Georgia Could Cash In Big Bet on Casinos
Dave Schechter is a veteran journalist whose career includes writing and producing reports from Israel and elsewhere in the Middle East.
Josh Arieh has a simple reason for wanting to see casino gambling legalized in Georgia. The professional poker player, with career tournament winnings of nearly $7 million, could go to work, then sleep in his own bed in Alpharetta.
Mike Leven, the former president and chief operating officer of Las Vegas Sands Corp., the casino and resort company founded by billionaire Sheldon Adelson, sees a low probability of the state legalizing casinos and worries that legislators will not ask the right questions.
Jason Frank, who has experience with online and brick-and-mortar casino enterprises, offers a cautionary tale about the benefits touted by proponents.
These members of Atlanta’s Jewish community have unique insights into an issue likely to make headlines in early 2016.
Atlanta-area rabbis, many of whom are recreational poker players, have said little about the issue, though the holy books suggest that the rabbis of old took a dim view of wagering for profit (and loss). In the coming months, rabbis may contrast biblical references to casting lots with casting dice down a green felt table.
The odds on casino gambling will become clearer after Jan. 11, when the Georgia General Assembly convenes a session that likely will adjourn in mid-March.
Legislators may find before them a resolution to amend the state constitution and legalize casino gambling, earmarking a percentage of the proceeds to the HOPE college scholarship fund and the state-funded pre-kindergarten program.
Billions for Education
Money for education was the lure when Georgia entered the lottery business in June 1993 after 52 percent of voters approved its creation in the previous November’s election. The Georgia Lottery Commission has reported sales of more than $59 billion since 1993, producing more than $16.7 billion for education.
The size of a casino windfall for education would depend on the tax rate applied to revenues, a figure that could be contentious if the proposal gets that far.
This is a high-stakes game.
The keepers of Georgia’s coffers know that hundreds of millions of dollars — estimates range as high as $400 million — cross the borders for casinos and resorts in other states.
Casino backers tout some big numbers if the state gives gamblers the option to stay home.
A proposal by Rep. Ron Stephens, R-Savannah, who heads the House Economic Development & Tourism Committee, calls for up to six “destination” casino resort licenses across five geographic zones in Georgia: metro Atlanta (two, with one more limited than the other); Columbus; Macon; Savannah; and South Georgia.
Potential Atlanta sites include a downtown area known as the “Gulch” and property near Centennial Park. As for the Turner Field site, which the Atlanta Braves will vacate after the 2016 season and which Leven and others suggested as a viable casino location, the Atlanta Fulton County Recreation Authority announced Dec. 21 the selection of Atlanta real estate company Carter and Georgia State University as the winner bidders for the 67 acres. Plans call for student housing, apartments and retail space, as well as the conversion of the baseball stadium for use by GSU’s football team.
Those six proposed casinos could have a combined impact of $5 billion per year, create more than 30,000 permanent jobs and bring in $288 million annually in tax revenue, according to a study done by the consulting firm Marquette Advisors (“international hospitality and gaming consultants” retained by MGM Resorts International) for House and Senate committees considering methods of preserving the HOPE scholarship.
Annual Olympics
The House committee was scheduled to issue a report on its findings by Dec. 1, but that date was extended. Its final meeting was held Dec. 10, and the report is expected by Dec. 31. A separate report is expected from the Senate committee.
The $5 billion annual figure — a combination of $2.8 billion in direct impact and $2.2 billion in what is termed “catalytic” impact — is the “equivalent of hosting another Summer Olympic Games every year,” according to the study.
The Marquette Advisors report estimates that 26 million people a year would visit those casinos and spend $2.4 billion.
The job creation would consist of 15,655 in the casino industry and 14,626 generated indirectly — equivalent to 10 percent of those currently unemployed in Georgia.
In addition to the $288 million in taxes for education, the report projects $345 million in federal payroll taxes, $200 million in sales taxes, $29 million in property taxes and $9.3 million in hotel taxes.
Whatever tax rate would be applied to the hypothetical casino revenues — the 12 percent figure in the legislative proposal should be considered an opening bid — would be compared with the percentage the lottery provides to the education fund.
While the state law “encourages” the lottery to give about 35 percent of its ticket sales to the fund, the return rate in fiscal 2015 was about 25 percent, or $980.5 million on revenue of more than $4 billion. In fiscal 2016, the return is expected to exceed $1 billion.
