sources- the easy to tax nature and high tax rates of the gaming industry provide a potential remedy to fill that revenue gap.

Wenz and Gallagher’s numbers show that casino and gaming revenue, patronage, and tax revenue generated continue to grow in the state of Illinois over time.  This data set the framework for the underlying assumption of their presentation, which was that casinos will continue to grow, so for the professors-the overarching question is not about whether we should continue to expand gaming, but rather how should we do this.  Under this consideration of the how of casino expansion, their research seeks to explore two primary questions: 1) which locations will best generate revenue for the state; and 2) which communities stand to benefit the most from casino expansion.  As you’ll see in their presentation, these two questions don’t always have the same answers.

For me, the key takeaways of their presentation were the questions that Gallagher raises about possible cannibalization effects of more casino licenses (locating casinos too close together causing them split patrons- which is bad for existing casinos), Wenz’s thoughts about the difficulty of measuring the costs and the benefits of casino location from the perspective of a receiving community, and also Wenz’s questions about how casinos may actually cannibalize existing local businesses upon arrival- shifting consumption from local restaurants, bowling alleys, movie theaters, etc. to the new casinos.  While their presentation did not focus on the politics of casino location (which I believe might be the most important lens to use for analysis of this particular legislation), the conversation did suggest an explanation for why decisions might not actually be based on the research on cannibalization and/or a cost-benefit analysis of location decisions: the establishment of new casinos will generate new tax revenue, which regardless of how much is generated- new tax revenue is always better than zero for a state and municipalities that are in dire need of money.

The gaming expansion debate is back for another round this year in the General Assembly.  After being tapped at the last minute in the 2013 spring session and failing to get a bill out of the House, State Rep. Robert Rita (D-Blue Island) has been holding state-wide listening sessions and meetings to gather input on how to structure a new bill- although spectators note that the bills will probably look very similar to last year[1].  The politics of site selection continue and it will be interesting to watch as the legislation continues to develop, especially in an election year of a governor who has been very involved in this legislation since its inception.

GCI’s Real Time Chicago Spring 2014 is focused on Planning and Policy in Suburban Chicago.  For more information about the remaining lectures in the semester, visit our events calendar.   To catch up on events that have already happened, check out GCI’s YouTube channel.

About the Author:
Megan McKenna-Mejia, GCI Research Associate: joined GCI in 2013 and brings extensive research and policy experience in the field of urban planning. She received her Master’s degree in Community and Regional Planning from the University of New Mexico.