The Great Casino Rip-Off
State Issue 6 permits a new casino in Clinton County, which is easily
accessible to the Cincinnati, Columbus, and Dayton metro centers.
Throughout the rhetorical back-and-forth on the issue, voters are being subjected to a variety of competing claims. Strip away the layers of double-talk, and you will see that it is a gigantic taxpayer rip-off and a cynical attempt by Lakes Entertainment, an obscure casino company, to increase its stock price multifold.
The amendment provides Lakes Entertainment with a casino license worth $1 billion, in exchange for a measly $15 million payment, ensuring a $985 million windfall.
It's doubtful the framers of Ohio's Constitution intended the amendment process be used by businesses as a way to enrich themselves through a public vote.
The proposed casino's monopolistic nature and its low tax rate guarantee the property will mint money. If Ohio is going to allow such an establishment to open, shouldn't Ohioans get the largest possible share of the massive revenues the casino will produce?
In Indiana, Illinois, and New York, legislators woke up to the sizable cash involved in the right to operate a casino. Instead of providing a mammoth giveaway, they auctioned off licenses. Consider:
- This month New York State received a $370 million bid for an Aqueduct casino license. The facility will be the same size as Ohio, but it has a tax rate twice as high.
- In April 2007, the state of Indiana sold two Indianapolis casino licenses for $500 million. Each property was to be half the size of the Ohio casino. A few months later -- before either Indianapolis casino even started construction -- one of the licenses was "flipped," for $400 million. This indicates an $800 million value for both properties, which are collectively the same size of the Ohio casino.
- Recently the state of Illinois received bids on its auction of a tenth casino license outside of Chicago. One company bid $435 million for a casino with only 1200 slots and table games, versus 5000 for Ohio. Furthermore, the tax rate in Illinois is around 50%, not 30% as in Ohio, which decreases the value in Illinois.
Adjusting these prices for Issue 6 provides a $1 billion appraisal for the license to operate; and that value is before one dime is spent on actually building the Ohio casino. What could Ohio do with $1 billion?
Considering that the state is struggling to find enough revenue to pay for its current spending obligations, it's clear $1 billion in revenue would be welcome in Columbus. And with a recent Tax Foundation study finding that Ohio has the seventh-worst tax burden in the nation, $1 billion would provide room for substantial tax relief for the state's overtaxed citizens.
Of further concern is the fact that the amendment's backers may never construct the facility themselves. The terms allow them to sell the license the day after the election. A quick flip would propel Lakes Entertainment stock from its current $5 per share to $35. While shareholders may prosper, this is not how American business is supposed to operate.
As we have seen with
past gambling initiatives, a lot of money is at stake. It is clear that
if the state grants an exclusive license to build a casino near
Wilmington, those who own the casino will gain a huge windfall.
Giving away this windfall for free is a bad deal for the taxpayers of Ohio.
Jeff Hooke is a Buckeye Institute adjunct scholar and author of several gambling studies.