Since the inception of the lottery, more than 1.7 million students have used some $8 billion in HOPE scholarships, and 1.4 million 4-year-olds have attended state-funded pre-K programs.
The general HOPE scholarship (different from what now is called the Zell Miller scholarship, which has higher academic requirements) provides money to students with a 3.0 grade point average in high school (which must be maintained in college).
For example, HOPE in 2014 paid 79 percent of the tuition for students taking 15 hours of classes at the University of Georgia, the largest college or university in the state.
To cope with financial pressures, the HOPE program has reduced its benefits (no longer covering books or fees), and the pre-K program increased class sizes.
The law also mandates that the Georgia Lottery Corp. annually devote up to $200,000 of unclaimed winnings to programs for the prevention and treatment of problem gamblers — an amount that, even if met, is less than what’s needed for the task, said Eric Groh, the director of the Georgia Council on Problem Gambling.
Two Steps to Bet
Legalizing casino gambling in Georgia would be a two-part process.
First, two-thirds of both houses of the legislature would have to vote to put a constitutional amendment before Georgia voters, possibly in 2016 (amendments are permitted on the ballot only in even-numbered years), and a majority of voters would have to say yes.
The second part would address the devil in the details: enabling legislation defining how casino gambling would be operated and regulated, including the tax rate on casino revenues.
Republican Gov. Nathan Deal has said he opposes an expansion of gambling beyond the state-run lottery and video slot machine games.
The governor could not block a constitutional amendment as it made its way through the legislature, but he would have to sign off on the enabling legislation. Observers of Georgia politics report that Deal has signaled he might refrain from vetoing such legislation if voters approved a constitutional amendment.
Before a casino opened for business, voters in its designated region would have to vote on whether to host a casino.
State Rep. Michele Henson, D-Stone Mountain, the only Jew in the Georgia House, is unsure whether casinos in the Atlanta area would be a good idea. She is one of only a handful of legislators who remain from when the lottery was approved.
“I’d like to see more money going toward our students. I think pre-K is very, very important. I think likewise the HOPE scholarship has been very instrumental in allowing a lot of kids to go to college,” said Henson, for whom education has been a legislative priority.
She said she would want to study the details of the enabling legislation before passing judgment. The percentage of revenues casinos would pay the state would be the key, in her view.
Don’t Bet on It
Leven, a veteran of the hospitality industry, left Las Vegas Sands in 2014 after five years as the right hand to Adelson and now is the chairman and chief executive officer of the Georgia Aquarium.
“I think there’s a low probability it will pass,” Leven said of a casino amendment. “Even if it passes, I’m concerned about whether they do it right. If they do it right, it could be a massive economic generator for the state and the city of Atlanta. If they do it wrong, it will be a bust and recirculate money that’s already there. … The only way to do it right is a really significant destination resort in Atlanta.”
A Las Vegas-style resort, he said, would draw money from out of state while also serving people who now travel to North Carolina, Florida, Mississippi and beyond to gamble. The Southeast has no such resort now. As an impressive noncasino venture in the region, he mentioned the Gaylord Opryland Resort & Convention Center in Nashville.
“The only reason you want it to happen is if, in fact, it is an economic development function, meaning that it creates jobs, development, tourism, and it’s done in the right way so that the state or the cities also gain revenue. If it doesn’t do that, if it’s not for economic development, it’s not worth doing,” Leven said.
Smaller casinos elsewhere in the state would run the risk of merely recirculating money already in the local economy, he said, but Atlanta could hit the jackpot with a Southern twist on the Venetian, operated by Las Vegas Sands, or the Bellagio, operated by MGM.
Leven said a $2 billion investment — the type he could imagine Adelson making — would create a casino-hotel-retail-entertainment complex employing 6,000 to 7,000 people and potentially returning $350 million annually to the state. “What you want when you develop things is for the gift to keep on giving.”
Leven has not talked with his former boss about Atlanta, he said, but “I’d like to see Sheldon do it because I think he’d do the right thing.”
The casino itself would produce 30 percent of the revenues — enough money to finance construction and pay the mortgage — with the remaining 70 percent coming from the hotel-retail-entertainment side of the enterprise.
Tourist Attraction
Leven estimated that 35 percent to 40 percent of those coming through the doors would be locals, enjoying the entertainment, casino and retailers, and the rest would be visitors filling some 2,000 hotel rooms. (The Marquette Advisors study, based on a $1 billion investment, projected 500 rooms for the primary Atlanta casino.)
