07/12/13

Casinos redux


Seniors and slotsFirst let’s clarify the terms. A “casino” was never really in the discussion, although just about everyone used that term. What the Ontario Lottery and Gaming Corp. (OLG) offered was a “gaming facility” as they euphemistically called it. A gambling joint, others said.

It was to be a warehouse-like, windowless building with up to 300 slot machines. No keno, no gaming tables for poker or blackjack, no roulette. Up to (and maybe less than) 300 slot machines. No guarantees on the number, just up to 300.

The OLG decides how many: not the town, not the operator. The town can’t even comment on who the operator will be. That decision is in the OLG’s hands.*

Locals also referred to it s a “slot barn,” underscoring its aesthetic deficits. Casino, however, stuck as the word for general palaver.

The OLG made an enthusiastic pitch to every municipality in its artificially-created and somewhat illogically-determined  “zone seven.” Do you want to be a host, they asked, assuming a civic stampede to their door. They held out the promise of money. Who doesn’t want money? It helps grease the wheels of municipal progress. Continue reading

01/1/13

The Hidden Costs of Gambling


Casino gamblingLet’s start 2013 with a sober consideration of the social and economic costs of gambling. Back n 2006, the Canadian Medical Association noted that,

“Provincial governments may be glossing over the societal and health costs of problem gambling, including depression and suicide, because of the significant income they gain from gambling, claim several public advocacy and mental health organizations.”

Glossing over is a polite way of saying “deceiving.” They’re hiding the facts from the public. The CMA called for a thorough and scientific study of the “relevance of depression and suicide among problem gamblers.”

“The normal system that provides checks and balances around this area is compromised because government in every province is responsible for alcohol and gaming regulation of the industry — and the welfare of those with gambling problems,” says Neasa Martin, a researcher at the Mood Disorders Society of Canada. “Their revenues are closely tied to the gambling industry, putting a pall on normal advocacy around the issue.”

This article has a parallel piece in the CMAJ that lists the three “elephants in the room” that have to be part of any discussion about gambling. These, the author states, are:

  1. …the inequitable distribution of the risks and benefits of gambling in our society;
  2. …treatment of problem gambling cannot undo the damage caused by lost wealth;
  3. …health promotion. It is time for governments and public health advocates to stop being seduced by the promise of anti-gambling campaigns and education that place the onus of self-control on the shoulders of the very individuals who have a serious disorder of impulse control.

New Zealand Mental Health
Gambling is, of course, voluntary taxation.* I have no moral issue over gambling; however, if people wish to gift the government their wages, they could just as easily mail the Minister of Finance a cheque every few weeks, and save us the contentious debate over gambling in our municipality. I do, however, believe that government dependence on gambling revenue is a fool’s economy. Any government – municipal and higher.

Back to the numbers

Let’s take a moment and consider some numbers before we continue. The Ontario Lottery Gaming Corporation (OLG)** has accepted the studies that show roughly 3.4% of the population as “moderate to serious” gambling problems. The Problem Gambling Association (PGIC) suggests a range between 1.2% and 3.4%, depending on which study you read and how you define “problem.” There are other studies that show the percentage in Ontario is as high as 4.8%.

The population of Ontario in 2011 was 12,851,821. At the low end of that range, there are 154,222 Ontarians with severe gambling problems. At the upper end, there are 436,962. A London Free Press article on gambling ups this to “almost 500,000″ without a source reference.

In other studies, the national average of problem gamblers (moderate is not mentioned) was estimated to be 2%. At 2%, there are still more than 257,000 problem gamblers in Ontario; but that media figure is lower than most experts estimate. In young gamblers aged 15 to 24 years, the percentage is much higher as this study found:

 “…the national prevalence of moderate-risk or problem gambling was 2.22% (3.30% in male respondents and 1.10% in female respondents). …Regional prevalence estimates of youth moderate-risk or problem gambling were… 2.75% in Ontario….”

This article repeats another warning from CAMH that, “Young people are twice as likely as their adult counterparts to develop serious gambling problems.”

 Younger Ontarians are also more likely to gamble online, as the Centre for Addiction and Mental Health (CAMH) reported in 2005: “…aged 18-34 were most likely to gamble money over the Internet compared to the older age groups.” And to capture more of that market, the OLG is launching a whole new internet gambling initiative in 2013.
Until recently, it was illegal for Ontarians to gamble online, but because the OLG now wants a slice of that pie, the laws got changed to accommodate them. Seems the MOH’s recommendations in 2005 were overlooked: “Prior to the adoption of any new technological innovations proposed by the gaming industry, consideration should be given to their potential impact on problem gambling…”.

