Earlier this year, I penned an OpEd outlining five bold new initiatives to stimulate Lake area economic growth and take the Lake to next level and make it a “Worldwide Destination.” I followed up with more detailed cases on scheduled commercial air travel, a world class convention center and a national sports center. The fourth bold initiate I briefly outlined previously is legalized gaming at the Lake.
#4 – The Case for Legalized Gaming
If you want to generate strong reactions – both for and against – just bring up the topic of legalized gaming at the Lake. Social media lights up with diverse, and in most cases, ill-informed opinions. At the end of this article there is a comprehensive Q&A regarding bringing gaming (i.e., casino/s) to the Lake. This list of facts (not opinion) is the culmination of extensive research conducted over several years.
For a quick review:
The US Casino Gaming Industry represents $261 billion annually and supports more than 1.8 million jobs. The 465 commercial casinos in the US generated nearly $42 billion in revenue (2018) and directly employ more than 360,000 people generating $17 billion in wages. The industry also generated almost $10 billion in direct gaming taxes.
Presently, there are 13 riverboat gaming casinos in Missouri. The state industry employs nearly 10,000 people with an annual payroll of $320 million. Industry annual revenue in the state exceeds $1.5 billion and generates nearly a half billion in direct gaming tax revenue.
Using industry models to scale a facility size based on the Lake’s demographics, a single casino/hotel would bring at least $100 million in new net revenue to the Lake economy and generate $25 million in additional tax revenue. The multi-year construction project would be between $150-$200 million. The construction phase would generate as many as 700 direct jobs (mostly local) with an equal number of permanent jobs (all local) once operations commence. Many of the jobs created would be year-round, full time with benefits. We also estimate half that many indirect jobs. Such a facility would likely be the Lake’s largest employer (with the possible exception of Lake Regional Hospital).
Of the estimated $25 million in new tax revenue, approximately $5 million would be retained locally. Missouri’s gaming tax is among the highest in the nation; and therefore, the state generates nearly half a billion in revenue. It is the state’s fifth largest revenue source. The 13 Missouri casinos as a group generate more tax revenue for the state than the other 156,000 businesses combined.
It is simply inconceivable that the State’s primary tourist and entertainment destination is precluded from the gaming industry, yet some of the smallest, most rural destinations are not. It is simply a matter of economic fairness.
Writer’s Note: In the interest of full disclosure, I am a member of and spokesman for Osage River Gaming, an investor group whose primary goal is to bring gaming (i.e., casino/s) to the Lake. Last year, working with State Representative Rocky Miller and others, House Joint Resolution 87 (an amendment to the State constitution to include the Osage River to the permissible gaming locations) was making its way through the Missouri Legislature. Passage seemed within reach until the Pandemic hit and all non-essential bills were pulled. HJR 87 died along with many other bills in the legislature. However, a follow-up bill to HJR 87 is currently in the process of being drafted.
*A Casino at Lake of the Ozarks - 35 Questions and My Answers*
#1. Q: What benefits would a casino bring to the Lake area?
A: Using industry models to scale a facility size based on the Lake’s demographics, a single casino/hotel would bring at least $100 million in new net revenue to the Lake economy and generate $25 million in additional tax revenue. The multi-year construction project would generate between $150-$200 million in revenue and as many as 700 direct jobs with an equal number of permanent jobs once operations commence. Many of the jobs created would be year-round full time with benefits.
#2. Q:How many jobs would be created?
A: As many as 700 for the construction phase and at least that many more permanent jobs once operations commence. We also estimate half that many indirect jobs. Such a facility would likely be the Lake’s largest employer (with the possible exception of Lake Regional Hospital).
#3. Q:Who is paying for this? Will our taxes go up to build a casino?
A: Investors will be paying for a casino if/when it is built. No, taxes will not be used to fund a casino. In fact, a single casino/hotel of the size proposed for the Lake area would generate $25 million in additional tax revenue. This additional revenue can be used for schools, infrastructure, law enforcement, and other worthy causes. Remember the soccer complex the voters rejected recently since they did not want their taxes raised to pay for it? A casino would be constructed completely with private capital. Moreover, once in operation, the additional tax revenue generated could be used for those type of projects to bring more sports/family activities to the Lake area without the need to raise taxes.
#4. Q:How much tax revenue will a casino generate?
A: At least $25 million in new tax revenue for the State and Lake area. Missouri’s gaming tax is among the highest in the nation; and therefore, the state generates nearly half a billion in revenue. It is the state’s fifth largest revenue source. The 13 Missouri casinos as a group generate more tax revenue for the state than the other 156,000 businesses combined. A casino at the Lake would be by far the single largest source of tax revenue at both the state and local level.
