Bangor Casino Will Cost Jobs

Douglas Muir

December 7, 2004

Bangor Mayor Daniel J. Tremble was recently quoted as saying that the project to build a racetrack casino in Bangor "represents an enormous economic development opportunity, both for our city and the state of Maine as a whole." He went on to say "We expect that 400 to 500 new jobs will be created."

I have to respectfully disagree on both counts. The racetrack casino will have a visibly negative effect on both jobs and the economy in Maine.

The Mayor's optimism may be based on the March 2003 study prepared by Prof. Jonathan Rubin and colleagues at the University of Maine. As noted by Dawn Gagnon, writing in the Bangor Daily News on May 23, 2003, the Rubin study "was commissioned by Capital Seven LLC, owned by Nevada businessman Shawn Scott. A spokesman for Capital Seven said the study cost about $20,000."

Like most economic and marketing studies prepared at the request of gambling developers around the country, the Rubin study does not dwell on potential negative impacts. According to the authors of the study, "... issues that are not addressed in the report include, among other things, the effects of a racino on the local labor market, added demand for public services, and the potential social costs associated with crime and compulsive gambling. Further, the study does not assess the effect of the racino on existing state lottery revenues."

Especially noteworthy is the lack of consideration of the financial costs associated with compulsive gambling. Probably the world's leading independent expert on casino economics is Prof. Earl Grinols. In his recent book "Gambling in America: Costs and Benefits," published by Cambridge University Press, Prof. Grinols writes "The costs of pathological and problem gambling are comparable to the lost output of an additional recession in the economy every four years." So much for the "enormous economic development opportunity."

To its credit, the Rubin study does address the important question of whether or not the projected casino revenues can be considered as "new" money available for truly new job creation. The answer is "no." According to the authors, "A recent survey of in-state gamblers at Missouri casinos found that 64 percent of the gamblers' casino expenditures represented reduced spending that otherwise would have been made at other businesses within the state." Because of Bangor's considerable distance from the state's borders, the diversion of revenues away from in-state business will likely be higher here than in Missouri. Therefore we can safely conclude that an increase of $75 million per year in gambling revenues in Bangor will reduce revenues by at least $48 million per year in other Maine businesses.

It is crucial to consider the jobs impact of this lost revenue. A useful fact, also taken from the Rubin study, is that in 2000 the economy in the Bangor region generated $3,050 million in total sales and supported nearly 45,000 jobs. In other words, in that year each $1 million in sales produced, on average, 15 jobs. Based on this figure, the loss of $48 million in annual revenues will result in the loss of 720 jobs in the market area of the casino.

And how many jobs will be gained? Again quoting the Rubin study, "The developers of the proposed casino estimate that the combined operations of the racetrack and casino will generate annual gross revenues of $75.3 million, employ 314 people, and pay $5.3 million in wages and salaries."

At least 720 present jobs will be eliminated by the diversion of revenues from other in-state businesses, and only 314 jobs will be created. As a result, the operation of the casino in Bangor will result in a net loss of over 400 jobs.

By the developers' own figures, the casino will produce only 4.2 jobs per million dollars of annual sales, as compared with the Bangor-area average figure of 15 jobs per million dollars of sales. The difference between these two figures arises from the fact that slot machine gambling is highly automated activity. The primary "service" is provided by a mechanical device, not a human employee.

In addition the personal pain associated with the inevitable increase in gambling addiction, a Bangor casino would bring with it a weakened economy and a net loss of jobs to the state. Our elected officials would be well advised not to bet their political future on this tired horse.