Extranormal business considerations and the Penn National casino proposal in Prince George's County
Wow.
Penn National, which proposes a casino location at a less desirable facility in Prince George's County, the Rosecroft Racetrack, as opposed to the Growth Machine desired location of National Harbor, has offered to give all of the profits to Prince George's County, in order to win the bid.
See "Penn National: 100 percent of casino profits will go to Prince George's County during first 15 years" from the Washington Business Journal. and "Casino bidder offers hundreds of millions in profits to Prince George’s hospital, teachers" from the Washington Post.
It's a brilliant gambit.
Obviously they propose this because of cross-subsidies available to them from their broader portfolio, how a National Harbor casino would affect their overall profitability, and because it is a way to keep out and lower the profits of a competitor (not unlike how in its heyday, KMart "overstored" the Detroit area--its home base--to keep competitors at bay). See "The enemy of my enemy is my friend: casino edition (a/k/a "mutally assured destruction")."
Although the justification is to keep the racetrack going with the extra revenue stream ("Penn National Gaming Inc. makes pitch for casino at Rosecroft Raceway," Washington Business Journal).
Penn National proposes that PG County use the money to fund a system of public health clinics (actually I suggested that such a system be paired with a new county hospital system, see past blog entries "Disruptive Innovation Once Again" and "When the problem is defects in the structure of "the market", financial incentives won't do much good: Maryland's health enterprise zones"), pensions for teachers, and funding to community organizations located specifically within the Council District where the racetrack is located.
What I would recommend instead that if PG County and the State Casino Board selects this bid, that instead PG County come up with its own priorities. This is the course I recommend generally with regard to what are called proffers or community benefits. See "Community Benefits Agreements (revised)" and "Social infrastructure (community benefits)."
And as much as I think National Harbor is gross, it probably makes more sense to put a casino there ("MGM unveils details of proposed $800 million National Harbor," Springfield Republican, Massachusetts).
Instead, PG County should seek a counter offer from that group which would probably be financially similar, and use the money to pay towards high capacity transit connections, such as an extension of the Purple Line light rail from Alexandria to New Carrollton.
Sierra Club concept diagram, Purple Line light rail system, Washington Metropolitan Area. The leg from Bethesda to New Carrollton is currently being designed and is expected to break construction within 2 years.
That being said, casinos generally are gross and reliant on revenues from people who ought to be spending their money on other things. But proximity to DC will probably make a PG County casino a winning proposition.
If the county uses the revenues wisely, they could benefit. Although it's not a sure thing. See "What to make of casinos as an "urban revitalization" method and detroyer?" and "Casinos in Atlantic City may be a losing proposition."
And if it is not part of a project that strengthens connections and intensify within the county then the desired goals and objectives will not be attained. See "Can enclave development "save" Prince George's County?"
posted by Richard Layman @ 11:26 AM&Permanent Link
2 Comments:
Atlantic City's demise came when there was more competition from other states that legalized and invited casino gambling in their states. Why would I drive from DC to AC when there are ore convenient casinos in MD, DE, and WV? In addition, all across the country, casinos are popping up. And when you base a large portion of your revenue off of the casino industry in this increasingly hostile environment, you end up like Detroit. There are parallels. When Detroit was faced with competition from other countries and other states for auto manufacturing, their main industry, Detroit began to decline. Maryland has revenue streams from more modern industries such as bio-science, defense, IT, and green environmental firms. Not including the most stable industry of all - the Federal Government. I don't think three casinos between Baltimore and DC will change the economic vitality of the area for the worse. Unless the government cuts spending by 25%.
1. Detroit's issues are very very different and not comparable. I have written about this a lot. The casinos are one itty bitty issue. The fact that the auto industry declined generally was one, but more important was the industry's deliberate policy to move out of Detroit--there are 2 plants in the city now, there used to 12--and Michigan.
2. WRT Maryland and casinos/1, the issue is as you point out, competing with other states for the money that residents would spend on gambling. Facilities in MD preclude people from going out of the state.
WRT Maryland and casinos/2, but it comes at a terrible cost to the most persistent gamblers, who usually can't afford it.
3. And wrt your point about MD having the capacity to support three casinos between Balt. and DC, I disagree. Probably there is capacity for two. And because the Balt. location is so uncongenial, probably the Anne Arundel facility will succeed at Baltimore's expense.
This may not have been the case if a Balt. facility had opened at the same time as Maryland Live.
4. As importantly, there probably isn't enough capacity to support gaming facilities in outlying areas like Perryville and Rocky Gap. The statements about how casinos in those places will be a great economic boom are probably not going to be supported by the actual results.
5. That being said, I agree with you that a facility in PG can be successful.
What is key is whether or not, as I wrote about in this entry, the ultimate selection supports a new paradigm for land use and transportation planning, or not.
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