• Casino economics - part 1
• Casino economics - part 2
• Gaming compact - what does it mean?

Bob Whelan, senior project manager and economist for the EcoNorthwest firm since 1996, has performed analysis of Oregon's gaming industry competition as part of the Governor's Task Force on Gaming and conducted comprehensive casino and state lottery revenue forecasts for the state.  He conducted many studies for private Oregon casino customers, including studies of employment and business impacts, gaming legislation, market studies of casino customers, revenue effects of gaming machines, revenue forecasts for individual tribes and casinos, socio-economic impacts of gaming currently in communities and possible impacts of casinos entering communities.

EcoNorthwest has offices in Portland, Eugene and Seattle.  Whelan is based out of Portland.  Whelan said that, statewide, Oregon's 2001 revenue forecasts show gaming at a little more than $1 billion.  Approximately 60 percent of that goes to the Oregon Lottery, while Oregon casinos take 30 percent.  "Generally speaking, growth has slowed quite a bit although the market appears to be growing some," Whelan said. In 1999, the statewide revenue forecast done by EcoNorthwest showed revenues at $927.3 million, seven percent more than in 1998.

Because of the geography of the Florence area, a casino here could not be expected to capture a lot of the gaming market, Whelan said.  When you get a casino in Florence, it is a small casino kind of area.  You're probably looking at a casino that would make $10 million a year.  That compares to a statewide total of all the other casinos of $325 million.  If I were building a casino in Florence, it would be small.  I would hire about 350 people.

A person's likelihood to gamble at a casino is based on the distance they have to travel to get there, Whelan said.  Most people average 2.5 hours of gambling per visit, he said.  Therefore, if it takes that long or more round-trip to reach the casino, people will not make the drive.  "There are too many other things people can do that are closer," Whelan said.  "If you drive an hour and a half each way to gamble, you're spending more time driving than gambling.  Your geography in Florence works against you.  Casinos do better when they are in the middle of a large city.  The Mill Casino in North Bend is in a good position and is the only truly urban casino in the state.  Chinook Winds is also in a good spot."  Whelan's position is supported by a 1999 national study on gaming behavioral habits conducted for the National Gambling Impact Study Commission by the National Opinion Research Center at the University of Chicago, Gemini Research, The Lewin Group and Christiansen/Cummings Associates.

The study looked at gaming habits (including money spent on lottery, bingo, casinos and betting) in 100 different communities, polled 3,481 people at casinos or by telephone, and did 10 in-depth case studies of communities around the nation.  One of the conclusions in the study says that communities within 50 miles of a newly-opened casino report a per-capita increase in casino gaming expenditures of 237 percent.  "Thus, if annual per-capita casino spending approximates $10 on a particular community before the opening of any proximate (within 50 miles) casino, we would expect per-capita casino spending to equal $33.70 in the same community after the opening of a proximate casino," the study finds.

The study said that 40 percent of adults within 50 miles of a casino participated in casino gaming within the one year studied, and only 23 percent participated if they lived within 50 to 250 miles of a casino.  Whelan said that income is the biggest factor for whether people will gamble.  People with more income have more "discretionary income," he said, and casinos do best when they are in or nearby communities with high income levels.  After income, the second biggest factor is convenience.

Francis Somday II, tribal administrator for the Confederated Tribes of Coos, Lower Umpqua and Siuslaw Indians, said that the primary market for the Florence casino is the Eugene/Springfield area.  "The best site is a site with a city of more than 100,000 people within a 100 mile radius," Somday said.  Whelan said that, in general, college towns are bad for casino business because of the lower income levels.  And Eugene is just over the optimal 50-mile distance.  "Eugene is a terrible source of gamblers.  College towns under-gamble by a huge percentage, regardless of the person's income," Whelan said.

Somday said he has also heard this general statement about college towns, but that Eugene/Springfield is different.  "Eugene and Springfield are viewed as college towns, but there are also several major high-tech industries there.  I don't know if I'd term them as a non-gaming society," Somday said.  "Somebody from Eugene/Springfield is obviously going south on I-5 to Seven Feathers.  Generally, college towns and college students are very limited in their expenditures of funds, but that's not the population our industry would want to cater to anyway.  We want them to get an education first."