Socio-economically, the patrons would be a mix of middle class, upper middle class and the wealthy, he said. “Ninety-nine percent of the people buying lottery tickets are not going into a Sheldon Adelson casino. They can’t afford it,” said Leven, who considers the lottery “immoral” and “a regressive tax on the poor.” People don’t buy lottery tickets for fun, but “because they hope their world is going to be saved.”
Leven worries that if legislators do not talk with people who know the business well — a group that includes him — they won’t ask the right questions. While neither the governor nor the leaders of the legislature have asked Leven for his opinion, the veteran of the hospitality industry is willing to share. “I have no skin in the game.”
Among Leven’s suggestions: Do not put the oversight of casinos under the Georgia Lottery Corp.; instead, create a casino commission, such as exists in Nevada and New Jersey.
Forty states have casinos, either commercial or tribal. The Seminoles in Florida, the Cherokees in North Carolina and the Choctaws in Mississippi, for example, operate full casinos on their own lands, while the Creeks in Alabama offer slot machines.
Georgia, like neighbors South Carolina and Tennessee, is one of the 10 states with no casino gambling, although a boat that puts to sea from Brunswick permits gambling once into reaches international waters. In an increasingly saturated national casino market, Georgia is sought-after real estate by the gaming industry.
Georgia Code Title 16, Section 16-12-21, bans wagering on the result of a game or contest, as well as games played with cards, dice or balls, to win money or other things of value.
Online casinos are not explicitly banned, but the general prohibition is viewed as covering Internet gambling.
Betting on professional or college sports teams is outlawed. Aside from the Georgia Lottery, so are lotteries and raffles not approved for charitable purposes (such as those used by congregations and other organizations as fundraisers).
That penny-ante (or greater) poker game in your friend’s basement? Illegal.
Slot machines (or “coin operated amusement machines,” as they’re formally known) are legal. Some 25,000 devices operate at 5,000 locations, regulated by the Georgia Lottery Corp.
The state limits payouts to $5 in merchandise, gasoline or lottery tickets (no alcohol or tobacco) per spin, but police raids have targeted locations that allegedly paid out cash.
Groh compared the slot machines to crack cocaine.
$95 Billion Industry
Nationally, the money generated by the legal gambling industry, in all its forms, adds up to about $95 billion annually.
Major segments include about 500 commercial casinos (including those in resorts and hotels), about 475 Indian casinos, 43 state lotteries, bingo parlors, online casinos, off-track betting facilities, electronic betting arcades and sports bookmakers.
U.S. casinos and the manufacturers of the games they offer had a $240 billion economic impact and employed 1.7 million people in 2013, according to the industry.
Those businesses paid $38 billion (including $10 billion directly attributable to gambling) in 2013 to local, state and federal governments in gambling fees, property taxes, income taxes and more (including money paid by tribal casinos, casino game makers and some online enterprises), according to the American Gaming Association.
“It’s completely ridiculous that we don’t have a casino already,” said Arieh, who has won two World Series of Poker titles in his career and finished third in the 2004 WSOP main event. “The lottery is the worst possible way you can gamble, percentagewise. Georgia is so far behind, not having a casino. So many Georgia tax dollars work their way out of Georgia from people driving to North Carolina and Mississippi. There are so many ways that a casino in Georgia could be successful, but the government is yet to pull the trigger on it.”
Arieh grew up in the Emory-Druid Hills area. “My father moved to the U.S. after the Israeli army and eventually divorced and raised three kids on his own. We weren’t very religious growing up, but I was very independent because my dad was busy working so that he could take care of myself, my brother and sister. I found gambling at an early age, and the many aspects of it really intrigued me. I’ve been gambling since I was 14 years old.”
The 41-year-old, now living in Alpharetta, would welcome the opportunity to take home a prize playing in his home state.
He’s not holding his breath. He remembers talk in the late 1990s about putting a casino in Underground Atlanta. “So I don’t get too excited when these talks come about every couple years. But there is nothing I would love more than to be able to practice my profession legally and sleep in my bed that night.”
Biblical Criticism
The Jews of another age viewed gambling as the result of greed and laziness, the desire for wealth without work, the gaining of good fortune at someone else’s expense. Particular opprobrium was directed at dice players and those who raced pigeons; neither was welcome in Jewish courts.
Among the admonitions is Proverbs 13:11: “Wealth hastily gotten will dwindle, but he who gathers little by little will increase it.”
Another is Psalm 26:10: “In whose hands are wicked schemes, whose right hands are full of bribes.”
