Casinos: Georgia Is Leaving Significant Money On The Table

Two weeks ago I wrote a column debunking the thought that we don’t have significant legalized wagering going on already in Georgia. We do, and it’s available at every corner store, fully backed by the Georgia constitution, and sanctioned and governed by the Georgia Lottery Corporation.

We’re more than a little pregnant on the issue.  We have institutionalized legal gaming in Georgia.  This fact is not debatable. It is a settled question.

Open for debate is how to spend the revenue generated by a new tax on gaming revenue.  The original bill dedicated all the money to the HOPE scholarship fund.  Newer versions of gaming bills include money to ensure HOPE loses no ground, but include projects such as needs-based college scholarships, rural healthcare, and rural broadband.  This debate is wide open, and everything seems to be on the table.

In between is the most important question that is being debated but has a clear answer:  Is the state financially better off by legalizing casinos in a limited “destination resort” format?  The answer is yes.

Let’s break this down, highlighting the various ways that state and local coffers will benefit from adding two casinos to our mix of legal games of chance currently restricted to those run by the Georgia Lottery.

Note, and this is a huge note, that this is tax revenue generated without economic development incentives.  Quite a few critics have slandered this bill with cries of “crony capitalism”.  This is the opposite of that.  Instead of the state using tax dollars to invest an industry here, the industry is agreeing to pay at least one out of every five dollars generated back to the state in exchange for a license.

The benefits go far beyond the gaming revenues, however.  Again, without state or local incentives, Georgians would get:

Gaming Revenues:  The current measure expected to be heard in before a Senate Committee Thursday has a 20% tax on all gaming revenue generated.  Current estimates place this at $300 Million per year to augment HOPE scholarships, and/or be divided based on needs the legislature decides meet the highest priority.

Construction jobs:  With a minimum $2 Billion to be invested in an Atlanta based (or, depending on final bill wording, Atlanta-area based) destination resort and an addition $450 Million at a secondary location presumably Savannah, Augusta, or Columbus, we’re looking at roughly $2.5 Billion in construction and furniture, fixtures, and equipment expenses on the front end.  That’s the equivalent of two Mercedes Benz stadiums in spending.  In Maryland, where MGM just opened a $1.4 Billion Destination Resort Casino, approximately 6,200 construction jobs were created over a 20 month time horizon.  Extrapolating for Georgia’s plan based on dollars, it appears we’re in the neighborhood of 10,000 construction jobs for a $2.5 Billion investment.

Permanent jobs: MGM’s two closest (albeit smaller) non-Vegas domestic destination resorts are in Detroit and the prior mentioned National Harbor outside of Washington DC in Maryland.  Detroit directly employs 3,100 individuals with an average annual salary of $52,000.  National Harbor is estimated at 3,600 employees with a similar salary plus benefits.  This number of employees and pay scale is on par with an automotive plant, but again, without the heavy tax incentives needed to lure these large payrolls here.

Workforce Development:  Many of these jobs are above routine hospitality industry pay scales.  These are not minimum wage jobs, but professional ones that are well above the average salaries for many Georgians. According to the American Gaming Association, a frontline casino employee averages 47,000 per year in wages and tips.  Casino Management and Administration positions average $54,000 per year plus benefits.  Gaming equipment workers average $75,000 per year.

Of interest again to Georgia is that frontline casino workers and many of the gaming equipment workers require specialized skills not found outside the industry.  Georgia spends tens of millions each year (much more if you count our higher education system) training Georgians for high wage jobs. In this case, like with the lack of economic development incentives, it’s the industry that trains the bulk of their workers.  We get a highly trained professionally paid workforce, with no burden shared by the state.

Income taxes:  Those workers would pay income tax to the state of Georgia, at 6%.  Between the two proposed casinos we’re looking at 5,000 direct jobs with an average salary in the $55,000 to $60,000 range.  That’s about $300 Million in annual taxable income – most of it in Georgians pockets, 6% of it back to the state.

