Mike Kropf/Richmond Times-Dispatch via AP
William Carstanjen, CEO of Churchill Downs, speaks about a resort, casino, and entertainment complex during a press conference in Richmond, Virginia, as Alfred Liggins III, CEO of Urban One, listens, August 31, 2023.
With the country’s eyes on Virginia’s state legislative elections and their implications for presidential politics, there has been little attention paid to the distinctly different contest under way in the state capital. For the second time in two years, there is a casino question on the ballot in Richmond.
In 2021, Richmond voters narrowly voted down a casino developed by Urban One, the country’s largest African American media company. The current contest promises to be as tight as the first—which means serious money must be spent. This time around, Urban One, which has no prior casino development experience, joined forces with Churchill Downs, the horse racing and regional casino firm founded in 1875.
Together, they put more than $8 million into a casino PR campaign, setting a state record for referendum campaign spending—three times what pro-casino groups spent on the failed 2021 effort. Not surprisingly, casino opponents have a far thinner budget. At the end of September, Richmond’s “No Means No Casino” campaign reported having less than $25,000 on hand.
Why do cities and states, especially latecomers like Virginia, decide to jump into casino gambling? It’s simple—there are phenomenal sums of money to be collected courtesy of people drawn to the adrenaline rush of slots, table games, and sports betting. Meanwhile, the political fallout is minimal.
In 2018, Virginia’s Democratic Gov. Ralph Northam was frank. “When individuals enjoy doing this—if it’s part of their lifestyle—when it’s going across our borders into Maryland and other states, we need to step back and say ‘Should we be keeping that revenue in Virginia?’” he said. “And that’s why I’ve been open-minded to it.” The state legislature legalized casino gambling two years later.
Economic development—in Richmond, that translates as jobs—is also a lure. Last year, U.S. casinos took in $60 billion in revenues, the sector’s best year ever. In 2021, states and localities took in about $35 billion. “The casino is now sort of the ultimate grifter project because it raises more money,” says Paul Goldman, a former Virginia Democratic Party chair, and a leader of the “No Means No Casino” campaign.
Yet that development may be a mirage these days. The Federal Reserve Bank of Richmond has noted that there are limits to increases in tax revenue, since “as the means to gamble proliferate and gambling-restricted states dwindle, commercial casino expansion is less likely to induce economic growth.”
Worse, even though some people can enjoy gaming and walk away, two to four million Americans spiral into addiction every year. A six-year longitudinal study on problem gambling in Massachusetts published in 2021 identified lower household income as one of the risk factors in problem gambling and recommended “limit[ing] the placement of gambling opportunities and the marketing of gambling in lower socioeconomic neighbourhoods.”
Unfortunately, those are some of the very cities and neighborhoods where city leaders decide to site casinos. The most infamous failure of casino trickle-down economic development is Atlantic City. Beyond the iconic boardwalk, Atlantic City is as desolate and broken as it ever was. It has nine casinos but no full-service supermarket. The wider South Jersey region, however, did see some job growth after the casinos opened.
Outside “destination casino” hubs of Las Vegas, Atlantic City, and southern Connecticut, gamblers are usually local residents.
In Virginia, the casino conversation got traction as a way to dig out Bristol, a struggling southwestern Virginia community on the Tennessee border. State lawmakers prioritized the city and four other “economically distressed” municipalities for casinos. They are up and running in Danville on the North Carolina border, and in Portsmouth on the southeastern coast. Norfolk is working on a construction schedule.
That left Richmond to sort itself out.
Outside “destination casino” hubs of Las Vegas, Atlantic City, and southern Connecticut, gamblers are usually local residents, which keeps the resulting economic and social effects close by instead of sending them home with out-of-towners. A resort casino in Richmond would be about 100 miles from the Norfolk and Portsmouth casinos, which are themselves only 2 miles apart. A 2019 state report on gaming found that Richmond would only generate about 12 percent of its revenues from out-of-state visitors. Danville and Bristol casinos are likely to see significantly more visitors from other states than the capital city.
The $562 million Richmond Grand Resort and Casino plan envisions a development of one million square feet plus a 250-room hotel, conference center, and entertainment venue shops and eateries. It would be situated in an industrial zone off Interstate 95, on the site of the former operations center of Philip Morris, the multinational tobacco company. That’s a stark example of swapping one problematic sector for another even as city officials profess an interest in providing jobs for Africans Americans and invigorating the surrounding neighborhoods.
Richmond’s resort casino host community agreement with the developers generously sprinkles terms like “luxury” and “first-class” throughout the “resort casino” plan, implying that tourists are likely the target market. But there is no clear statement of how the developers plan to prioritize attracting them, or reporting those figures, notes Jonathan Krutz, president of the Stop Predatory Gambling Foundation.
“Labeling something a resort casino does not make it a resort casino,” says Krutz. “They want a casino in Richmond to take the money that is in Richmond that is not being gambled now. The people who are going to be gambling in that casino are people who are going to be within 50 miles of it, primarily the population of Richmond itself.”
Projected annual gaming revenues are $309 million. The city would take in $30 million in annual revenues as well as a “referendum payment” of $25 million after a successful vote is certified, plus a $1 million financing payment. Under a nonbinding city council resolution, most of the city-designated monies would go to an independent child care and education trust fund, child care centers, and parks. The casino developers have also pledged an additional $16 million over ten years to its community groups to include investments in workforce development, affordable housing, and education.