Whelan estimated that the "local market" would account for between 50 to 60 percent of the business at the casino.  Only $1 out of $11 spent at a casino in Oregon is spent by a tourist, he said.  He said it would take approximately three years for a new casino to build a reputation as a destination gambling spot.

"Typically, the patterns are that a tribe opens a casino in Oregon, over builds, gets disappointed, has to lay off workers, and then three years later is adding people back on and a change in the marketing strategy develops," Whelan said.  "It takes about three years for a business to stabilize.  People who come once a year for other reasons remember seeing the casino and will then start coming back for that.  As business starts to develop, people will say, "Well, I could go to Brookings or I could go to Florence.  I like to gamble.  I'll go to Florence."  Whelan said that is true of most tourist destination sites and tourist-related industries, such as lodging and restaurants.

According to Whelan, tribes always overestimate the amount of people who will drive by and stop at a casino on the way to somewhere else.  "All casinos get a percentage of pass-by business," he said.  "But pass-bys don't tend to gamble as much because it isn't the reason they're passing by.  You go to Nevada with the intent on gambling.  You go to Florence's coast to hang out at the beach, eat seafood or see a local performance," Whelan said.  "You're not going to bring as much money as someone who is going to a place to gamble.  And you're also not going to stay as long as someone who goes to gamble."

Whelan said that studies show only one out of every nine people in Oregon is a casino-playing gambler.  "What are the odds that both adults in a car going somewhere else are avid gamblers?  It's pretty low.  one adult is bringing another adult who doesn't really want to gamble, so they don't stay very long.  A lot of people come with kids, so they're not going to gamble at all," Whelan said.

"Pass-bys and tourism sound great, but it's never as lucrative as the tribes think it will be.  They all model after Nevada.  But people who go as tourists to Nevada go to gamble.  Less than one out of 10 tourists in Nevada doesn't go to gamble.  Here, two out of three people or three out of four won't gamble," he added. 

This is the first in a series on possible impacts of a casino.  The next will analyze casinos' effects on economics in the community.  Future stories will analyze pathological gambling, crime rates and traffic.  Source:  2/9/02, The Siuslaw News, by Karen Vitek.

A majority of the tribes that currently have casinos also support the local economies by providing community benefit grant funds.  "Grand Ronde (Spirit Mountain Casino) gives millions of dollars back to the Oregon community.  This tribe will do the same once it establishes its gaming operation in Florence and establishes its community development fund," Somday said in an interview last month.

Somday said the community development fund and general economic support from the growth of the community may help the school districts that currently have to worry about state budget cuts, the city which has to worry about water, sewer, fire and police services and funding.  "It might be a positive thing for the community," Somday said.  Somday's statements are supported by studies done by EcoNorthwest for area casinos and tribes on effects of casinos on communities.

Bob Whelan, senior project manager and economist for the EcoNorthwest firm since 1996, has performed analysis of Oregon's gaming industry competition as part of the Governor's Task Force on Gaming and conducted comprehensive casino and state lottery revenue forecasts for the state.

He conducted many studies for private Oregon casino customers, including studies of employment and business impacts, gaming legislation, market studies of casino customers, revenue effects of gaming machines, revenue forecasts for individual tribes and casinos, socio-economic impacts of gaming currently in communities and possible impacts of casinos entering communities.  EcoNorthwest has offices in Portland, Eugene and Seattle.  Whelan is based out of Portland.

Whelan said that, in his company's studies around Oregon, he has run into many examples of the ways casinos increase personal income for people who work at them.  "Generally speaking, casino jobs pay well.  The wage level may not be high, but the high amount of tips means good money," Whelan said.  "I talked to an 18 year old parking valet who made enough money to buy a Jeep Cherokee in his first year working at the casino.  Stories like that are not uncommon."

According to an EcoNorthwest study done for a proposed casino in Hood River in October 1998, the average annual wages of most casino employees - without factoring in tips - was still above minimum wage.  For example, the 1996-1997 annual wage for a blackjack dealer in Oregon was $6.25 an hour, as opposed to minimum wage which was $5.50 an hour.  The total average employment and payroll data for six Oregon casinos in 1996 was estimated by EcoNorthwest at $17,371 a year, or approximately $8.35 an hour.  "On average, over half of all casino employees earn substantial amounts of gratuities," the study said.