Property Taxes:  Often the easiest way to provide economic incentives is to waive property taxes on a plant that is proposed to be built. The rationale is if the plant wasn’t built, the county wouldn’t have any property tax revenue anyway, so nothing is really lost.  Here, you’re looking at $2.5 Billion in investment split between two locations.  The taxable value will be less as the total investment isn’t in real estate.  Still, if the taxable value of real property at the Atlanta Destination resort casino is $800M, that’s real money to local governments for support services.

Let’s put this into perspective.  Atlanta’s tallest building, the Bank of America Tower, has a tax assessed value of $218 Million.  Last year its owners paid over $1.7 Million to the city of Atlanta and almost $500,000 to Fulton County.  A casino valued conservatively at 4 times this amount would bring in $2 Million annually to Fulton County and almost $7 Million annually to the city of Atlanta.  Figure about the same as Bank of America tower to the locale that lands the second casino.

Sales Taxes:  Gaming revenue is not the only tax dollars that money spent in casinos turn into direct tax dollars.  Every meal sold, every show ticket sold, every T-shirt, every room, etc will have an 8.5% sales tax if in Atlanta, and 7-8% depending on location for the other casino.  That’s 4% for the state of Georgia, and up to 3-4% for local governments, 1.5% for MARTA in Atlanta, and 1% for Atlanta’s Watershed Department to pay down sewer upgrade infrastructure bonds.

Hotel & Motel Taxes:  The City of Atlanta also has an 8% tax for hotel motels that benefits the Atlanta Convention Visitors Bureau and other tourism related interests, and the state has a $5 per night hotel tax that funds transportation infrastructure improvements.  Figuring 600 rooms at 80% occupancy and an average $150/night rate in Atlanta, that’s $2.1 Million per year in additional hotel motel tax, and and about $875,000 per year to fix roads and bridges.

Additional Tourism:  While some incremental personal tourism is anticipated with these resorts, the major target is the state’s convention business.  The Georgia World Congress Center is a “world class” facility, but Georgia has lost some of its largest shows such as Comdex due to space constraints, and other cities offer a wider variety of nightlife and entertainment options than Atlanta.  Meanwhile, Savannah has difficulty competing for larger conventions than the current Convention Center’s hotel can handle, and other downtown hotels remain mostly occupied on current tourism business.  Note that conventioneers are among the highest in per person spending, as much of their expenses aren’t paid by personal income, but by expense accounts.  This is a way to attract not only more people to Georgia, butt those who spend more per person per trip, increasing all of the above mentioned numbers.

Recapture of money wagered in other states: It’s estimated as much as $600 Million is currently spent every year by Georgians traveling to other states for higher end gaming options.  Those that believe destination resorts will feed off the poor and vulnerable are missing the first and last point.  The first, again, is that Georgia has already made it convenient for lower income Georgians to gamble via scratch off lottery tickets and a mixture of draw games. It’s unlikely that two resorts aimed at higher end business travelers will compete for, nor take away, much of this business.

What it will do, however, is compete for the money that desires a higher end product and is using Hartsfield-Jackson airport to go find it. The Georgians that are currently taking $600 Million per year and helping other states and cities grow jobs, fill state coffers, pay local property and sales taxes, etc.

There’s a Kenny Rogers song called The Gambler with the lyric “Know when to walk away, know when to run”. Many at the state legislature have tried so hard to run that they’re not looking at the chips we’re leaving on the table. Running away from something that appears controversial is easy. Understanding that the idea this isn’t a question of morality anymore is a bit harder. Explaining that to some Georgia voters a bit harder still.

What’s not hard is understanding that Georgia at the state level is among the lowest taxed per capita in the nation. We still have needs to fund, but little appetite for new taxation. We have an opportunity for approximately 5,000 direct professional jobs at very respectable wages. We will offer no tax incentives to get these jobs, but instead will ease revenue problems at the state, county, and municipal level.

This also has a double circuit breaker built in. The people of Georgia will have to ratify this decision at the ballot box, and then local citizens who would have a casino in their community would also hold a referendum. None of the above will be realized if the people of Georgia decide to support it.

This isn’t the time to fold ’em. Georgia needs to hold em, and ask our citizens if they’re ready to go all in.

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