This 2007 study suggests online gambling will create even more problem gamblers:

“…the inherent nature of Internet gambling would seem to make it conducive to increasing the rates of problem gambling. …The increasing patronage of online gambling sites will also increase the actual numbers of problem gamblers in the general population.”

The OLG contributes about $40 million a year to problem gambling treatment and services throughout the province, but it’s a small figure compared to its revenue:

“The OLG’s current contribution to education, prevention and treatment is less than 1% of its total revenues of $6.5 billion. There’s no indication this tokenism will be replaced with a serious investment in curbing the social and economic impacts of gambling.”

Based on the accepted number of problem gamblers in Ontario, that divides out to between a high of $259 each person per year, to a low of $91.54 each. There are 52 agencies treating gambling in the province right now. Dividing $40 million by 52 and you get less than $750,000 a year per centre.

If people wish to gift the government their wages, they could just as easily mail the Minister of Finance a cheque every few weeks.

So how much does problem gambling cost, and is $40 million sufficient to counter the social and economic costs?  Does the profit from gambling offset its cost? This is hugely complex and difficult to adequately measure, because are so many factors to take into account – medical, economic, social, legal, many of which are difficult to quantify, or may be intrinsically linked with other issues like substance abuse.

This PDF is a 24-page chapter of a larger US report on gambling, and it reviews numerous state studies. One such study that estimates that, in Wisconsin, there is a net benefit from gambling: “social costs represent about 42 percent of the economic gain…

The OLG net benefit to the Province of Ontario is approximately $2 billion. In its strategic plan (pgs 3-4), the OLG has stated it wants to increase that contribution by $1.3 billion, to more than $3 billion a year by “modernizing” gambling (making it more “accessible” by increasing the opportunities and locations so more Ontarians gamble). For all their high and mighty words about social responsibility, to me, it looks like simply an outline of a plan to grab more money from our pockets.

If our social costs are roughly the same as Wisconsin’s, then 42% of $2 billion is $840 million. Subtracting the $40 million currently paid to problem gambling issues, problem gambling costs the province $800 million every year. At $3.1 billion, it will cost us $1.26 billion, assuming the OLG does not increase its contribution to problem gambling programs. Gambling is, if the situations are similar, profitable for the province in this comparison, but not nearly as much as we are led to believe: there are high social and economic costs not being disclosed.

In response to this plan to expand gambling, in its Winter 202 newsletter, the PGIC wrote,

Without question, this will increase the incidence of gambling problems and associated negative impacts, including harm to families and the community.
The OLG plan means that, more than ever, Ontario needs an accessible, skilled, comprehensive and well-resourced problem gambling (PG) treatment system.

However, nothing in the OLG strategic plan indicates to me a significant increase either in funding or treatment system. At the very least that a 50% increase in revenue should be matched by a 50% increase in funding. Or is the net income the only measure of success? The Toronto Star  noted,

“…there is no indication that funding for education, addiction counselling and Trillium Foundation grants will be increased proportionately to the gambling universe that’s being created. It’s already inadequate.”

Back in 2005, a report to the Ministry of Health on gambling in Ontario noted (emphasis added):

“…if a culture of responsibility is fostered in the decision making process, then decisions will be made taking into account the impact of any proposal on the treatment of problem gamblers, the provision of information to gamblers and the public on problem gambling and responsible gaming,the research that should precede the decision and whether an element of consumer protection is involved. Those involved in each component of the Strategy should have a role to play in contributing to initiatives that are designed to advance the minimization of potential harm from gambling activities. A culture of responsibility reaches out to other Ministries as well whose programs impact on problem-gambling issues.”

The OLG and the rest of the Ontario government seems to have overlooked that in the new strategic plan. They just want the money. Responsibility? No our job.

A study in Florida, described in that US report, used costs-per-problem-gambler “…calculated by Volberg (1994) of $13,600 on average per pathological or problem gambler.” That study looked into collateral costs such as prisons and increased pressure on the justice system to arrive at that figure. If Ontario is similar per-capita, the cost of problem gambling ranges between $2.1 and $5.9 billion a year. In this model, there is no net benefit from gambling revenues, just losses.

