CINCINNATI — Economic forecasts can be a roll of the dice, but the stakes are often high. That was the case with predictions on the impact of casino gambling in Ohio.
It’s been 6½ years since Ohioans voted to approve Issue 3, which amended the Ohio Constitution to allow casinos to be licensed in the state’s four largest cities. The 53-47 percent voter approval itself beat the odds: It followed the sound defeat of four previous ballot efforts to bring casino gambling to the Buckeye State.
Southwest Ohio played a pivotal role in the casino campaign: Charlie Luken, Cincinnati’s former mayor, was the public face of the campaign as chairman of the Ohio Jobs & Growth Committee, which sponsored the casino proposal. And on Election Day, voters in three Tri-State counties — Brown, Clermont and Hamilton — approved the issue by three of the five widest margins in the state. Hamilton County’s 67 percent vote in favor was tops in Ohio.
Further, casino backers trumpeted a study they had commissioned of the University of Cincinnati’s Economics Center for Education & Research. The study predicted that, if approved, the casinos would generate 16,000 new, permanent jobs in the state and have an initial economic impact of $1.85 billion, $388 million of that in Hamilton County.
In all, the study predicted casinos would generate $651 million a year in tax revenues.
In mid-2009, Secretary of State Jennifer Brunner requested a similar study from Ohio’s Office of Budget and Management and the Ohio Department of Taxation. Released about a month before the Issue 3 vote, it, too, painted a rosy picture of casino tax revenues — up to an estimated $643 million a year.
The state’s analysis also included a Plan B of estimates in the event that video lottery terminals were approved for Ohio’s seven race tracks. In that event, OBM said, the competition would cut the annual tax revenue from casinos to $469 million.
Casino taxes are collected at a rate of 33 percent of the casinos’ revenues. That means the $469 million tax estimate assumed total annual casino revenues of $1.42 billion. The tax money is split among the state’s counties, major cities, schools, state commissions and gambling-addiction services.
With casinos now in operation for just more than four years, none of those lucky numbers — even the Plan B guess — has ever come up. Casino-tax receipts for 2016 are on track to reach a new high, but, extrapolated from first-quarter results, they will be only about $284.7 million.
Ohio casino tax revenue
Includes downtown casinos in Cincinnati, Cleveland, Columbus and Toledo.
Year
Taxes paid*
2016*
$284.7
2015
266.9
2014
267.5
2013
272.5
2012*
111.6
*-Dollar figures in millions. Only the Cleveland and Toledo casinos were open in 2012. 2016 figures are annual rate based on first-quarter results.
Source: Ohio Department of Taxation
Why the disparity? Gary Gudmundson, communications director for Ohio’s Department of Taxation, said the state had to work with the figures it could find. “We did the best we could based on assumptions and other histories from other venues around the country,” he said.
There were plenty of those to study, too. Ohio was the 39th state to allow casinos, trailing neighbors Indiana, Michigan, Pennsylvania and West Virginia. Issue 3 backers used the specter of Ohioans’ spending their gambling money in other states to encourage support for the proposal. Greater Cincinnatians, for example, have for years had quick access to a trio of casinos in Southeast Indiana.
Besides out-of-state competition, as OBM warned, video lottery terminals were indeed OK’d in 2011. Revenues at the so-called racinos have since ballooned, already jumping nearly fivefold from fiscal 2013 to fiscal 2016 — and that’s with a month’s results yet to come in for 2016. (The state’s lottery commission, which regulates racinos, runs on fiscal years that begin July 1.) Combined monthly revenue at the state’s racinos is now approaching $80 million.
Two racinos are short drives from downtown Cincinnati: Belterra Park in Anderson Township and Miami Valley Gaming in Lebanon, Ohio.
Alan Silver, a professor at Ohio University and an expert on the gambling industry, said racinos offer the equivalent of suburban convenience compared to Ohio’s downtown casinos. “They’re safe, and they have free parking,” he said.
Racinos also require a much smaller capital investment to set up. Ohio’s downtown casinos cost up to $400 million to build, he said, while racinos can be up and running for $150 million to $200 million. The challenge for the casinos, Silver said, is, “How do you differentiate your product? Is it customer service? Perks? Entertainment venues?
“It’s all about marketing, all about loyalty.”
And technology.
Casinos’ player rewards programs make patrons feel like VIPs — “Everybody wants to be treated like a VIP,” Silver said — but they give the gaming houses an unparalleled ability to track players’ habits. That leads to precisely targeted marketing, he said.