#5. Q: What is the breakdown in tax revenue, i.e., state vs local?
A: Missouri casinos are assessed a 21% tax on gross gaming revenue (90%/10% split – between the state and home dock community respectively). Additionally, there is a $2 per patron admission fee, per excursion, split evenly between the home dock community and the state. This equates to a Net Effective Tax Rate on Commercial Casinos of approximately 26%. For illustration purposes, a casino in the Lake area would generate at least $100 million in gross revenue, and as much as $26 million would be in tax revenue – with the state receiving just more than $21 million and the local community receiving nearly $5 million.
#6. Q: How will the additional tax revenue be used?
A: Missouri has one of the highest effective tax rates on gaming at approximately 26%. Approximately one fifth of the taxes collected would be retained locally. Tax revenue from Missouri casinos funds education, veterans’ programs and other statewide worthy causes. The majority of gaming tax revenue, approximately $330 million in 2018, is reserved for Missouri’s Gaming Proceeds for Education Fund. This fund was created by the Missouri legislature in 1993 and distributes funding annually to statewide education programs. Also in 2018, approximately $80 million in admissions fees were paid to special state funds and local governments that host Missouri’s casinos. Some of the beneficiaries of those funds last year included a Missouri Veterans’ program, the state’s National Guard and a pair of financial assistance funds for college-bound students. Admission fees have also provided nearly $5 million since 2001 to Missouri’s Compulsive Gamblers Fund. Since 1994, Missouri gaming has funded $6.93 billion to education programs (early childhood through high school) and $927.5 million to worthy causes, including $342.2 million for veterans’ programs.
#7. Q:Since the Lake economy is so seasonal, can the proposed casino facility make it year-round?
A: Our economic models indicate a Lake area casino/hotel would thrive year-round. It is likely the addition of such a facility would be the single largest reason that the Lake indeed becomes less seasonal.
#8. Q:The Lake area is already a party place. We don’t need more party places; we need more family activities.Why don’t we focus on that?
A: There has been focus on such family projects. Most recently, a soccer complex was voted down because it was only feasible with a tax increase on local residents. A casino would generate such substantial revenue that such a project could likely be accomplished without raising taxes. Moreover, a casino in and of itself is not necessarily a party place; it is an alternate entertainment option for those who do not boat, fish, shop, or go to bars. In addition to being a vacation destination, the Lake area is also a retirement area. Many seniors enjoy going to casinos (perhaps instead of a movie) but now must travel out of town or out of state to enjoy a casino, a comfortable and safe place to play slot machines, table games, etc.
#9. Q:Can you name an example whereby a casino helped create family entertainment since kids don’t gamble?
A: Yes. In Maryland Heights (St. Louis suburb) the Hollywood Casino generates approximately $10 million in local annual tax revenue, approximately one fourth of the total for the city. This has allowed the municipality to undertake various family development related projects. In April of 2017, the Maryland Heights Community Center opened. The 92,000 square foot $30 Million state of the art facility would certainly have not been possible without the significant tax revenue produced by the Hollywood Casino.
Just a little more than two years later, the $78.2 million Community Ice Center was built on the grounds of the Hollywood Casino. Financed with a combination of private and public funds, the facility features four NHL sized ice sheets (one being a covered outdoor rink designed as a multi-purpose venue), the state-of-the-art facility will not only be used by the St. Louis Blues and other hockey teams, but it will also provide a place for kids of all ages and levels to practice and play hockey. The people who visit the area to watch or participate in games/events will fill additional hotel rooms, eat at local restaurants, and shop at local stores. This is a great facility for the area with a very positive economic impact that would not have been possible without the significant tax revenue generated by the Hollywood Casino. Similar stories have played out across the state in locations where casinos have been built.
#10. Q:Why do we need a casino since most people don’t like to gamble?
A: Approximately 85% of Americans have gambled at least once in their lives; 60% have gambled in the previous year. A casino provides an alternative entertainment option for residents of and visitors to the Lake area who do not like to boat, fish, shop, or go to bars. Many recreational gamblers are looking for gaming destinations to try; therefore, a casino in the Lake area would attract gamblers from other states/areas who would not have otherwise visited the Lake area.
#11. Q:Shouldn’t we be worried about compulsive gamblers using the casino to squander their mortgage payments and other money which could lead to financial ruin?
A: Of course. Compulsive gambling is a serious issue; however, statistics show that it represents an extremely small percentage (far less than 1%) of the population. It is a fact that the vast majority of citizens gamble responsibly. Prohibition did not work for the same reason. Moreover, Missouri casinos generate admission fees for this purpose and have provided nearly $5 million (since 2001) to Missouri’s Compulsive Gamblers Fund.