This 2007 study showed that the number of people with moderate to severe gambling problems is much higher than previously estimated. This is based on a sample size of 6,654 Ontarians. It found,

“…3.74% were moderate problem gamblers (CPGI = 3-7); and .99% were severe problem gamblers (CPGI = 8+), with an overall of prevalence of 4.73% for moderate and severe problem gamblers combined… this adjusted Ontario prevalence rate of 4.76% is significantly higher than two

previous Ontario prevalence studies: 3.8% obtained by Wiebe, Single, & Falkowski-Ham in 2001 and 2.0% obtained by the Canadian Community Household Survey (CCHS 1.2) for Ontario in 2002 (Statistics Canada, 2002).”

Sources of Revenue

The study also concluded that the OLG gets more than a third of its revenue from problem gamblers, but also that gambling machines (slots) take a higher proportion of that:

“Both the winsorized and losses-only data suggest that this proportion is approximately 36%… This evidence indicates that gambling machines and horse racing derive a much larger portion of their revenue from problem gamblers, in comparison to other forms of gambling. In rank order, the rough proportions are: 61% gambling machines; 45% horse racing; 32% casino table games; 22% bingo and raffles; and 18% lotteries, instant win, and Sports Select.”

Similar studies in the USA have reported this as well. Salon noted in a recent article:

“A significant portion of gambling revenues — one-third to one-half — is derived from problem gamblers, says Grinols, who, in a 2006 Review of Economics and Statistics article concluded that 8 percent of crime in casino counties can be attributed to the presence of legal gambling.”

The Canadian study recognizes that estimates of income are problematic because in their survey, only a small number of people who identified themselves as “severe” gamblers responded to the questions about gambling expenditures:

“Expenditures from the prospective diaries of 364 individuals tentatively indicates that about 36% of Ontario gambling revenue is derived from moderate and severe problem gamblers.”***

What I found most compelling about this figure is in the policy implications section near the end of the report (emphasis added):

“Thirty-six percent would be a problematic figure for private industry, but is especially problematic for a government-run operation, when the purpose of government is to serve the people, not to exploit the people.

Ontario spends 13 times more money advertising and promoting gambling as they do on prevention and treatment (Williams, 2006). Furthermore, the $36 million put into gambling prevention, treatment and research in 2003/2004 only represents 2.6% of the $1.41 billion dollars estimated to have derived from problem gamblers in that time period. It is also far from clear whether gambling revenues represent true economic gain. Gambling revenues largely come from a transfer of wealth,rather than creation of wealth (e.g., Grinols, 2004). Furthermore, this is not an innocuous transfer, as it harms a significant minority of people (problem gamblers) in the process, and it tends to generate its revenue through the cannibalization or crowding-out of other (privately owned) 15 entertainment industries (e.g., Grinols, 2004).

There is another factor to consider when trying to estimate the economic impact of gambling: productivity loss. An Australian study found gambling was, overall, economically positive (for the government) but it recognized that it cost the Australian economy. Based on the loss of one hour per week per problem gambler:

“The study was able to “cost out” a number of factors associated with problem gambling. The effects of gambling on employment, consisting of job change costs, unemployment, and productivity loss, were estimated at A$27.8 million annually. The largest component of this estimate was productivity loss, accounting for almost A$20 million, followed by A$5.2 million for job change and A$2.7 million for unemployment.”

I’m not sure how they measure the economic value of lost productivity in this study. One simplistic way is to simply multiply the average hourly wage times the number of problem gamblers for the losses per week, then times 50 (allowing a two-week holiday per person) for the annual impact. If one hour per week is lost in Ontario, then based on 257,000 problem gamblers working at minimum wage ($10.25/hour), the resulting loss in productivity is about $132 million per year. If we use the upper end estimate (437,000 problem gamblers), and an average $15 an hour wage, the resulting loss is almost $328 million.

And what about suicide? The CMAJ article notes that, “problem gambling as a contributor to suicide is difficult to measure,” however, it does report an Alberta study that indicated gambling is a key factor in roughly 10% of suicides:

“In Alberta, gambling was listed “in the files” of suicides about 10% of the time; 46 out of a total of 482 suicides in 2001, and 54 out of 430 suicides in 2000.”

Can we quantify the impact of suicide? Not really. The emotional impact, however, is devastating to family and friends. Ontario has been been tracking gambling-related suicides since 1998 – there are on average five a year. The number may be higher because the method of identifying them is solely through a note left behind. The Globe & Mail reported 13 in 2007 and noted the number was rising, in part encouraged by casino tactics:

“A Globe and Mail investigation last fall revealed government-owned casinos are spending hundreds of millions of dollars on freebies – trips, dinners, theatre tickets – that keep gamblers coming back. Gambling debts have led to bankruptcies and even suicides.

