My last two columns on Paragon Gaming’s proposed Edgewater Casino expansion at B.C. Place have looked at its impact on our community, unanswered questions about its finances, its hidden costs, its vulnerability to crime and money-laundering and its role in re-branding Vancouver as a casino destination.
But with the province now raising more public money from gambling than from corporate income taxes, it’s also worth questioning the value of gambling as economic development. This project is promising to spin off millions of dollars every year to federal ($32 million), provincial ($224 million) and municipal ($23.5 million) governments, plus $6 million to PavCo to pay for the new stadium roof, with up to 1,900 new jobs contributing a total economic impact of $538 million a year.
Unfortunately, those numbers are only one side of the ledger. They take no account of the social costs this project, with each problem gambler estimated to cost the economy $13,200 a year. Nor do they spell out how much public money will be invested in this project and its social impacts, especially if it has to be bailed out.
Remember what happened at the Olympic Village with similar unrealistic revenue projections, rushed deadlines, uncertain financing and public land-ownership?
Deloitte’s October 2010 study of the Edgewater expansion shows $16.9 million in government revenue being given back to Paragon as part of the B.C. Lottery Corp.’s program to upgrade casino premises. These are only handed back over time as a percentage of net revenue, which will be hard for this project to achieve.
For city revenue from Edgewater to jump to the $17.2 million being promised from $6.2 million today, business at the Edgewater’s new location would have to increase accordingly – by 180%. When Burnaby’s Grand Villa Casino did a similar redevelopment, within a far stronger local market, its business increased by just 6%.
Where would that business come from?
It’s widely accepted that 90% of North America’s gambling market lives within 45 minutes of the casino, notwithstanding comments from Paragon CEO Scott Menke that tourists will be his focus.
This casino, with its 1,500 electronic slot machines, will be catering mostly to a local market. At River Rock Casino Resort in Richmond, also a so-called destination casino, tourists are a small percentage of its market. Paragon is predicting that 200,000 people will be coming to its hotels annually “as a result of destination gaming demand by non-local visitors.” How many of these will be new visitors, and how many simply relocated from other hotels?
“This city doesn’t need another single hotel room,” said hotel industry veteran Angus Wilkinson.
PKF Canada reports declining hotel occupancy and room rates in 2009 and 2010, partially offset by the Olympics, but forecast for a further decline in 2011.
Wilkinson notes that at 70% occupancy, a new hotel in Vancouver has to make $400 per room to be economically viable. No hotel is averaging even $250 a night. That’s why they’re all being built with condos (except the Coast Coal Harbour Hotel, which benefited from a land swap with the former Coast property on Denman).
Back in 1994, when the debate was raging in this city over whether to allow a Vegas-style casino on the harbour waterfront, Robert Goodman was addressing a U.S. Congress committee as director of the United States Gambling Study, based at the University of Massachusetts.
“Using gambling as government policy to create jobs and to supplement public treasuries is a dangerous form of economic development,” he warned. “As gambling proliferates, and local markets become saturated … what little discretionary consumer dollars still exist in these markets are being drained from other, already troubled local businesses. Not only are local economies further undermined by this process, but increased numbers of problem gamblers are adding new costs to government and to the operation of existing non-gambling businesses.”
Vancouver businesses need to take a hard look at this project’s unrealistic assumptions and hidden costs before believing it will add new dollars to our economy.