According to figures released by the Spirit Mountain Casino during 2001, Spirit Mountain has a payroll of approximately $32 million divided between approximately 1,600 employees, or an average annual income of $20,000 plus tips and benefits.  The employees paid approximately $1.9 million in Oregon income taxes, Spirit Mountain also said.

According to the Hood River Study, 90 percent of employees at Oregon casinos are from the local population.  A similar study done for the Confederated Tribes of the Siletz in 1999, said that - based on a survey of Chinook Winds Casino employees - 97 percent of the employees lived in Lincoln County and approximately half of the casino's employees lived in Lincoln City.  In 1998, the casino's estimate was that it employed 712 people and approximately 15 of those were half-time.  Approximately $7.1 million of Chinook Winds' 1998 payroll went to Lincoln City residents, the study found.

Increases in income lead to increases in spending habits, Whelan said.  "A casino brings money into town and does have a positive impact on employment.  That in turn raises the income levels, which in turn increases the demand for housing, food and everything else," Whelan said.  The casinos themselves also spend money in the local area - from construction and maintenance contracts to purchases of products.  "In 1998, Chinook Winds spent approximately $2.9 million in Lincoln City on goods and services, such as utilities and fuels, maintenance and repair services, and donations to charities," the Siletz study states.

However, it also said that approximately 82 percent of the non-labor operational spending of the casino is spent outside Lincoln City.

Spirit Mountain claims in its promotional materials that it has spent $24.2 million annual on purchases from Oregon companies.  Somday has stated that the casino would not have a hotel at this time, just a Chinook Winds does not.  In the Chinook Winds study, EcoNorthwest claims that "the facility supported another 112 service-sector jobs in Lincoln City.  The local hotel and lodging industry employed 62 of those workers.  Sales in the lodging industry were $2.8 million higher in 1998 because of Chinook Winds."

However, a 1999 national study on gaming behavioral habits and community impacts saw a different set of casino impacts.

The study was conducted for the National Gambling Impact Study Commission by the National Opinion Research Center at the University of Chicago, Gemini Research, The Lewin Group and Christiansen/Cummings Associates.  The study looked at gaming habits (including money spent on lottery, bingo, casinos and betting) in 100 different communities, polled 3,481 people at casinos or by telephone, and did 10 in-depth case studies of communities around the nation.  The study looked at 45 communities with a casino that opened within 50 miles between 1980 and 1997.

"In communities proximate (within 50 miles) of a newly opened casino, per-capita rates of bankruptcy ... are not significantly changed.  Unemployment rates, welfare outlays and unemployment insurance in such communities decline by about one-seventh," the study said.  "Per-capita income stays the same, indicating that the communities reap more jobs, but not necessarily better jobs.  There appears to be more of a shift in the types and locations of work than a net improvement in the local standard of living ... The net picture in the economic ... data is on the positive side, but not in an overwhelming way."

The study said that approximately one percentage point is taken off the unemployment rate in communities with newly opened casinos.  The receipt of welfare dollars decreases by approximately 13 percent, unemployment decreases by 17 percent and transfer payments associated with government employment drop by three percent.

"There is a slight increase in the employment rate in construction trades, matched by a larger increase (18 percent) in actual per-capita construction earnings, an important component of the local labor market," the study said.  "Even more substantial percentage increases are seen in earnings in hotels and lodgings (43 percent) and recreation and amusement industries (22 percent); however, these start from quite small bases in the communities under study.  No change is seen in overall per-capita income, as the increases noted above are offset by reductions in welfare and transfer payments as well as a drop-off in income from restaurants and bars, which may be losing business to the food and beverage services in casinos."

Retail markets saw no change and restaurants and bars saw a 19 percent decrease, the study said.

The study conducted 10 case studies of communities throughout the country.  Three of those 10 had tribal casinos nearby.  The study polled at least seven or eight people in each community, usually people in prominent positions - planning departments, chambers of commerce, police chiefs, consumer credit counselors - and they were asked to give their subjective opinions on the effects of a casino on their communities.

According to the study, a wide variety of opinions came out about the economic impact of casinos and gaming as a whole.  "The silver lining and dark clouds seemed inextricable from each other.  For example, a recurrent positive theme was the new employment opportunities that casinos created for local people.  In five communities, this was cited as a very positive advantage (all but one of these communities was located within 10 miles of a major casino)," the study said.  "Respondents in the other four (sic) communities indicated that unemployment remained a problem, despite former hopes to the contrary."