Although there are no countrywide statistics, Canada Safety Council estimates 200 problem gamblers kill themselves every year. The Globe and Mail contacted each province to track the numbers of gambling-related suicides, finding only 50 such deaths were recorded in 2007 among the seven provinces reporting.”

Problem Gambling Institute of Ontario has a short FAQ on the potential impact of expanded gambling with many links to studies on gambling. In one called the Social and Economic Impact of Gambling, which tallies an objective view of both positive and negative effects, the authors write,

“One of the main negative impacts of gambling introduction is an increase in problem gambling and its related indices (e.g., bankruptcy, divorce, suicide, treatment numbers). The bulk of the impacts tend to be social/nonmonetary in nature because only the minority of problem gamblers seek or receive treatment, and only a minority typically have police/child welfare/employment involvement. Most of the increase in problem gambling occurs after the initial introduction of gambling, with progressively less impacts on problem gambling occurring with extended exposure… Research confirms that lower income people consistently contribute proportionally more of their income to gambling than do middle and high income groups (‘socioeconomic inequality’)…”

The report concludes that, gambling’s impact is a mix of good and bad, but that overall the good is limited, and not enough to fully offset the bad:

“…in most jurisdictions, in most time periods, the impacts of gambling tend to be mixed, with a range of mild positive economic impacts offset by a range of mild to moderate negative social impacts.”

My point here in this rambling (and incomplete) survey of the literature, is twofold:

  1. The true costs of gambling are not being disclosed by the government or the OLG, while the benefits are being exaggerated;
  2. Problem gamblers are contributing a significantly large portion to the OLG revenue, but also to the economic and social expenses caused by their gambling.

I’ll have more to post in the future, as we approach the debate at the council table (again). In a future post, I want to tackle the question of pork-barrel politics: what turns politicians into shills advocates for gambling? (It’s a story well, but partially, documented in the book, Betting the House, by Brian Hutchinson; it needs to be brought up to date). Does all the support for gambling and OLG’s planned expansion pass the smell test?


* The Fraser Institute, a right-wing think tank, framed the debate in 2002, ideologically: as one of “Individual freedom versus government paternalism.” It concludes as one might expect of conservatives, that social and economic impacts on individuals, families, or even communities, are not the concern of government:

“…the small number of people who are unable to control their gambling does not merit heavy-handed government intervention. Although there are socially harmful activities that require government intervention, gambling should not be considered one of those activities. Furthermore, those who become addicted to gambling rarely threaten the overall harmony of the community …”

The report concludes with a bit of Old Testament thunder:

“…intruding on gamblers’ liberties, prohibition makes a mockery of individual responsibility, which is hardly the best way to sustain the nation’s moral health.”

Ayn Rand must be smiling in her grave at that line.

** Gambling advocates like the OLG often use carefully chosen words to present gambling as entertainment. They call slot warehouses “gaming facilities” as if they were on a par with sports facilities. They don’t call them “gambling facilities.” Terms like “slot barns” annoy them. The Toronto Star calls them “…those windowless structures on the outskirts of cities, surrounded by huge parking lots.

*** The full disclaimer and explanation of the tentative results reads (emphasis added):
Limitations of these Findings
Regular gamblers occasionally have very large wins and losses. These statistical outliers have a major influence on the averages, making it very difficult with small sample sizes to establish what the “true” average expenditures are, so as to compare them with actual revenues.
Gambling is glamourousRealistically, there would have to be thousands of people completing prospective diaries from each of the four categories of gamblers to offset the impact of these outliers. The present study compensated for this by using winsorized data and data sets that eliminated winners. This is a reasonable but not perfect solution to this problem.
The proportion of revenue from severe problem gamblers is very tentative because of the small number of severe problem gamblers completing prospective diaries (n = 32). There is more certainty in the proportion derived from moderate and severe problem gamblers combined (n = 92). Similarly, the proportion of revenue derived from problem gamblers for particular forms of gambling is also tentative; not all problem gamblers participate in all forms of gambling and so some of these estimates are based on small sample sizes. It seems certain that gambling machines derive more revenue from problem gamblers then other forms of gambling. However, the actual portion for each form of gambling is less certain.
There is not a perfect match between reported expenditure and actual revenue for the prospective diaries. The total winsorized expenditures are 36% below actual revenues, and the losses-only total is 37% higher than actual revenues. This makes some sense considering that the largest expenditures have been winsorized in the former and all wins have been eliminated in the latter. On the other hand, it is also important to realize that the present study found gambling expenditure exaggeration and minimization to be equally common for all four types of gamblers, as evidenced by the uniformly low correlations between retrospective estimates and subsequent prospective diary amounts.
The implication here is that if there is an over or underestimate of expenditures relative to revenues, it probably does not affect the proportion derived from problem gamblers because of equivalent exaggeration/minimization in each group.