#12. Q:A casino would increase the robbery and domestic violence associated with people losing money.Why would we want that?
A: The Lake area does have crime; however, the statistics regarding crime in cities in which casinos have been built indicate that crime has actually declined. The casino improved the area and actually cut down on crime. Just look at Booneville and St. Charles; both towns were deteriorating until the casino came in and rejuvenated the area. The additional tax revenue generated can also be used to provide the needed security for the casino and increase the security around the Lake area.
#13. Q:Won’t there be an increase in crime and corruption?
A: That has not proven to be the case in other out market properties in the state and elsewhere. Industry experts generally agree that 90% of the organized crime and corruption in the industry are associated with the two “destination” markets of Las Vegas, NV and Atlantic City, NJ. Towns such as Boonville and Cape Girardeau each reported overall lower crime rates since adding a casino. Officials point out that casinos are so heavily regulated in Missouri that there is very little opportunity for corruption within the gaming industry. They also argue that the large new tax revenue source that casinos produce has allowed major improvements in local law enforcement.
#14. Q:Won’t a casino hurt the existing businesses?
A: Any new business has the potential to impact existing businesses – simply an economic reality. However, we believe the magnitude of the project and the favorable overall gains to the local economy more than offset any short-term detriment to any existing business. Most local businesses seem to agree - and their response has been overwhelmingly positive.
#15. Q:Why does the constitution have to be changed to add the Osage River?
A: The Missouri State Constitution limits casino gambling to within 1,000 feet of the Missouri and Mississippi Rivers. Last year, a bill known as HJR 87 which would have included the Osage River (below Bagnell Dam) to the permissible areas for casino gambling was making its way through the legislature. That bill died with many others due to the pandemic; however, another replacement bill is currently being drafted.
#16. Q:Can’t the Missouri Legislature just change the allowable locations?
A: No. The Missouri Constitution currently limits casino gambling to within 1,000 feet of the Missouri and Mississippi Rivers. Adding the Osage River requires a change to the constitution.
#17. Q: Where can casinos be located in Missouri?
A: The statue states that boats in artificial moats, within 1,000 feet of an approved river, are allowed. The term artificial moats is deceiving; and as a practical matter, the current Missouri casino properties are simply hotel casinos located adjacent to the river.
#18. Q:What is the competitive landscape for Missouri casinos and especially a casino at the Lake?
A: Most of the states that border Missouri offer gaming options. Therefore, Missouri casinos contend with a robust and growing gaming market. Casinos in the greater Kansas City and St. Louis areas faced direct competition from rival properties in Kansas City, Kansas and East St. Louis, Illinois, respectively. Along the Missouri-Oklahoma border, four casinos operated by Oklahoma tribes attract customers from across the state line. To the north, Iowa has more than 20 casinos including two within 50 miles of the Missouri border. Meanwhile, to the south, Arkansas poses an emerging threat after voters there approved a statewide referendum in November 2018 authorizing the development of four commercial casinos. In recent years, Missouri casinos in the eastern part of the state have also faced increased competition from the rapid growth of video gaming terminals (VGTs) at non-commercial casino locations, such as bars and truck stops, in Illinois. Of course, there are the destination gaming locations of Las Vegas, NV and Atlantic City, NJ. Fortunately, the Lake’s location in the center of the state will shield it to a greater extent from such competition given that most of the existing casino properties are very close to state lines. Of course, all markets are exposed to competition from the destination markets. But for many out of state visitors, the Lake is already a destination market and a casino would augment that fact.
#19. Q:If there is so much widespread gaming occurring in neighboring markets, doesn’t it make sense to compete for as much revenue as possible within our own state?
A: Yes, and a Lake area casino would be a formidable gaming competitor given its unique location and demographics.
#20. Q:If there are a maximum of 13 casino licenses allowed by law in Missouri and they are all in use, how does changing the constitution to add the Osage River bring a casino to the Lake area?
A: It does not. There are currently no available licenses and the passage of a bill similar to HJR 87 has no provision for additional licenses. However, the constitutional change if passed would open the Lake area should a license become available. This happened 10 years ago when the President Riverboat Casino in St. Louis closed its doors. Ultimately, that license was reissued to a group in Cape Girardeau. We track the financial metrics of all Missouri casinos very carefully and believe four of the properties are under performing, two of them seriously so (even prior to the pandemic). Therefore, we believe it is a matter of time before a license becomes available. Also, the Missouri legislature could vote to add additional licenses at any time.
#21. Q:What was HJR 87?