In short, gambling was not considered a proper activity for Jews.
Nonetheless, history is replete with Jews engaged in various facets of gambling — too many to list. In modern times, Jews (including several with, uh, checkered backgrounds) helped establish Las Vegas as “America’s playground,” where “what happens in Vegas stays in Vegas.” Meyer Lansky’s heirs this month have talked about seeking compensation from Cuba for the loss of the Riviera casino, which mob leaders opened in 1957.
Today, some of the biggest names in the casino industry are Jews.
The biggest is Adelson, 82, who has a personal fortune estimated at $26 billion and owns Las Vegas Sands, with a market cap of almost $34 billion. The company operates casinos in Las Vegas, Pennsylvania, Macau and Singapore.
(Disclosure: About a decade ago, the author left behind relatively small amounts of money at Adelson’s emporium in Las Vegas, the Venetian, and nearby establishments, primarily at the dice tables.)
Those who follow politics rather than gambling know of Adelson as a major player in conservative politics; the “Adelson primary” is a term sometimes used when presidential hopefuls court his support (i.e., his money). He provided tens of millions of dollars to Republican candidates during the 2012 election cycle and serves on the board of directors of the Republican Jewish Coalition, along with Home Depot co-founder Bernie Marcus.
Adelson opposes online gambling, in part through the Coalition to Stop Internet Gambling. In June, several members of the U.S. Senate, including Republican presidential hopefuls Lindsey Graham of South Carolina and Marco Rubio of Florida, were among those reviving the proposed Restoration of America’s Wire Act, which supporters say would expand federal law to ban most forms of online gambling.
Those who follow Israeli affairs know Adelson as owner of the free daily Hebrew-language newspaper Israel Hayom (Israel Today), which has the largest readership of any Israeli paper and supports Prime Minister Benjamin Netanyahu. He also just bought the Las Vegas Review-Journal, the largest media outlet in Nevada.
Adelson and his wife, Miriam, have donated millions of dollars to various Jewish causes and institutions.
Potential Players
The casino mogul was spotted in Atlanta entering the Capitol in September (when Deal was out of town), apparently to parley with legislative leaders about siting a casino in Georgia after he failed to gain favorable terms in Florida.
“He’s a guy with a very good heart,” Leven told The Atlanta Journal-Constitution. “He’s controversial for sure. He’s dynamic and aggressive. But he makes enormous contributions to every community he’s been in. And that’s what people should be looking at.”
Adelson’s Las Vegas Sands may be the biggest potential player in Georgia, but it is far from alone.
MGM (market cap $12.3 billion) has hired 11 Georgia lobbyists since July to join three others on its payroll since January. MGM CEO Jim Murren told Georgia legislators that his company could envision a $1 billion investment in Atlanta that would create 3,000 to 4,000 temporary construction jobs and 4,000 to 5,000 permanent jobs. MGM owns 15 properties in Nevada, Mississippi and Michigan and has major investments in properties in Nevada, Illinois and Macau.
Boyd Gaming Corp. (market cap $2.1 billion) has had three lobbyists registered with Georgia since late August, and Penn National Gaming (market cap $1.3 billion) put two to work in October and another in November.
Another potential Jewish player is Steve Wynn (personal wealth estimated at $2.4 billion). His Wynn Resorts Group (market cap $6.3 billion) operates casinos in Las Vegas and Macau and is building a casino resort outside Boston.
The casino proposals have opponents, including such prominent Christian groups as the Faith & Freedom Coalition, although the Georgia Christian Coalition plans to sit out this fight, Atlanta Magazine reported in November.
None of a dozen area rabbis contacted for this article said they had spoken to their congregations about the issue.
Some objections are secular in nature.
John Kindt, a professor emeritus of business and legal policy at the University of Illinois, spoke at a November hearing at Armstrong State University in Savannah.
In a column published in the Savannah Morning News, Kindt wrote that Georgia lawmakers have “failed to open their eyes or their testimony beyond the propaganda promoted by the gaming industry.”
He cited data showing an increase in crime around gambling facilities and costs that outweigh benefits. “Under the best scenarios for gambling revenues to the government, the socio-economic costs of legalized gambling to the taxpayers are $3 in costs for every $1 in new revenues,” he wrote. “Non-gambling and less-gambling states have better economies and more future tax revenues than gambling states.”