Urban One and Churchill Downs’ agreement with Richmond specifies that it will make “commercially reasonable best efforts” to hire a minimum of 1,300 full-time employees and 347 part-time workers—with local hires making up 60 percent of the workforce. On-site, third-party businesses at the development will hire another 200 workers. News outlets have pointed out that the advertised compensation of $55,000 is not an annual salary but is an “average annual compensation” figure and includes costs like health care and payroll taxes that are not normally embedded in salary calculations.
The Richmond Building and Construction Trades Council has estimated the construction phase could create 2,000 jobs. The union has secured a project labor agreement with the developers; UNITE HERE Local 25, which represents casino and hotel workers, has also signed a labor peace agreement.
The host community agreement outlines a path toward achieving 40 percent minority business participation for the casino’s construction and operation procurements. Monthly reports on these goals would be submitted to the city, but it is as yet unclear whether these reports would be publicly available. A fuller minority business plan is set out in the agreement, if the referendum is approved.
Local leaders have to beware of “ribbon-cutting syndrome,” where politicians take credit for the initial opening but fail to ride herd on the project afterward.
Lucy Dadayan, a principal research associate at the Urban-Brookings Tax Policy Center, notes that casinos do not spawn meaningful economic growth since the jobs created include low-skilled positions or are ones that siphon off jobs from other existing business sectors such as entertainment. “Almost in every case the forecasts are highly overestimated for the revenues,” she says, adding that “the driver for economic growth are higher-skilled jobs and a more skilled labor force.”
Mismatched host community agreement expectations can sour relationships between cities and casino developers. MGM opened a casino in Springfield in western Massachusetts in 2018. Five year later, residents and some state lawmakers remain unsatisfied with the project. “They promised more. And we expected more,” state Rep. Bud Williams (D) told MassLive.
Like Richmond, Springfield is a majority-minority, midsized city with persistent poverty. The casino promised 3,000 jobs, a target it hit shortly after its debut. But the pandemic knocked everything off-kilter. Today, the casino has 200 vacancies and 1,500 workers. Springfield residents counted on casinos to revive the city’s desolate downtown with a strategy designed to get people into the surrounding neighborhood. Though small businesses closest to the casino have done well, business owners in an adjacent neighborhood said that the early boost they got from the casino has faded with time. “Just the hype of the whole project,” the owner of a gourmet food shop told MassLive. “We thought there would be a little more economic spin-off.”
The spin-off is elusive. “Small businesses see limited benefits from casino siting,” says Dadayan.
Local leaders have to beware of what Matt Szafranski, editor of the Western Massachusetts Politics & Insight blog, calls the “ribbon-cutting syndrome,” where politicians take credit for the initial opening but fail to ride herd on the project afterward. “It doesn’t have to be MGM Grand Las Vegas. But what is this going to spur that is realistic without bilking the taxpayer?” says Szafranski. “There needs to be a very clearly defined economic development plan around a casino before it opens, and clear work being done after it opens to make those redevelopments—there has been almost nothing built around MGM Springfield that wasn’t already in the works.”
The Richmond agreement provides $100,000 to $200,000 for problem gambling prevention. A small percentage of overall state casino revenues also go toward problem gambling treatment. The average case cost is $1,642; the problem is that very few people pursue gambling treatment and even fewer complete it. Krutz, a professor emeritus in Boise State University’s College of Business and Economics, explored some of the social consequences of gambling in his study on casinos and economic development. “It’s marketing money to make the gambling industry look like they are doing something for something that they are incapable of doing anything about,” Krutz told the Prospect. “They don’t report on people helped or behavior changed; what they report is: ‘Here’s how much money we spent.’”
After the 2021 vote, city officials and casino developers and supporters almost immediately went to work bringing the question before voters again. Richmond’s Democratic Mayor Levar Stoney supports the casino; the city council voted 8-1 most recently in June to move forward with a second vote. A mid-September Founders Insight poll found prospective voters split on the question 44 percent to 44 percent, with 12 percent “unsure.” Both Republicans and Democrats opposed the casino by slim margins, while independents supported it by a one-percentage-point margin. There was also a broad racial divide. Whites voters overwhelmingly opposed the plan; Black voters, particularly in neighborhoods around the proposed site, strongly supported it—which mirrors the results of the 2021 referendum.
When surveyed about Churchill Downs, the vast majority of voters across all demographics—age, gender, race, party affiliation, and more—indicated they were “unsure” about the company. The pollsters did not ask about Urban One. At the end of September, Nasdaq announced that it planned to pursue delisting Urban One from the stock exchange over its failure to file first- and second-quarter reports to the Securities and Exchange Commission. The company has an extension until November 30, three weeks after Election Day, to file the reports.
Asked about Urban One, Michael Kelly, a spokesman for Richmond Grand, noted in an email, “This has no impact on the referendum or the project.” The company claims that the delays were due to switching accounting firms and errors that included “an accounting of its investment in the operations of a Richmond casino joint venture,” according to Inside Radio. A multimillion-dollar project with one partner already in the sight lines of the federal government, before potentially stepping into a sector with even more complex reporting and recordkeeping requirements, is a risky bit of business for Virginia’s capital city.