A: HJR 87 was a bill introduced by former Representative Rocky Miller to amend the state constitution to allow gaming on the Osage River. The bill was successfully voted out of committee and was scheduled for debate vote on the full house floor before dying due to the pandemic.
#22. Q:If the legislature passes a bill like HJR 87 and the change makes it on the ballot this fall, what is the likelihood it will pass?
A: Our polling data indicates that such a measure would pass statewide.
#23. Q:If the geography is changed to include the Osage River, how can you be sure the Lake would receive the next available license should one become available?
A: We cannot be sure. If a casino license becomes available, it is likely there would be multiple applications. This was the case 10 years ago when a license became available – there were four applicants. The state sanctioned a study for the purpose of determining two basic criteria: (1) what location would have the least cannibalization of the other existing casinos and (2) what location would generate the most net “new” revenue for the state. Cape Girardeau was ultimately granted the license on this basis. If you apply the same criteria, the Lake is an easy win on both counts – particularly regarding the net “new” revenue since the Lake draws tourists from the entire Midwest. This is simply not the case in most of the other markets - perhaps with the possible exception of Branson. We believe we would prevail in the application process.
#24. Q:What if a replacement bill for HJR 87 does not make it on the ballot or if voters reject the measure?
A: Osage River Gaming would subsequently conduct a Citizen’s Ballot Initiative; whereby, we would collect enough signatures to place a much more expansive measure directly on the ballot bypassing the legislature.
#25. Q:What is “expansive” about your Citizen’s Ballot Initiative vs. a bill similar to HJR 87?
A: The Citizen’s Ballot Initiative that we are prepared to conduct will not only add the Osage River but also include the entire Lake of the Ozarks to the allowable locations. We also intend to include the addition of as many as three new gaming licenses.
#26. Q:What is Osage River Gaming?
A: Osage River Gaming is a Missouri Non-Profit Corporation formed by local investors for the purpose of amending the Missouri State Constitution to allow gaming on the Osage River and Lake of the Ozarks.
#27. Q:It would seem a “local group” would not have the expertise required by the state to prevail in the license application process.How do you overcome this?
A: We have partnered with a National Gaming Company for any license application.
#28. Q:How did your group form and how long has it been in existence?
A: We have been discussing the possibility for 10 years – ever since Cape Girardeau was granted a license. We studied that process very carefully and believe we could prevail in a similar fashion. We formally formed a corporation about three years ago and spent the interim building the necessary infrastructure and funding to conduct a ballot initiative.
#29. Q:Besides Tim Hand, who are the other members of your group?
A: The group consists of an undisclosed number of members (including Tim Hand). Steve Kahrs and his family, owners of Osage Catfisheries, Inc. and other entities are also part of the group. The other investors’ identities have not been made public. Currently, Tim Hand is the group’s spokesperson.
#30. Q:Will you identify the other investors in your group?
A: Not at this time.
#31. Q:If a replacement bill for HJR 87 passes and no licenses become available, are you prepared to wait indefinitely for an available license?
A: No. Osage River Gaming retains the option to either petition the state legislature for additional licenses or conduct a statewide ballot petition to add licenses (and likely additional geographical locations). We have the necessary expertise and funding to proceed in this manner.
#32. Q:Is Osage River Gaming accepting additional investors?
A: Not at this time.
#33. Q:When was gaming legalized in Missouri?
A: The Missouri Riverboat Gambling Proposition, also known as Proposition A, was on the November 3, 1992 ballot in Missouri as a legislatively referred state statute, where it was approved. The measure authorized riverboat gambling excursions on the Mississippi and Missouri rivers, to be regulated by the State Tourism Commission. The resulting law from this proposition was overturned under a ruling that games of chance can only become legal through changes to the state's constitution. In November of 1994, the voters of the state of Missouri passed a ballot initiative amending the state constitution to allow riverboat gambling on the Missouri and Mississippi rivers. Finally, gambling was legal in Missouri.
#34. Q:What is the structure and magnitude of the Missouri Gaming Industry?
A: Presently, there are 13 riverboat gaming casinos in Missouri. The state industry employs nearly 10,000 people with an annual payroll of $320 million. Industry annual revenue in the state exceeds $1.5 billion and generates nearly a half billion in direct gaming tax revenue.
#35. Q:What is the structure and magnitude of the US Gaming Industry?
A: The US Casino Gaming Industry represents $261 billion and supports more than 1.8 million jobs. The 465 commercial casinos in the US generated nearly $42 billion (2018) and directly employed more than 360,000 people generating $17 billion in wages. The industry also generated almost $10 billion in direct gaming taxes.