He added: “Historically, it should be noted that 80 percent of the U.S. Congress, including the Georgia Congressional delegation, supported establishing the bipartisan U.S. National Gambling Impact Study Commission. The U.S. Gambling Commission’s Final Report in 1999 called for a moratorium on the expansion of any type of gambling anywhere in the United States.”
No Moratorium
That proposal has been ignored as casinos have proliferated the past two decades, from riverboats to racetracks to resorts. One of the newest casinos is also the closest to Atlanta, Harrah’s Cherokee Valley River, which opened Sept. 28 in Murphy, N.C., about two hours away.
“What we are seeing now across the country is a massive rush to claim potentially untapped resources, which from a business sense makes sense, given that most states have massive budget shortfalls and no one wants to raise taxes or further burden their residents,” Frank said. In Israel and in the United States, he has worked in product development, marketing and management for online casinos and now consults for land-based and online gaming businesses.
The economic risk lies in a situation Frank compared to the proliferation of railroads earlier in American history. “I think Georgia is in a difficult position. On the one hand, they want to get their hands on the revenue it’s losing when its population drives to nearby states to gamble. On the other hand, if they can’t control themselves, they’ll find themselves with a market saturation, and instead of increasing revenue, it flattens out.”
Frank suggested Atlantic City, N.J., as a cautionary tale. “They were kings of the world until every state near them started building casinos, and the past few years has seen a dramatic nose dive in revenue, multiple closures and bankruptcies, and surrounding communities falling apart. And the taxes they relied on and budgeted for years ago dried up, and New Jersey now has one of the worst economies in the country.”
Then there is the ugly aspect of gambling, the people who can’t walk away and develop a habit that destroys lives — not only their own, but also those of their families — and wreaks havoc on the economy.
“We’re here to make sure that people who want to get help for gambling addiction, that everybody in the state who wants to stop, can get the help they need,” Groh said of the Georgia Council on Problem Gambling (888-236-4848).
Groh estimates that since 2002 he has counseled more than 500 people with gambling problems.
According to the council, 1.4 percent of Georgians have a gambling addiction, and an additional 2.6 percent are classified as problem gamblers. The council extrapolates that in a state with 10.1 million people, as of 2014 census figures, more than 403,000 Georgians are gambling addicts or problem gamblers.
Making a distinction between a problem gambler and an addicted gambler is “possibly splitting hairs,” Groh said. “Most people who report a gambling problem need treatment.”
Social Costs
The council has yet to issue a formal statement on the casino proposal, but Groh said, “It’s important to know that the legalization of gambling is not a free ride for Georgia taxpayers, and the creation of jobs and HOPE is not adequate justification financially for expanding gambling into casinos.”
He added, “The main points to be considered are not being discussed.”
The council estimates the annual hidden social and economic costs in Georgia at $1,200 per gambling addict and $715 per problem gambler. As for the personal toll, pathological gamblers and problem gamblers divorce at significantly higher rates than nonproblem gamblers, the council says.
When casinos were introduced in Gulfport and Biloxi, Miss., suicide rates increased significantly, Groh said. “There’s no reason to believe that wouldn’t happen with casinos in Georgia. We can’t assume that there would be anything significantly different between Mississippians and Georgians.”
The National Council on Problem Gambling has reported that one in five pathological gamblers attempts suicide, a higher rate than for any other addictive disorder.
The Georgia council cites research from 1999 that found 90 percent of pathological gamblers bet with their paychecks or family savings, 30 percent accrued debts ranging from $75,000 to $150,000, 60 percent borrowed from friends and family to avoid credit problems, and 20 percent borrowed from loan sharks.
All of that without casino gambling in the state.
“To start, the proponents, mostly elected politicians and influential business insiders, will focus on the revenue boon, which appeals to the people, as that money helps social services stay funded, etc. They’ll also focus on job creation, revitalization of local communities, and they’ll also sell it as a class addition to the state to drive tourism and so forth,” Frank said. “By the way, all of those things are true and good — if all true and nothing goes wrong.”
He said the issues around a casino are more complicated than government officials want people to think, “but if done fairly and with good business sense and proper planning, one or two casinos can be a really great thing for the state.”
Arieh conceded part of the argument against casinos but countered with the positive potential.
“Yes, casinos attract lots of bad elements but at the same time could generate an absurd amount of money from out-of-staters that the lottery could never reach,” the poker player said. “Done correctly, a casino in Georgia could provide all the tax dollars that the city of Atlanta and the state of Georgia need to improve education, along with many other areas that are neglected because of a lack of resources.”
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