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ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA: 

ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA William N. (Bauschard) Thompson Professor of Public Administration University of Nevada, Las Vegas 89154 wthompson@ccmail.nevada.edu 702-895-3319 Pennsylvania State University, Erie Erie, Pennsylvania August 23, 2005 Top Line: Annual Economic loss of $104,929,356 Bottom Line

ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA: 

ECONOMIC IMPACTS OF SLOT MACHINES FOR THE ERIE COUNTY AREA 1. It is About Trees. NOT! 2. A Frank Sinatra Story 3. Stonehenge, Rocket Science, Brain Surgery, Bath Tubs 4. Las Vegas is Economically Successful a. Inputs: History, Synergy b. Outputs: Eyes on the Prize 5. No Such Luck: South Dakota 6. Will the Erie Bathtub Hold Water? 7. The Mathematics a. How Much Money? b. Whose Money? Where Do They Live? c. Where the Money Goes: Taxes, Labor and Expenses, Profits d. Externalities: Crime/Compulsives Bottom Line: A Negative Number Annual Economic Loss: -$104,929,356

IT’S ABOUT TREES. NOT!!!!!!!!!!: 

IT’S ABOUT TREES. NOT!!!!!!!!!!

THE SOURCE : 

THE SOURCE

PHD IN SCIENCE NOT REQUIRED: 

PHD IN SCIENCE NOT REQUIRED

EVERYONE UNDERSTANDS HOW A BATHTUB WORKS: 

EVERYONE UNDERSTANDS HOW A BATHTUB WORKS

LAS VEGAS: ONE MODEL OF CASINO GAMBLING : 

LAS VEGAS: ONE MODEL OF CASINO GAMBLING

THE SOUTH DAKOTA MODEL OF CASINO GAMBLING : 

THE SOUTH DAKOTA MODEL OF CASINO GAMBLING

WILL THE ERIE BATHTUB HOLD WATER?: 

WILL THE ERIE BATHTUB HOLD WATER? How much money? Gambling (only) revenues 4000 machines @75,000 = $300,000,000 Five Million Visits@ $60 Per Visit

WHERE THE MONEY COMES FROM:: 

WHERE THE MONEY COMES FROM: *Base population Adult Erie County 280,000 196,000 Crawford/Warren 133,000 93,000 Ashtabula 103,000 72,000 Chautauqua 138,000 97,000 TOTAL 654,000 458,000

WHERE THE MONEY COMES FROM:: 

WHERE THE MONEY COMES FROM: Casino Visits: 6 for base= 2,748,000 1 for surrounding area= 2,252,000 Play per visit: $60 Revenue Source Base Area 458T x 6 x 60=$164,880,000 Surrounding 2,252 x 60 =$135,880,000

WHERE THE MONEY COMES FROM:: 

WHERE THE MONEY COMES FROM: TOTAL 5 mil visits x 60= $300,000,000 LOCAL DIRECT Discount 10% replacing current gambling = $148,392,000 (49.7%) EFFECTIVE NEW MONEY= $151,608,000 (50.3%)

WHERE THE MONEY GOES: 

WHERE THE MONEY GOES Expenditures Stays/Area Leaves/Area Tax-State 34% $0 $102,000,000 Local Tax 17% $51,000,000 $0 Labor 16.8% $34,632,000 $15,768,000 Machines 6.7% $0 $20,000,000 Other Supl 5% $7,500,000 $7,500,000 Building 4% $12,000,000 $0 Admin/adv 4% 8,000,000 4,000,000 TOTAL EXP 87.8% $113,132,000 $150,268,000

WHERE THE MONEY GOES: 

WHERE THE MONEY GOES Total Expenses 263,400,000 (87.8%) Profits 36,600,000 (12.2%) LEAVES Stays Leaves Distrib 100% $113,132,000 $186,868,000 (37.7%) (62.3%) Local Money IN $148,392,000 (49.7%) Money RETAINED Local $113,132,000 (37.7%) LOCAL LOSS (-$35,260,000) New Money OUT/IN $151,608,000 (50.3%) Money LEAVING $186,868,000 LOSS TO OUTSIDE +$35,260,000

LABOR EXPENSE (NOTE): 

LABOR EXPENSE (NOTE) (Explanation Labor 16.8% 50,400,000) 1200 jobs salary 30,000, fringes (include social security 12,000) minus 5,040,000 social security minus 3,600,000 1/2 of fringe 20% minus 1,728,000 96% of 5% state tax minus 5,400,000 15% federal tax MINUS 15,768,000 STAYS 34,632,000 LEAVES 15,768,000

EXTERNALITIES: 

EXTERNALITIES The Proposed Slot Machines represent a DIRECT economic loss of $35,260,000 to a local area of Erie County and four surrounding counties. But It’s Worse--There are Indirect Losses Too

EXTERNALITIES: 

EXTERNALITIES Social Costs* Crime @$17x 458T= $7,786,000 (Casino related crime costs local residents $17 per year) ----------------------- Pathological (.006--x 458T=2748 x $10,053) =$27,625,644 Problem (.007--x 458T=3206 X 4926) =$15,792,756 ------------------------ TOTAL............$51,204,400 (Econ.Loss 33.6% = $17,204,678; Govt.Loss 7.2% = $3,686,717) *A "Social" Cost represents a loss that a gambler imposes on an unwilling (non-gambling) fellow citizen. Some of the loss becomes a loss to governments, and some of the loss (33.6% of the social cost) becomes a loss for the entire society.

DIRECT AND INDIRECT ECONOMIC LOSS: 

DIRECT AND INDIRECT ECONOMIC LOSS -35,260,000 -17,204,678 LOSS to ECONOMY DIRECT $52,464,678 But It’s Worse, Isn't it? Proponents LOVE to talk about the multiplier effect of dollars as they spin around in the economy. Guess what? The economic loss represents money THAT WOULD HAVE SPUN AROUND if it would have remained in the Erie Area. A conservative multiplier of 2 tells us that by having a slot machine casino (again considering only the gambling revenue) in the Erie Area represents an annual economic loss of $104,929,356 Economic Impact Loss -$104,929,356

IF THE BATHTUB DOESN’T WORK, IT’S “FAREWELL CRUEL WORLD.”: 

IF THE BATHTUB DOESN’T WORK, IT’S “FAREWELL CRUEL WORLD.”