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What If Danville Gets a Casino? Risks, Rewards, Uncertainties

A study commissioned by Danville Regional Foundation in Danville, VA to review the potential impacts of a proposed casino entertainment complex by Fourth Economy Consulting.

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What If Danville Gets a Casino? Risks, Rewards, Uncertainties

  1. 1. What if Danville gets a Casino? December 4-5, 2019 A Review of the Risks, Rewards and Uncertainties
  2. 2. About The Danville Regional Foundation engaged Fourth Economy to conduct a study of the economic and social impacts of a potential gambling and entertainment complex on Danville and surrounding communities. 2 DRF is taking no position on the Casino.
  3. 3. Great Communities ▰ Market Analysis to Identify Gaps and Opportunities ▰ Highest and Best Use Studies ▰ Project feasibility Analysis ▰ Opportunity Zone and Investment Prospectus Development Strong Economies ▰ Investment Criteria Development ▰ Economic Competitiveness Strategy ▰ Industry Analysis ▰ Sector Modeling ▰ Economic Impact Analysis Impactful Organizations ▰ Data Driven Initiative Development ▰ Business Planning ▰ Program Creation and Evaluation ▰ Impact Assessment 3 At Fourth Economy We Create...
  4. 4. Project Team 4 Jerry Paytas, Ph.D. Vice President, Research & Analytics Principal in Charge Chris Worley Consulting Analyst Project Analyst - Economic and Tax Impacts Monica Hershberger Design & Marketing Manager Design and Communications Joshua Devine, CEcD Economic Opportunity Strategist Project Analyst - Social Impacts
  5. 5. Agenda ▰ Assumptions ▰ Key Findings ▰ Taxes and Revenues ▰ Job Creation ▰ Job Quality ▰ Development Impacts ▰ Tourism ▰ Social Impacts 5
  6. 6. Two potential state tax rates from proposed legislation (SB1706): ▰ 10 percent and 15 percent state gaming tax rate. ▰ Benchmark states ranged from 23 to nearly 47 percent. Three scenarios for total casino revenues based on the experience of casinos in a set of benchmark regions: ▰ Low Estimate: $50 million (Monticello NY, St. Joseph, MO) ▰ Mid Estimate: $150 million (Dubuque, IA) ▰ High Estimate: $300 million (Charles Town, WV) 6 Assumptions Taxes and Revenues
  7. 7. 7 Assumptions Benchmark Communities Benchmark casinos and regions were chosen because they reflected different operating conditions for a potential casino within regions that shared some characteristics with Danville - a range of sizes, demographics and market locations. Shelbyville, IN St. Joseph, MO Monticello, NY Dubuque, IACharles Town, WV
  8. 8. 8 Benchmark Casinos have pre-tax revenues of $30 million to $336 million. Compared to Benchmark Communities, Danville: ▰ Has a population in the 100-mile draw area that is in the middle of the pack. ▰ Has a proposed state tax rate that is lower than all of the benchmarks. Shelbyville, IN St. Joseph, MO Monticello, NY Charles Town, WV Dubuque, IA Danville, VA Pre-Tax Net Gaming Revenues of the Casino $276 M $43 M $30 M $336 M $117 M $50 M- $300 M (Estimated) Population within 100 miles 7.8 M 2.9 M 24 M 11.8 M 3 M 5.4 M State Tax Rate (Total State Casino Tax Revenue / Statewide Pre-Tax Net Gaming Revenue) 27% 26% 44% 47% 23% 10 - 15% (Proposed) How do the Benchmark communities compare?
  9. 9. 9 Assumptions Comparison of Assumptions & Estimated Impacts Revenue Assumptions Low High Bristol Pre-Tax Net Gaming Revenue $50 M $300 M $600 M Casino Non-Gaming Revenues $5 M $15 M $289.7 M Casino Total Revenues $55 M $315 M $889.7 M Visitor Assumptions Low High Bristol Annual Visitors 180K - 367K 1- 2.1 M 4 M Daily Visitors 500-1K 3K-6K 11K Comparison of Impacts Low High Bristol Total Direct Employment 575 3,050 5,426 Total Estimated Tax Revenue to Danville $3.2 M $9.1M $20.3M How successful will it be? Revenues will depend on the number of visitors, their spending and the tax rate.
  10. 10. How Many Visitors? Tourism Market Share Gallup reports that 26 percent of Americans visited a casino in the past year. Market shares of 26 percent or below are more feasible. 10 Spending per Visit Total Gaming and Non-Gaming Revenue $55M $160M $315M Estimated Market Share of Adult Population $150 8% 24% 47% $300 4% 12% 24% Lower Risk Higher Risk
  11. 11. 11 Competition Danville’s casino will compete with other VA casinos for the in-state market and parts of the NC market. If the legislature sets the age at 21, there will be a smaller market. If NC legalizes casinos, Danville could lose a significant portion of its market and revenues. Note: Adult Population = 18 years and older
  12. 12. 12 Who Benefits? Distribution of Benefits Low High Virginia Gaming Taxes $2.5M $22.5M Lynchburg Transportation District Gaming Taxes $1.9M $16.9M Danville Gaming Taxes $625K $5.6M Danville Other Taxes $2.6M $3.5M Jobs 575 Jobs 3,050 Jobs Aggregate Wages $12.7M $68.4M
