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Expected effects of casinos on Virginia’s local economy

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We will look into the projected impact of the newly emerging casino and gambling industry upon the local economy of Virginia.

At a federal level, gambling is a legal activity supported by an industry valued at $261 billion. However, each state reserves the right to administer related legislation, depending on its context. Here is the current state of gambling in the state.

The Virginian context

Democratic former Governor Ralph Northam introduced SB 1126 to give the Virginia Lottery Board regulatory rights for the state-wide gambling industry.

Local regulator

The bill passed on February 12, 2019, with twelve votes for and five against. Thus, currently, the Virginia Lottery Board is the sole agency tasked with regulating land-based casino venues and sports betting sites.

Its activities span across several areas, such as licensing, operator auditing, and compliance verification for operators, manufacturers, distributors, suppliers, and venue employees. The Board is active, constantly updating the legislation and regulatory codes for all areas it oversees.

Local businesses

As for the actual implementation and appearance of land-based casinos, Virginia has been devoid of any infrastructure and a native industry for most of its history. However, on November 3, 2020, state voters approved the launch of several casinos in Bristol, Danville, Portsmouth, and Norfolk. It was only in Richmond that residents rejected the proposal to open such a venue.

Virginia does not have any Native American-run casinos, nor do any of the opened venues adhere to the regulatory authority of the US Indian Regulatory Act and the National Indian Gaming Commission.

This situation is mainly due to the local authorities assigning the Lottery Board as the sole licensor. All things said, two of the four initially opened casinos were to be run by Native American tribes.

Sports betting legalization

Following the tumultuous but finally successful effort to legalize sports betting in 2018, Virginia joined the ranks of states to allow the activity.

Casinos will become hosts for retail sportsbooks, with concrete implementation being set to occur in early to mid-2022. Online bookies were faster, making their platforms being accessible from January 2021.

The visible & projected effects of gambling

During its emergence, the Joint Legislative Audit and Review Commission established the main hotspots for casino-style business development in conjunction with The Innovation Group, a national consultant.

Their extended study developed an initial investment of $200 to $300 million and a 27% revenue tax – the national average. Under these conditions, the industry was projected to generate $970 million in net revenue and $260 million from gambling taxes. Around one-third of the revenue was set to come from out-of-state customers.

The casino industry would have still failed to compare to the Virginia Lottery, which generates over $600 million annually after prize payouts.

Concerning employability, the venues would garner at least 1000 “low-wage and low-skill” jobs each, with an average wage of $33000.

Further potential

The study also investigated the potential effects of opening a casino in Northern Virginia, a project that was not authorized by SB 1126. The venue would have almost doubled the total gambling tax revenue, bringing in another $115 million. The number of opening jobs would have been tripled, with 3200 more workers finding employment in this hypothetical casino. More importantly, it would have retained another $100 million that residents spend outside Virginia.

The 2019 study also mentioned sports betting and online gambling. However, these two sectors were estimated to contribute to a lesser extent. A fully developed sportsbook industry would have brought in $55 million in tax revenue.

What is actually going on?

Gambling industry development is facing a rockier start than initially expected.

The current global pandemic situation pushed the opening of the four confirmed casinos back to late 2022 or early 2023. However, the worst development for the projected effects of gambling in Virginia was the results of the casino authorization referendum in Richmond.

In 2021, 40,243 residents, amounting to 50.95%, voted against opening a venue in Richmond. This decision would decidedly change the economic and employment effects outlined in the 2019 study.

The referendum vote could signal a change in local attitudes towards the desirability or necessity of on-land gambling in Virginia. More so, it may put the last nail in the coffin of a potential casino venue in Northern Virginia.

How do the 2019 study findings stand now?

Granted, the study from the JLARC seemed hopeful either way. However, most of its overall findings would fail to materialize given the current trend. Richmond was expected to make up 31% of the entire local industry, bringing in a total of $80 million from taxation and generating 2,050 jobs.

Given the current state, gambling can only be expected to generate around $181 million, a contribution that is simply dwarfed by other industries.

Economic dynamics

One more element is that of economic redistribution. Given the business model of casinos, revenue would only flow up, with little to no spread across the community, even with taxation and employability considerations.

The absence of Native American casinos comes again into the picture. Such venues have an obligation to redirect venue revenues to community welfare programs and projects.

Thus, casinos under the supervision of native American operators and the National Indian Gaming Commission directly benefit the local community.

Currently, Virginia would only see the opening of commercial casinos that function solely on a for-profit basis.

How online gambling plays into it

iGaming, both sports betting and casino-styled, is gaining ground across America and in Virginia on a more local level. The jury is still out on whether opting for online platforms or going into a venue are competing or complementary.

Similarities to on-land casinos

On a grassroots level, clients that develop a nick for a game like roulette can use learned playstyles and systems in physical venues and online platforms. Thus, the consumer of one can become a customer for both, migrating from online to offline services, depending on convenience.

And the differences

The difference remains that of infrastructure implementation and availability. Online gambling does not face the same developmental limitations of on-land casinos. Services are immediately accessible across the state, with the only requirements and expenses for the operator appearing in areas of certification and adherence to local law.

The issues

However, redistribution considerations come back with a vengeance. If commercial brick-and-mortar casinos present issues of unequal allocation of resources in the community, iGaming businesses are so much worse. Online gambling yields little to no effects on local employment. Additionally, profits of online casinos simply flow out of state bounds towards operators that function either nationally or are offshore based.

The only guaranteed economic benefit for online gambling in Virginia comes from taxation, certification, and licensing fees. As a motto, gambling legalization is positive since it addresses the pre-existent illegal activities. The JLARC estimated online gambling to bring in only $84 million. However, given the current standing of commercial casinos, sportsbook, and online gambling, such services have a limited positive effect on the economy of Virginia.

Story by John Reeves

augusta free press
augusta free press
augusta free press

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