Peter Van BurenAuthor of "Ghosts of Tom Joad: A Story of the #99Percent" and "We Meant Well"

 

Casinos Fail Old Industrial Towns

Posted: 11/14/2014

 

It wasn't just a business, it was a way of life-- what residents of Bethlehem, Pennsylvania referred to simply as "The Steel"-- a mill once America's second largest steel producer with 31,500 souls working in a single facility.

 

The Mill

 

The mill made the steel for the Empire State building and the Golden Gate Bridge, and for WWII warships. After cheap imports flooded the United States in the 1980s, the Bethlehem Steel facility closed, leaving behind a mile-long scar of rusted out buildings people call the brownfields, along the Lehigh River. Allentown, Billy Joel's bitter saga of industrial decline, name-checked the town.

 

The Promise of Legalized Gambling

 

So as soon as Pennsylvania legalized casinos in 2004, Bethlehem scrambled for one of the first, and won. Symbolically, Las Vegas' Sands corporation would build right on top of the old mill. Everyone hoped the casino would replace a decent portion of the jobs lost when The Steel left. But by 2014, there were only 2,200 positions at the casino, plus 700 at leased businesses inside. Was a casino really the answer?

 

Even those new jobs didn't come for free. Roads, some $10 million worth, had to be built or repaired to make it easier for out-of-towners (New York is only 75 miles away) to reach the casino. The city added to its police force. Since the casino was located outside the downtown business district, the city paid for a shuttle bus to try and draw players to their shops. But the casino had its own retail mall competing with anything local. No one should "plan on a casino to bring about urban renewal," said a Wynn Casinos property manager in nearby Philadelphia, "because that's not what casinos do."

 

The House Always Wins

 

Still, there was money to be made in Bethlehem. Casino profits, of course, were repatriated to the owners in Las Vegas. Pennsylvania requires casinos to pay a 55 percent tax on revenues, but only four percent of that goes to the host community. For Bethlehem in 2013, that totaled $9.5 million, not game-changing money for an area so economically devastated for so long. Baltimore, an early adopter of casino gambling as an economic resurrection strategy, has seen similar results. In Atlantic City, the first major destination outside Las Vegas to feature legalized gambling, four major casinos closed in the past year.

 

Bringing in a casino is about jobs and money. Jobs created statewide in Pennsylvania via gaming do not even equal the number lost in Bethlehem alone. As of 2013, Pennsylvania casinos directly employed only 17,768 people, leaving significant questions about the role of gaming in lifting America's devastated rust belt towns out of unemployment-driven malaise.

 

As for money, a report notes that after some initial successes, revenues in Pennsylvania from gaming declined by 2013. Statewide, casinos did contribute about $81 million in taxes last year. However, it is unclear how much of the revenue behind those taxes came from local residents, what might be called churning rather than creation, a back-door tax on those ill-prepared to lose money at the slots (affluent people visit casinos less often than poorer people do.) One group of frequent visitors who have found a way to beat the house come from New York's Korean community; they sell the promotional meal vouchers from the casino on the black market.

 

Competition is a serious problem, as new casinos open in surrounding states. For example, New Jersey is considering a casino at the Meadowlands, only 30 minutes outside New York City, which will pull many away from Bethlehem's new bright lights. Pennsylvania is also among the states with the highest casino tax rate in the nation, raising further the question of market cannibalization should gaming corporations seek out lower rates in adjoining states. Casino revenues nationwide have not recovered their 2007 peaks, and Moody's projects a drop through 2015, cutting industry earnings by as much as 7.5 percent.

 

Don't Gamble if You Can't Afford to Lose

 

Only a generation ago, Bethlehem, Pennsylvania had a steel mill employing tens of thousands of people at good wages. Including benefits, an average union steelworker made $26.12 per hour then, the equivalent of $40.66 today. It was enough to create one of the most powerful economies on earth, supported by a robust middle class driving demand for housing, cars, everything. They could afford to gamble a bit on yearly vacations, too.

 

The typical casino worker today in Bethlehem makes $10-12 an hour. Many are part-time. They labor in the shadow of the mill that helped build the Empire State building and the Golden Gate Bridge, a new way of life that may flounder on a bad roll of the dice.

 

Follow Peter Van Buren on Twitter: www.twitter.com/wemeantwell

More:

CasinoBethlehemDeindustrializationGamblingPennsylvaniaWynnSandsEconomy99 PercentOne PercentSteelAllentownThe SteelMeadowlands

 

 

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