BETTING ON THE FUTURE
JULY 15, 1996
In the past two decades, revenue from gambling has increased 2800 percent. With this dramatic growth in the industry, criticism of gaming's impact on the moral, economic and social fabirc of local communities has also increased. Congress is now debating whether to create a commission to look into gambling's effect on localities. Following a background report by Spencer Michels, Margaret Warner leads a debate over the pros and the cons of legalized gambling.
MARGARET WARNER: Now for a discussion on the growth of gambling, we turn to Frank Fahrenkopf, president and CEO of the American Gaming Association, a Washington-based lobbying group for the gambling industry; Bernie Horn, political director of the National Coalition Against Legalized Gambling, the grassroots organization that fights to keep gambling from expanding in states and communities; and two mayors of cities that have recently introduced gambling, A.J. Holloway, the mayor of Biloxi, Mississippi, where Las Vegas-style gambling is flourishing on river boat casinos, and Charles Tooley, the mayor of Billings, Montana, where gamblers wager on computerized card games and bingo, keno, and the fast growing game of video poker. Welcome, gentlemen.
Spencer Michels reports on the explosive growth of the gambling industry.
Let's try to put this growth of gambling in some perspective and just get an idea of the scope of it. If it's $480 billion, as we just heard, that's $2,000 for every man, woman, and child in America. Why, Frank Fahrenkopf, are we seeing this explosive growth in this, in this pastime?
FRANK FAHRENKOPF, American Gaming Association: I think it probably really began to start in 1963 if you had to pick a significant date, because that's the year that New Hampshire was the first state to authorize a state lottery. As was correctly reflected in the report, there are now 36 states plus the District of Columbia that have state lotteries, and I think when the state got involved in actually being involved in the, in the gambling business, it sort of gave a legitimacy that eventually led to some of the states in the Midwest that have adopted what we call river boat casino gaming, I think it was a little easier for, for them to pass the legislature. Some of the stigma had gone away from it, so on balance, if I had to go back to what really was the starting point, probably it would be the state lotteries--
MARGARET WARNER: Bernie Horn, why do you think, though, that once this legitimized, why is it so popular?
BERNIE HORN, Anti-Gambling Coalition: Well, it's available, it's successful. It's a new form of entertainment. There's a certain novelty to it. The problem is that there's an addiction attached to it. It cannibalizes local businesses, and it attracts crime.
MARGARET WARNER: You obviously don't see it that way?
FRANK FAHRENKOPF: Absolutely not. To say that it attracts crime just it's an old saw. It's an old stereotype. Most people in the FBI and law enforcement will tell you that there's nothing inherent about gaming that attracts crime. For example, take the town of Branson, Missouri, which has become a great tourist attraction over the last few years because of country and western music. They pride themselves in calling themselves the buckle of the Bible Belt. In fact, I think the organizational meeting of the National Coalition Against Legalized Gaming was actually held in that town, one of the meetings. Well, it turns out crime has gone up about 800 percent in Branson. Any attraction that draws large numbers of people, whether it's a football game, a basketball game, Disney World, so forth, will, in fact, have more street crime. That's a direct result, but gaming inherently does not itself produce crime.
MARGARET WARNER: Mr. Horn, does he have a point?
BERNIE HORN: Well, criminals are attracted to criminal opportunities. The criminal opportunities are greater in the case of casinos. The cities with the five worst crime rates in the country, according to a U.S. News & World Report study, were all casino towns.
MARGARET WARNER: Let's go to the two mayors who have had some experience on this. Mayor Holloway from Biloxi, what's been your experience? What do you think the impact of gambling as a whole has had on your community and also address the crime question that these two gentlemen just discussed.
MAYOR A. J. HOLLOWAY, Biloxi, Mississippi: Well, the impact as a whole has been a tremendous impact on the city of Biloxi. We in Biloxi were way behind on our bills for many, many months and for many years. Since gaming came in in 1992, we have prospered and our finances have soared highly through the roof in the last several years. And as far as the crime is concerned, in the city of Biloxi, we're a population of 53,000 people--last year, our crime decreased in every category, with the exception of DUI's, and that's just because we have put in a DUI task force. But as far as auto theft, burglary, umm, any other crime statistic we have decreased from anywhere from 40 percent to 29 percent and, you know, it just does not hold water as far as we're concerned as the increase in crime.
MARGARET WARNER: Let me get Mr. Horn to respond to that. He says crime went down in his city.
BERNIE HORN: Well, since casinos started in Biloxi, crime has increased in all categories, and in the categories of rape, robbery, murder, car theft, crime has more than doubled.
MARGARET WARNER: Mayor.
MAYOR A. J. HOLLOWAY: That's not true in Biloxi. Rape has decreased 40 percent. Auto theft has decreased 29 percent. Burglaries have decreased 19 percent. So I don't know where he's getting his statistics.
