MEDILL NEWS SERVICE
Gulf Coast Casinos Win Over Skeptics
By HOLDEN FRITH and HYE JEONG
MEDILL NEWS SERVICE

BILOXI, Miss.-A decade ago, Mississippi newspaper publisher Roland Weeks felt his community was threatened. Casinos had arrived in Biloxi, bringing with them a bundle of pros and cons, and Weeks sensed the town would soon face trouble. "The bottom line is whether gambling is going to be part of Biloxi or Biloxi is going to be part of gambling," he told the Biloxi Rotary Club.

The state had legalized gambling a few years earlier and casinos were beginning to spring up in the sleepy coastal town, punctuating the ribbon of white sand that fringes the Gulf of Mexico.

Now 12 casinos have colonized the coast and, despite calls for a national moratorium on new gambling ventures in the National Gambling Impact Study Commission's report to Congress in 1999, the growth of casinos has shown no sign of abating. Weeks, now retired after 33 years as publisher of the Biloxi Sun Herald, recognizes Biloxi has become part of gambling, but says, "I quite frankly have to say I was wrong. There are a lot of good things that have come from gambling."

Weeks' change of heart has coincided with a broader shift in American attitudes toward gambling. "While older Americans have come to like us, younger adults love us," the American Gaming Association boasted in a recent annual report. It cited polls showing 91 per cent of adults ages 21 to 39 find gambling acceptable compared to 81 per cent of Americans over age 50.

The association's president, Frank J. Fahrenkopf Jr., has pursued an aggressive campaign portraying gambling as just another form of entertainment, and it seems to be working. America now has 432 commercial casinos operating in 11 states, whereas 15 years ago they were confined to Nevada and New Jersey. With so many of the states in financial disarray, casinos can look forward to a sympathetic hearing from more and more governors.

"As a way to solve their budgetary problems, it's desirable for a number of reasons," Fahrenkopf said in an interview. "It's very capital intensive and a lot of economic development flows from that investment. It's job intensive, and it tends to produce jobs inordinately for those at the lower rungs of education in our society."

"Most importantly," Fahrenkopf added, "you can tax the hell out of this industry."

Opponents, however, continue to cite the social costs of legalized gambling, but they are quieter than they used to be. Long-time campaigners struggle to muster the money and energy to keep fighting a business that shows no sign of leaving, and a new generation is growing up to expect the jobs and entertainment provided by the casinos.

It's a story that's unfolding across America. Between 1989 and 1994 six states turned to gambling to supplement their incomes. Iowa led the charge, inviting riverboat casinos into its waters in July 1989. Illinois, Mississippi, Louisiana, Missouri and Indiana soon followed, creating a gambling corridor down the center of the country.

While most of the states chose to limit the number of casinos and the size of payouts and losses, Mississippi opted for a Nevada-style free market approach, which is paying dividends. The state has been on a 13-year winning streak that's netted nearly $2 billion in tax revenues.

Combined income from the 8 percent state tax and 4 percent local tax was $330 million for the year ending June 2003, 10 percent of the state's budget, and that doesn't include the additional hotel, restaurant and sales taxes paid by the millions of visitors drawn in by the chance to gamble.

That kind of money makes a big difference to cash-strapped towns and states. "When I came back to town in 1989, it was pretty sad down here," said Rick Carter, co-owner of Gulfport's Copa Casino, who grew up in Gulfport.

Unemployment was high, morale was low and the city was struggling to maintain basic services. The shrimp and timber industries, traditionally the cornerstone of the region's economy, had been hit hard by competition from cheaper foreign imports.

Copa Casino employs about 800 of the 35,000 Gulf Coast residents who work in the industry, and Carter says the economic benefits outweigh the side effects.

"It's brought its fair share of problems," he acknowledged, "but when you equalize it all out it's been very impressive what we've been able to do here."

Money from casinos has helped fund many of the Gulf Coast's nongambling tourist developments, according to Steve Richer, head of the regional tourist board. Richer said a new museum designed by Frank Gehry to house the work of George Ohr, the ëmad potter of Biloxi,' will attract visitors from across the country.

For further evidence of the casinos' impact, just look at Biloxi's public schools, said Denise von Herrmann, a dean at the University of Southern Mississippi who wrote a report in 2000 on the economic impact of the state's casinos.

"In the early 1990s (the schools) were old, they were crumbling, they were in bad, bad shape," she said. "Now we have beautiful, brand new, large, very high-tech facilities, and there's no question that they were paid for by the local portion of the gaming tax."

Despite the clear economic advantages, even those responsible for bringing gambling to Biloxi admit to a downside. Lawyer and former state Sen. Sandy Steckler, who helped create the gambling legislation, said the town's infrastructure is becoming overloaded.

"The traffic, of course, is becoming more difficult every day," Steckler said. "We are losing the character of our community [and] our green space. We are losing a beautiful landscape."