This is the second in a series on possible impacts of a casino.  The next story will analyze pathological gambling.  Future stories will look at crime rates and traffic.  Source:  1/13/02 The Siuslaw News, by Karen Vitek.

1/12/02 - Gaming Compact - What Does It Mean? -- Once the U.S. Department of  Interior signs off on a piece of property as trust land useable for tribal gaming, the state and tribe must work out an agreement on how that land and potential casino will be managed.  This agreement, called a "compact" is based in language of the Indian Gaming Regulatory Act of 1988.  "Any Indian tribe having jurisdiction over the Indian lands upon which a class III (casino style) gaming activity is being conducted, or is to be conducted, shall request the state in which such lands are located to enter into negotiations for the purpose of entering into a tribal-state compact governing the conduct of gaming activities," according to the IGRA.  "Upon receiving such a request, the state shall negotiate with the Indian tribe in good faith to enter into such a compact ... (but the compact) shall take effect only when notice of approval by the Secretary (of the Department of the Interior) ... has been published in the Federal Register."

The compact, according to the IGRA, can contain provisions for application of civil and criminal laws by the state on the casino, manner of law enforcement and associated costs of regulation, "taxation by the Indian tribe of (gaming) activity in amounts comparable to amounts assessed by the state for comparable activities." standards for operation and maintenance of the casino, employee and contractor licensing procedures, and "any other subjects that are directly related to the operation of gaming activities."

The state has 180 days to respond to any request for compact negotiations, and if it does not respond -- or does not do so "in good faith" -- the tribes can take the state to the U.S. District Court, according to Danny Santos, legal counsel to the governor.

The state has a compact negotiating team made of representatives form the governor's office, Oregon Department of Justice and Oregon State Police, Santos said.  Once a compact is negotiated, the Secretary of the Department of the Interior has 45 days to sign it and publish it in the Federal Register, or deny the compact if it violates the IGRA, andy other federal laws, or Indian land trust laws and obligations.

Of the nine tribes in Oregon with compacts, including the Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, the majority were negotiated under the term of former governor Barbara Roberts, according to Santos.  Legalized gambling in Oregon began with the legalization of race track gambling in 1931, according to a position paper on gambling in the state produced by Gov. John Kitzhaber.  "Over the next 45 years, (gambling) came to include social gambling, whereby citizens could play friendly games in public by local option and statutes allowing charities to raise funds for good causes through an occasional casino night," the position paper said.  "In 1984, when voters authorized a state-run Lottery, gambling in Oregon acquired a new dimension ... a further complication has arisen, in the form of a large and growing tribal-sponsored gambling industry."

In 1987, a U.S. Supreme Court decision stated that tribes could offer any gaming and gambling not expressly prohibited by the laws of the state the tribal land was in, and the IGRA in 1988 allowed casino-style gaming.  "(The IGRA) allowed Indian tribes to conduct casino-style house-banked games (such as blackjack, craps, roulette and other tables games where gamblers bet against the house) on tribal land as approved by the Department of the Interior, provided that the tribes and the state first negotiate a compact specifying how - not whether - such games will be conducted." according to Kitzhaber's position paper.  "Beginning in 1992, the Roberts administration entered into a series of compacts with eight of the nine federally-recognized tribes (in Oregon) ... A look at these compacts indicates that, at the time they were executed, neither the state nor the tribes had a very clear conception of how the industry would grow or the impact it might have on the state as a whole. Moreover, the compacts give little attention to developing security standards across the industry and allow the Oregon State Police only a minimal security role."

Because the compact between the state and the Confederated Tribes was signed on Dec. 8, 1994, it was included in this category.  Unlike all the other compacts with all the tribes in Oregon, this compact has never been amended or renegotiated, until now.  "(The current request for renegotiation) takes us back almost to the starting point," said Santos.  "The other tribes have all amended their compacts (over the years).  And with the new location, that generates a lot of new interest (in the compact).  In fairness to the Confederated Tribes the same thing is also taking place with the Warm Springs tribes as they look for a new site."