BERNIE HORN: I'm talking about since casinos came into Biloxi, not just the last year.
MAYOR A. J. HOLLOWAY: Well, that's, that's false also.
MARGARET WARNER: Well, let me get Mayor Tooley in this. Mayor Tooley, how about in Billings, Montana, what would you say is the overall impact of, uh, the gambling you have there on the community?
MAYOR CHARLES TOOLEY, Billings, Montana: Well, we think two things: In the first place, gambling has not necessarily promoted a healthy economy in my Montana; and second, we--
MARGARET WARNER: Explain that. What do you mean by that, not promoted a healthy economy?
MAYOR CHARLES TOOLEY: Well, let me give you an example. Um, the year before gambling was introduced in Montana, we had zero pawn shops and six secondhand stores in Billings. Our population at that time was about 65,000 people. Now we have 48 casinos in Billings, we have 85,000 population, and, uh, we have about 49 pawn shops, and other shops that pay cash money for used merchandise. We don't believe that a proliferation of pawn shops and secondhand stores is progressive economic development. Casinos offer $4.95 T-bone steaks to encourage the public to come in and gamble. In the past 10 years, locally-owned restaurants have been going out of business left and right because they have no way to compete. In the 10 years since, uh, gambling began, since casino gambling began, our county attorney's office has seen a quadrupling of bad check cases.
But the economy, Margaret, is only one issue. Another is good government. We should, in my opinion, be in the, in the business of protecting citizens from that which they cannot protect themselves, to ensure equal opportunity, to be concerned about the general health and welfare and to reflect the common values that bind us together as a community. Now the city of Billings gets 13.8 percent of its general fund revenues from gambling, primarily from video gambling, keno and poker. But if you go to any casino in Billings, you'll notice that the majority of the people sitting at those machines are not the most affluent people in the community. Yet, they are providing millions of dollars to the city treasury.
MARGARET WARNER: Let me get Frank Fahrenkopf to comment on that. What about these points he's made, his economic points, one, that it drives businesses out of business and two the kinds of people that mostly play these games.
FRANK FAHRENKOPF: Well, from the state of Montana, it has not been used as a means to attract outside tourists to come in and to make positive contributions to the economy. When you look at a city like Biloxi, when you look at Las Vegas, you look at other cities where what we call river boat type casinos have been put in place, it has been a draw, and it has been a very positive--but it's going to depend on each jurisdiction.
MARGARET WARNER: Explain what you mean about why that means Billings is having one experience and Biloxi is having another.
FRANK FAHRENKOPF: Well, I think one thing you have, and what you're seeing in Biloxi are large hotel type casinos being built with the kind of casinos that you would normally see in Las Vegas or in Atlantic City. What we're talking about in Montana are usually in bars, there's a number of machines that can be played. We're not talking about roulette wheels. We're not talking about crap games. We're talking about crap games. We're talking about limited gaming, which doesn't really attract people from outside who might--
MARGARET WARNER: I see. So the difference is mostly in Montana, it's Montana people who are gambling.
FRANK FAHRENKOPF: I think that's probably the case.
MAYOR CHARLES TOOLEY: We get about 5 percent of our gambling revenues from tours. 95 percent of our revenues come from our own people.
MARGARET WARNER: So as, whereas, Mayor Holloway, your experience in Biloxi, what, what percentage is tourists?
MAYOR A. J. HOLLOWAY: That's just the opposite in the city of Biloxi. You know, he's mentioned they had 85 casinos in Billings. We only have eight casinos in the city of Biloxi with two under construction at this time, which averages probably anywhere from five to ten thousand visitors per day in each casino. So we have a different situation than what he has there. Ours is probably 95 percent tourist, 5 percent, uh, local.
MARGARET WARNER: I see.
MAYOR A. J. HOLLOWAY: We have not hurt the local businesses in our community.
MARGARET WARNER: Mr. Horn, your comment on the economic--
BERNIE HORN: Sure, sure. Well, the norm in the states that are talking about legalizing gambling is to create a local type of casino. For example, in Illinois, there was a recent study that showed that 90 percent of the patrons were locals, and that the local businesses got virtually no money from those people who came in to play at the casinos. That's the norm in the casinos that have been set up in the last few years, and in the states where they are considering casinos, that's the kind they would set up.
MARGARET WARNER: So your point is what, that the Biloxi situation can be successful economically but--
BERNIE HORN: I don't think Biloxi is successful overall, but I'm saying that, umm, the norm is that the casino cannibalizes local businesses. People spend their money at the casino instead of a local restaurant or retail store. That means that for every job created in the casino a job is lost in the local restaurant or retail store. It's a zero sum gain.