While Steckler said the positives far outweigh the negatives, not everyone has been won over by the economic arguments. "Those who opposed the casinos for moral and religious reasons still oppose the casinos for moral and religious reasons," von Herrmann said.
Active opponents are few and far between, however. Keith Rogers used to direct Families for Quality Life, which opposed the introduction of casinos to the Gulf Coast, but the group has now become dormant.

"I haven't been active in opposing them for some time," Rogers said. "Our organization kind of fell apart for lack of funding."

However, Rogers has not changed his opinion of the casinos. He said fears that gambling interests would overrun Biloxi were well founded. "Whatever casinos want, they get," Rogers said. "What they don't want, they don't get."

He cited the Imperial Palace casino and its 32-story hotel, which was built despite codes limiting the height to 30 stories. Keesler Air Force Base, one of the region's biggest employers, said the construction would obstruct landings at the airbase, but the city permitted the addition after fining the casino. According to Biloxi city spokesman Vincent Creel, the city fined Imperial Palace $13,300 in April 23, 1998.

But this was not the first time the casino had flexed its muscles, Rogers said, nor the first time the city had played along.

"Up until five years ago, there was a church there," he said, pointing to the casino's giant sign at the street corner. "It had been there for probably 60, 70 years." When casino traffic increased, Rogers said, the city declared eminent domain proceedings against the church, forcing it to move so the road could be widened.

The odds are stacked against gambling's opponents. While they must get by on a shoestring, the casinos spend heavily on advertising, lobbying and donations to political parties.

The industry's contributions to federal election campaigns have increased tenfold in federal elections since 1991, to $14.2 million in 2001-2002 election cycle from $1.4 million in 1991-1992, according to the Federal Election Commission.

That makes gambling one of the fastest growing political donors, according to Steven Weiss, spokesman for the Center for Responsive Politics.
Sen. Trent Lott, R-Miss., received about $75,000 between 1993 and 2002, according to the Federal Election Commission. Sen. Thad Cochran, R-Miss., received slightly less, $62,500 between 1995 and 2003.

Lott's press secretary, Lee Youngblood, said the casino industry has a right to donate money to political campaigns. "All these industries put money into our economy and provide jobs," he said, adding that Lott "treats them as constituents."

Cochran said his fundraising committee has never been cited for violating regulations. "If we comply with all those rules," he said, "I don't purposefully try to include or exclude any class or group of people."

Casino companies' generosity could explain the reluctance of politicians to campaign against gambling. "It has a very colorful, checkered past," Weiss said. "Yet the industry gets by with a fairly low amount of criticism at the national level by the parties and by party leaders, and in no small part because it gives a lot of money to both parties."

Casino owners also hope their contributions will avert tax hikes being considered in many states. The same budget crises that have driven the expansion of casino gambling now make higher taxes on the industry an attractive proposition to state legislatures, but financial analysts say the states could end up shooting themselves in the foot.

Three months ago Illinois introduced a 70 percent tax rate for casinos with revenues of more than $250 million and increased the rate for those making less than that from 35 percent to 50 percent. "The first month after the tax increases the revenues were down 9 percent," said Patricia Wright, a gaming industry analyst at Fitch Ratings in New York.

Wright said that although the companies are unlikely to go out of business, they will cut investment in their Illinois casinos. That could mean the state's attempt to increase revenue will end up backfiring. "More and more people will flow over the border to the Indiana properties that are being invested in and renovated," she said. "Illinois casinos will take a hit in terms of revenues, and obviously that will filter through to the tax coffers as well."

While Illinois may have to deal with lower than expected revenue from casino taxes, some of Mississippi's coastal towns have decided to do without casinos altogether. In Long Beach, less than 5 miles west of Rick Carter's Copa Casino, 60 percent of voters decided against allowing casinos within the city's boundaries.

Mayor Robert Bass said his town's opposition to casinos has remained solid, but he acknowledged that going without casinos has been difficult for Long Beach.

"When we took office in July of 1997," Bass said, "I was asked to approve a $38 purchase order for toilet paper and cleaning supplies to go into our central fire department. I went ahead and approved it, and got back to the city hall and was accosted by my city clerk, who told me, ëDon't ever go out and approve purchase orders like that again. We don't have any money.'"

After some civic belt-tightening, the city is now in better shape. "We privatized our public works department, and that saved us a bunch of money," Bass said. "Any kind of building cleaning, we essentially took care of ourselves."

The towns on the Gulf Coast have become used to compromise. Biloxi's casinos may have cost the 304-year-old resort town some of its old charm, but charm alone won't pay the bills.

Weeks, the retired newspaper publishers, said the gambling companies have proved their commitment to the community and, like many in Biloxi and across America, he has decided his initial instinct against gambling was out of sync with the real world.

"When you live in a changing world," he said, "you change with it."

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