New Casino is Not the Answer for Kenosha

By DANIEL ALESCH, Ph.D. | Sept. 11, 2013

The Bureau of Indian Affairs has approved a proposal by the Menominee Indian Tribe of Wisconsin to build a casino in Kenosha County. But all that is required to stop the creation of the proposed casino is for Gov. Scott Walker, to say “No”.

Besides Kenosha, tribal casinos are proposed but still pending BIA approval for Beloit, Sheboygan, and Shullsburg. Whether any of these casinos should be permitted should depend on the answer to this question: Do likely benefits to the local community and to the sponsoring tribe outweigh the costs to the statewide economy, all the tribes in Wisconsin, and to non-tribal people of the entire state? 

Answering that question demands that several other questions be explored as well:

Is there sufficient market demand for another casino in Wisconsin?

There is considerable evidence that the casino gambling market is generally saturated. Nevada casinos have suffered revenue declines for a number of years. Casino owners in Reno, for example, claim they have suffered badly because of competition from tribal casinos recently developed across northern California. Revenue and profits in Atlantic City casinos have declined in each of the past seven years. The picture is the same nationally.

Closer to home, the Lac Courte Oreilles Band of Lake Superior Chippewa Indians experienced a drop of more than two-thirds in its casino earnings over the past few years, compared with losses of about five percent over the same period for all tribal casino earnings in Wisconsin. The Wisconsin market certainly appears to have matured and the supply of gambling opportunities already generally exceeds demand. Total wagers and profits have fallen in recent years and adding to the supply of gambling opportunities is not likely to generate significant net gambling revenues in Wisconsin.

One reason casinos have experienced losses is increased competition. Not long ago, casinos were limited to a Nevada and New Jersey. Today, they are everywhere and there is rapidly growing competition from internet gambling. Internet gambling could do to tribal gaming what tribal gaming did to dog tracks in Wisconsin.

The probability that internet gambling will become widely available is enough of a problem that tribes have called on the federal government to step in and ensure tribes get a piece of the action without having their revenue taxed and their sovereignty compromised. One of the concerns for state governments is that Internet gambling requires only a computer with an Internet link. It has no state or national boundaries and will be extremely difficult for government at any level to regulate and/or tax. 

What are the benefits and costs likely to be for the Kenosha area?

Kenosha’s local officials and residents hope the casino will provide a boon to the community’s lagging economy. It is not a certainty that will happen. Kenosha reports that the Menominee tribe will guarantee that at least 15 percent of the jobs at the casino will be for local residents. That amounts to only about 500 jobs, most of which are likely to be in the service industry and are not particularly high-paying. Local government will also receive annual payments from the tribe. The amounts and procedures are spelled out in the agreement between the tribe and the local government, but the payments usually amount to some percentage of the amount wagered or net profits. 

For a tribe to build and operate a casino, the land on which it sits must be part of the tribe’s reservation. That means, among other things, that the tribe must own the land and place it in trust with the federal government. Once that happens, local government can no longer enforce zoning or other local laws and regulations on the property except to the extent that its agreement with the tribe specifies. 

Kenosha hopes to profit from jobs and from payments to local government from wagering proceeds. The proposed clients include area residents, tourists, and Chicagoans. The extent to which that will happen will depend in part on the success of others who have proposed casinos in Illinois in and near population centers.

Are benefits to Kenosha area residents likely to outweigh the costs to others.

The Kenosha casino would compete for customers and gambling dollars with other casinos, in this case with the Potawatomi’s casino in Milwaukee.  In a saturated market, any “new revenue” to the sponsoring tribe is likely to come from another Wisconsin tribe and from another Wisconsin community. In that case, there would be little if any net gain to the people of the state: there will simply be a transfer of jobs and money from one community to another and from one tribe to another. The community with a new casino built in a favorable location will compete effectively with established casinos until another casino is built in a better location or an existing casino counters with newer, more attractive amenities. Customers are likely to benefit from that competition, but it is unlikely that either the respective tribal owners or local governments will.
Gambling and casinos have, thus far, been a boon to most of the tribes that own them. The casinos with good management and the tribes that have made good decisions about how to use the profits brought prosperity to many who were living on reservations with few opportunities for employment, education, and a path out from poverty.

Adding a casino in Kenosha would reduce the gains from one tribe to benefit another. It might well threaten the intertribal cooperation that has generally characterized the past two decades. Kenosha would certainly benefit from sustained and sustainable economic development and that area warrants assistance in that endeavor from the state, but we do not think that a casino is the answer to the challenge. For that reason and because of the answers to the three questions posed above, creating a casino in Kenosha at this time is not a good idea.

For an extended analysis of adding casinos in Wisconsin, read “Do Additional Casinos Make Economic Sense for Wisconsin?,” a Wisconsin Policy Research Institute report issued September 2012.