FRANK FAHRENKOPF: But any new industry that comes to a community--if a new mall, a super mall, comes in to a small community and it has with it modern motion picture theaters, it has restaurants, it has a, a very modern shoe store, those existing shoe stores, movie theaters, restaurants in the community that are outside of this very modern mall which are going to draw and attract people to it are probably going to suffer. Those that are successful may survive. Some will fail. That's not only with the gaming industry. That's a fact of life. We do live in a market economy, and, and competition exists, and someone who can compete will always do a better job and prosper.
BERNIE HORN: But gambling has advertised the assumption it's going to help everyone, and it is not. Further, you can put that mall up, but you're not going to have an addiction that's attached to it, as you have with gambling.
FRANK FAHRENKOPF: Well, that's not true. There are about 10 million people in the country today who are addicted to the use of credit cards without having money in the bank to pay their bills.
MARGARET WARNER: Mayor Holloway is trying to get in here . Yes.
MAYOR A. J. HOLLOWAY: That's not true in the city of Biloxi also, because our sales tax revenues have generated over $2 million a year for the past three and a half years, increases by local purchases in local businesses throughout the city. So the people that are coming in are spending their money in the local businesses, in local restaurants. We have increased our restaurants, national chains have come into Biloxi since gambling has come in. We have opened new malls. We have opened new factory outlet stores. We have--the whole economy has been on the up-swing, even the pride of the citizens of the city of Biloxi and the Mississippi Gulf Coast is in a better frame of mind than they were before gaming.
MARGARET WARNER: Mr. Horn, you made a comment. I'd like you just to expand it a little. You said it has an addictive nature. I mean, did you mean that literally, and, and to what degree do you think gambling is addictive?
BERNIE HORN: Oh, well, the American Medical Association says that there is such a thing as pathological gambling, which is a legitimate mental disorder, and people become addicted to gambling. They spend all their money. They borrow all the money they can get, and they start to steal money. This is a very serious problem, including in Biloxi, where there used to be two members of Gamblers Anonymous and now there are hundreds of members of Gamblers Anonymous. There are social costs that the mayor is not considering here.
MARGARET WARNER: Mr. Fahrenkopf, what's your comment on that?
FRANK FAHRENKOPF: The experts in the field, including those in the American Medical Association, the Psychiatry Association, say this--I agree with Bernie--they say there is an addictive nature to gambling. But overall in the population, it's somewhere between 1, 5, or 6 percent. Even the way you determine today who is addicted and who isn't is under a great deal of flux by the experts. The industry, however, has taken a position very strongly that one problem gambler, whether it's 1 percent or 6 percent, is one too many, where the industry, itself, is funding necessary research to leading hospitals, doctors, psychiatrists around the country to try to see if we can't do something about this behavior.
MARGARET WARNER: Mayor Tooley, what's your experience on this particular issue, whether there's a sort of addictive problem?
MAYOR CHARLES TOOLEY: Yes, yes. There is an increase in treatment at our local treatment centers, but I would like to encourage those communities who are intending to look into gambling with a local focus, I'd like to suggest to them that it's not good government to have those who are at least able to pay to contribute such a large percentage to the annual budgets or to their treasury, to their city or county treasury. I don't think it's good government to encourage, encourage people to gamble, to encourage a way of life that promotes the philosophy of something for nothing, a government to trust, and there's an implied contract between the people and their elected officials, and for government to promote gambling I think violates that trust.
MARGARET WARNER: Mayor Holloway, what's your response to that point?
MAYOR A. J. HOLLOWAY: We are not out promoting or asking people to go gambling. That is a personal choice. So, you know, as far as good government, I think we have good government in Mississippi, good government in Biloxi.
MARGARET WARNER: Mr. Fahrenkopf, on this proposal in Congress to have a commission look into the effect of gambling, I understand your association, while you support the idea of a commission, you don't support giving it subpoena power--
FRANK FAHRENKOPF: Where we are right now, a commission is fine, but let's make sure it's fair and unbiased. Let's give the commission enough power, subpoena-wise, so that it can get the information it needs to make the decisions it has to make, but let's also protect the privacy rights of individuals and the trade secrets of the company. All my companies are publicly held. We file 10-K's with the Securities & Exchange Commission every year. There are no secrets about the financial problems that--or the financial condition. But we want to protect the privacy rights of our citizens, people who gamble with us, and our trade secrets.
BERNIE HORN: So you have no basic problem with the bill that came out of the Senate Governmental Affairs Committee?
FRANK FAHRENKOPF: Oh, I do, Bernie, because you've been quoted as agreeing with protecting privacy rights and protecting trade secrets, and--it does not mention anywhere in that bill, and I'm glad you're here today, and I hope that in front of all these folks you'll agree, let's put that in the bill--
BERNIE HORN: Frank's organization has been trying to kill this bill and then gut this bill. We've been trying to get an objective study of gambling. That's been our goal from the beginning. We believe that we will get it.
MARGARET WARNER: All right. We'll come back to discuss that another time. Thank you all very much. Thank you both mayors.