Jack Entertainment, the new name of Detroit-based Rock Gaming, recently announced a deal with Scientific Gaming Corp. to install a new suite of Bally Systems slot machines that can send individual promotional messages to frequent customers. Jack’s CEO, Matt Cullen, told WCPO.com the system is designed to complement the casino’s new loyalty program, Club Jack.
Neither is it a coincidence that casinos feature a full house of restaurants. It keeps people inside the casino longer, Silver said, and spending money even if they’re not gambling.
By Silver’s calculation, there’s room for growth at Ohio’s gambling outlets. Total annual wagers there in the state were $1.8 billion last year, he said, including casinos and racinos. That could fairly easily rise to $2 billion, he said, which he noted is a 10 percent bump.
To do that, they’ll have to overcome the loss of the Horseshoe brand, which dates to the early, heady days of Las Vegas. After acquiring full control of Cincinnati’s and Cleveland’s casinos from Caesars Entertainment, Jack Entertainment this month rebranded its casinos under the Jack name.
Chad Barnhill, senior vice president and general manager of Jack Cincinnati Casino, said the venue had been retooled with the goal of breaking the $20 million mark in monthly revenues. As Horseshoe, the casino last hit that target in March 2014. It would also mean generating a 19 percent increase from the $16.78 million monthly average for the first five months of 2016.
Silver said an increase of that magnitude wouldn’t happen quickly and that he’d be satisfied to see revenues increase by 5 percent to 10 percent.
Revenues and tax receipts aren’t all that’s fallen short of original projections. The 16,000 jobs the UC study predicted would be created included an anticipated multiplier effect from economic activity generated at casinos — as players stay at hotels or casino employees spend their wages. That direct employment in all four Ohio casinos was 5,447 at the end of 2015, according to the Ohio Casino Control Commission.
There’s evidence of at least one ripple effect. Mary Cook, revenue manager for the downtown Cincinnatian Hotel, said the former Horseshoe “definitely brought new clientele to the hotel.” As one of Jack’s partner hotels, the casino maintains standing reservations on a bloc of rooms, boosting the hotels’ occupancy rate.
As Horseshoe’s revenues went flat …
Calendar
Revenues (millions)
Year
Year
Monthly avg.
2016 *
$201.3
$16.78
2015
196.5
13.37
2014
197.8
16.48
2013 *
184.5
18.45
*-Horseshoe Casino Cincinnati was open only 10 months in 2013; 2016 annual estimate based on January-May monthly results.
Source: Ohio Casino Control Commission
… Belterra Park’s have grown …
Fiscal
Revenues (millions)
Year *
Year
Monthly avg.
2016 *
$68.3
$6.21
2015
57.6
4.80
2014 *
9.35
4.67
*-Lottery Commission fiscal years start July 1. Belterra Park was open just two months in fiscal 2014.
Source: Ohio Lottery Commission
… And its share of state casino wagers slips
Calendar
State revenues (millions)
Pct. from
Year
Year
Monthly avg.
Horseshoe *
2016 *
$351.4
$70.27
23.9%
2015
812.3
67.69
19.75
2014
809.2
67.44
24.4
2013 *
821.3
68.44
26.9
*-2016 figures from January-May. Horseshoe percentage based on monthly averages; 2013 percentage based on Horseshoe’s 10-month average.
Source: Ohio Casino Control Commission
Spreading the wealth
Annual share from the combined pool of state casino taxes distributed by the Ohio Casino Control Commission to counties and large cities. Hamilton County and the city of Cincinnati get equal amounts.
Distributions (millions)
Year
Local *
State
2016*
$5.05
$145.22
2015
4.73
136.10
2014
4.74
136.41
2013
4.83
138.98
2012
1.97
56.92
*-Local distribution is amount received by both city and county; 2016 figures are annual rate based on first quarter.
Source: Ohio Department of Taxation
No place like home
Cincinnati’s annual share of the combined pool of state casino taxes as a city which hosts a casino.
Distributions (millions)
Year
Host cities
Cincinnati
2016*
$14.24
$3.69
2015
13.34
3.37
2014
13.37
3.27
2013
13.62
3.02
2012
2.62
0*
*-No distribution to Cincinnati in 2012 (before Horseshoe opened); 2016 figures are annual rate based on first quarter.
Source: Ohio Department of Taxation
Follow Thomas Consolo on Twitter: @tconsolo_news.
