Issue 3, bad bet for Ohio

by Policy in Practice on September 9, 2009

Few people are better-versed in the November ballot proposal that would bring casinos to Columbus, Cleveland, Cincinnati and Toledo than Jerry Chabler. Once a proponent of the plan, Chabler, a Commissioner on the five-member State Racing Commission and a member of the Board of Directors of the Toledo Lucas County Port Authority, completely changed his tune upon reviewing the language in Issue 3.

“It was written by the casinos, for the casinos,” Chabler says, “and it really shows.”

Among the various problems Chabler has observed in the proposal is the preponderance of hidden costs written therein, and the monopoly Issue 3 would place in the hands of self-interested parties: only one casino could be built in each of the cities listed above, and they would enjoy one of the lower tax rates in the country at 33%. Worse, Chabler says, is the fast one Issue 3 would pull on Ohio’s voters: as much as its backers say it would be a boon for the state, those ploys are dubious at best. It would instead be a cash cow for casino operators, and all that money Issue 3 ads assert would be flowing into Ohio would bypass the people and go right into the wallets of those who want Issue 3 to become part of the Ohio Constitution.

In their advertisements, casino companies are telling Ohioans that this proposal is all about helping the state, that a veritable fortune will flow into the state’s coffers. But the pockets that will be disproportionately lined will be those of the casino owners.

In Maryland, for example, casinos pay a 67% tax rate. In Pennsylvania, it’s 55%; in Illinois it’s 50%. Issue 3 would cap the rate in Ohio at just 33%, however, and any changes to that figure would require a change to the state constitution, Chabler explains.

Maryland has had other issues that could be instructive for Ohio voters, too. It was not long ago that voters there approved casinos, and the state has been less than impressed with the industry’s ability to keep the promises it made while campaigning for support from Maryland’s voters. Casinos having failed to apply for the number of licenses it had indicated it would during the campaign, Maryland has missed out on the economic windfall it anticipated when the proposal was passed.

Chabler is confident that similar woes would befall Ohio, and that such problems would be just the beginning.

“The upfront licensing fee is probably one of the lowest of any state that has casino gaming in the entire country. Some of the casinos in other states in the country are getting anywhere between $300-500 million just for the upfront licensing fee, so that in itself is a very disturbing issue. The exact ballot language calls for a fee of $50 million per casino. The casino plan for Illinois will bring more than $400 million; state officials in Massachusetts, they’re dealing now on casinos, they may ask $500 million for the 2 casinos that they’re talking about; a couple years ago, two Indiana casinos at the racetracks–they coughed up somewhere around $250 million each. The $200 million for the four casinos is not a good deal for Ohio, it really isn’t. We’re really getting short-changed.”

Additionally, Chabler notes, the language in Issue 3 would prohibit non-profits from hosting charity ‘casino nights.’ That would deprive countless organizations statewide of a great deal of money. In Cincinnati, for example, the Catholic Diocese would miss out on $12 million a year.

Then there’s the issue of ancillary expenditures, which Chabler believes would be heaped upon taxpayers rather than the casinos.

“There’s nothing in the ballot language that provides for who pays for the infrastructure improvements where the casinos are going to be located. For example, in Toledo the location is right off an exit ramp right by the main interstate. I was told by some of the engineers that that particular exit ramp would have to be relocated because of where there’s an option for the casino, and there’s nothing in the proposed amendment that says who would pay for the infrastructure improvements, so you can bet it won’t be the gaming company, it’ll be the cities involved. We’ve got a 15% unemployment rate here, our capital improvements budget is down to bare bones, and the cost would be absolutely astronomical.”

The problems extend further still, Chabler says, to Governor Strickland’s VLT plan, under which 51% of the gross profits would go to taxpayers. Under Issue 3, that number would be sliced to 33%. And there’s no guarantee the casinos would even be built anytime soon.

“Issue 3 uses the word ‘authorizes’ not ‘mandates’ that casinos be built in Cleveland, Cincinnati, Columbus and Toledo. ‘Authorizing’ versus ‘mandating’–there’s a major difference! In other words, Penn National, which controls Toledo, could choose not to build it until 30 years down the road. So that gives them a monopoly on all the casinos in the state of Ohio. Essentially, this proposal is just filled with hidden costs.”

And if Chabler is right, the onerous task of paying those formidable costs would fall to Ohio’s taxpayers, all without the extraordinary benefits being promised by the authors of Issue 3. That is certainly not a gamble on which Ohioans should roll the dice.