Upon taking office in January 1995, Kitzhaber set up a task force to examine gaming in Oregon, and also began a series of amendments and renegotiations with tribes.  his position paper emphasizes the need to balance the financial benefits to the state and tribal governments of gaming with "the public good."  Kitzhaber stated in his position paper that he will "agree with each Oregon tribe on one gambling site per tribe ... ensure the security of tribal-run games ... and promote charitable grants from Indian casinos in order to build stronger ties between tribes and the surrounding communities." Kitzhaber also suggested that some of the grants be for addiction counseling.

The renegotiations with the eight other tribes than the Confederated Tribes have all added in policies to support these goals as stated by Kitzhaber.  In looking at the trends formed by renegotiations and amendments of other compacts in the state, it is possible to estimate what kind of negotiations the Confederate Tribes could face.  "We do have a history with compact negotiations now and it should not take as long as the original ones did to negotiate," Santos said.  "They are by no means cookie-cutter (documents) but we know what the issues are and the scope of gaming allowed."

The 1994 compact between the Confederated Tribes and the Roberts administration was for a parcel of land near Coos Bay, later made unrealistic for gambling because of the opening of the Mill Casino in North Bend, which opened in 1995.  The 1994 compact sets up what gaming is authorized for the Tribes (at the time of this compact, the state was only authorizing video lottery terminals and bingo), how to license and run background checks on employees and any management firms running the proposed casino, contracts with suppliers, security and regulatory concerns (such as no minors, no alcohol in the gaming area, no firearms except for law enforcement, etc.)

The compact sets up a joint jurisdiction for the Oregon State Police and tribal police over the casino, and a tribal gaming commission for "on-site regulation, control and security of gaming operation, and for the enforcement of this compact on tribal lands."  "The state police are on the negotiating team to assure the public security is taken care of as much as possible.  It is more than just public safety, but also in the sense that the games are not fixed and the location is safe," Santos said.  Under the 1994
compact, the Tribes must obtain an annual audit by a certified public accountant, and allow the state (through the Oregon State Police) access to all records during business hours without prior notice.

The Confederated Tribes must also make its tribal ordinances about health, environmental concerns and safety standards "at least as rigorous as standards imposed by the laws and regulations of the state."  Where federal law preempts state law, the Tribes agreed to use comparable standards to the federal ones.  The Tribes were also required to provide a traffic impact study and "evaluate the effect of the proposed gaming facility and any related development proposed by the Tribes as part of the
same site, on the state highway system and any city street or county road that may be used  by customers as access to the gaming facility."  The compact outlines that the Tribes must work with the state and local transportation authorities (county and/or city) to determine transportation routes and access.

"A road approach permit shall not be denied because of the proposed use of the Tribes' land," the compact does state.  The Tribes are required to fund any improvement and maintenance costs on surrounding (roads) as long as the improvements can definitively be linked to the casino and related traffic.  "The Tribes shall pay the reasonable cost of necessary street, road or highway improvements determined to be necessary on the basis of the traffic impact study and Oregon Department of Transportation requirements," the compact states.  "Historically it is the state's responsibility to negotiate the compact," Santos said.  "But as part of the negotiations the state takes under consideration the local governmental concerns.  A lot of it we do count on the local governments and tribes for information, and we encourage that communication.  Especially in the line of utilities and land-use issues.  Those are local matters we are made aware of and we consider.  These are things every compact has taken into consideration."

In approximately 1996, the governor began to renegotiate compacts with other tribes than the Confederated Tribes to allow casino-style house-banked games in addition ot the video lottery terminals.  These so-called "blackjack amendments" were only good for one year each, and the tribes renegotiated every year.  Only recently have some of the tribes been able to negotiate
three-year amendments.  "Given the fact that other tribes have the Nevada-style gaming, we are sure the Confederated Tribes would want us to reconsider the scope of gaming (in its compact) to include that," Santos said.

As Kitzhaber refined his gambling policies to include the "public good" goals, the tribes agreed to changes in their compacts as part of these amendments or compact negotiations.  All the other eight tribes that have current gambling operations and compacts have had to add an annual or monthly assessment cost to reimburse the Oregon State Police for cost of law enforcement and monitoring of the facilities.  The compacts also set up "community benefit funds" providing money back to the communities and addiction support programs.

• Casino Effects on Children