  13. 13. 13 How do the local taxes compare? Danville may get an effective local tax rate of 1.3 to 1.9 percent of the pre-tax net gaming revenues compared to an average of 2 percent for the benchmark host communities (1.1 percent excluding non-tax revenue for the Q Casino). Local Effective Gaming Tax Rates (Tax Revenue from Local Gaming / Pre-Tax Net Gaming Revenues of the Casino) City of Dubuque (+ other Q Casino revenues) 6.9% St. Joseph, MO 2.2% Danville (15% Tax Rate) 1.9% Danville (10% Tax Rate) 1.3% Shelbyville, IN 1.2% Monticello, NY 1.0% City of Dubuque (Tax Only) 0.5% Charles Town, WV 0.3% Average (excluding Danville) 2.0% Note: The City of Dubuque owns the Q Casino and has non-tax revenue as a result. Without the city revenue the average is 1.1%
  14. 14. 14 Danville Non-Gaming Revenues Related Non-Gaming Revenue Low High Real Estate Tax $1,680,000 $1,848,000 Business Personal Property Tax $700,000 $1,540,000 Meals Tax $195,000 $585,000 Transient Lodging Tax $160,000 $480,000 Sales Tax to Danville $50,000 $150,000 Tax Diversion and Offset -$179,047 -$1,097,736 Subtotal Estimated Related Taxes for Danville $2,605,953 $3,505,264
  15. 15. 15 Who Pays? Wages Wages for Casino Jobs: National average wage is $15.75/hr, but ⅔ of the workers earn less than $15/hr. Workers would need to earn $24/hr for a living wage for one adult, one child households. In Danville, 60 percent of children live in single parent households. These workers will need access to quality, flexible child care. Gambling jobs have higher average earnings for jobs with similar levels of training. Workers in jobs that require similar levels of training will see increased wages. Existing businesses may need to raise wages to compete for those workers.
  16. 16. 16 National Wages by Occupation, 2018 Hourly Wage (Average) Annual Wage (Average) 3% Management $45.43 $94,500 2%All Other $27.01 $56,172 2% Business and Financial Operations $26.49 $55,090 4% Installation, Maintenance, and Repair $18.78 $39,060 11% Office and Administrative Support $15.90 $33,060 8% Protective Service $15.71 $32,680 2% Transportation and Material Moving $15.39 $32,010 29% Service Gaming Services Workers First-Line Supervisors Miscellaneous Entertainment Attendants $14.37 $29,890 7% Building Cleaning and Maintenance $13.24 $27,540 10% Sales and Related $13.21 $27,480 21% Food Preparation and Serving $12.85 $26,730 Higher Wage Lower Wage ⅔ of workers earn less than $15/hr. Nationally, ⅓ of gaming workers earn more than $15/hr. Source: Occupational Employment Statistics, Bureau of Labor Statistics - NAICS 713200 - Gambling Industries
  17. 17. 17 The wages (or earnings) for the new casino workers in Danville will determine how much opportunity these jobs provide to the workers. It will also influence whether existing business may need to raise wages to compete for those workers. . Job Quality 2018 Hourly Wages/Earnings for Select Industries
  18. 18. 18 Who pays? Crime Impacts Crime: The most comprehensive (& only) national study found that 8 percent of crime in casino counties was attributable to casinos. This study included all U.S. counties from 1977 to 1996 and compared casino and non-casino counties. ▰ Critics have used case studies or selected samples to dispute the findings. ▰ In 20 years no critic has replicated the scale or time frame of this study. ▰ The National Center for Responsible Gaming (funded in part by casinos) has done no crime studies. ▰ Adjusting the crime rate for visitors should be done for all visitor attractions, but casinos are different because visitors may bring or leave with CASH! Benchmark counties with casinos had an average of +765 property crimes and +50 violent crimes per 100,000 residents versus other counties in their state.
  19. 19. 19 Who pays? Problem Gambling Problem Gambling: Problem gambling could impact 2,200 local residents at an annual social cost of $1.3M in Danville and $1.9M in Pittsylvania. ▰ The annual social cost of problem gambling in Danville and Pittsylvania is estimated at $3.2M. ▰ Problem Gambling costs are social costs. Social costs include productivity losses, social services, and creditor losses. ▰ Social costs are not paid directly by the municipality, but are spread to employers, social service providers, and individuals.
  20. 20. Factors that Drive the Impacts What are the +/- Spillovers? 20 Casino is isolated and all-inclusive Casino is embedded with complementary businesses Casino patrons are primarily local residents Casino competes with local businesses Casino provides limited spillover benefits to other businesses Casino patrons are not local residents Casino provides limited spillover benefits to other businesses Greatest potential for positive spillover benefits
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  23. 23. Thanks! Any questions? Contact Jerry Paytas: ▰ ▰ 412-356-3755 23