A separate, Canada-wide, 2004 study on the percentage of revenue from problem gamblers is here. It notes:

“… the most meaningful figure is the proportion of revenue derived from problem gamblers averaged across all jurisdictions: 23.1%. …problem gamblers report a proportion of expenditure that is more than five times their proportion among the Canadian population.”

Another study on Ontario demographics for gambling found:

“…converging lines of evidence indicating that a substantial portion of gaming revenue derives from people who are negatively impacted by their involvement in this activity.”

12/18/12

Gambling and the local economy part 2


MoneySeventy three dollars. It’s not a large amount if you’re middle class, certainly not if you’re Conrad Black. But for others it can be significant. If you’re on minimum wage, it’s a full day’s wage, before taxes. If you’re a senior on a fixed income, it’s a week’s groceries.

It’s also the average amount a typical gambler spends at one time in a gaming facility in Ontario, according to the answers I got from my questions sent months ago to the OLG. The clerk gave me their answers last night, only after the discussion about extending the OLG deadline.

Seventy three dollars. It will get spent in 1.75 hours; the average length of a visit to a casino. That’s about $41 an hour.

When multiplied by 12.8, it totals $934.40. Twelve-point-eight is the average number of times a typical gambler visits a gaming facility in a year. The average gambler will spend almost $1,000 every year in a gaming facility.

Again, it’s not a stunning amount. If you have some discretionary income, it’s equivalent to a mid-level laptop computer, an iPad maxed out with all the accessories, a good, flat-screen TV, a good custom-made ukulele, a case of premium scotch or tequila. An air flight to Mexico or Cuba. Or for others, it’s a month’s rent. Three months’ car payments. Groceries for a family for two months, maybe longer. 

Problem gamblingConsider the potential problem gamblers here in Collingwood. I estimated them to be about 700 people in my last blog post on gambling, based on the percentages OLG provides.

Multiply 700 by $934.40 and you get more than $654,000.

Assuming these 700 people attend a local gaming facility (a windowless warehouse with up to 300 slot machines – the OLG gets prickly if you refer to them as “slot barns”), and spend the same amount as average gamblers, Collingwood’s problem gamblers could spend $654,080 a year in a gaming facility. But of course, they will probably spend more, because they’re problem gamblers. I’ll come back to that.

And what about those others who are  not problem gamblers yet, but are “at risk” from becoming problem gamblers? That’s about 1,200 more local people. If they are also “average” gamblers, they will spend about $1.2 million annually in the facility.

Add these two groups together – the smallest percentage of gamblers but the most problematic - and they will collectively spend almost $2 million a year in a local gaming facility. That’s money not going into the local economy.

Well, okay, five percent of it will come back to us: the town will get about $93,000 from our problem gamblers. For every ‘average” person who attends a potential gaming facility, the town will get $49. Win or lose, we tax you for playing.

Let’s say our problem gamblers spend the same amount per hour ($41), but stay three hours per visit, instead of the average 1.75. That means they could spend about $125 per visit, or $1,600 a year – about $1.12 million a year for those 700 people. And then there are those “potential problem gamblers…” If they spend 3 hours per stay, we get more than $3.1 million spent by 2,000 Collingwood residents.

You can endlessly speculate on these figures, guessing how much people will spend versus how much intervention a gaming facility will use to keep them out. There’s no concrete number we can use, no absolute figures. Just realize that the potential exists for local residents to spend a lot of money gambling.

Personally, I would rather see that money spent at local stores, eating at local restaurants, buying food, furniture, books, musical instruments, cameras, clothing, pet supplies… but with the OLG launching online gambling n 2013, the money may be spent outside local businesses even without a slot warehouse in town.

You can use these numbers to work out a few possible numbers about attendance. If, as the OLG suggests, the town might get $1 to $2 million a year, a gaming facility would need to bring in between $19 and $38 million a year for us to get our rake-off.*

To get $19 million, at the average $934 a year, you need more than 20,000 people gambling there every year. You need more than 40,000 to get $38 million. To get the unsupported-by-OLG-but-often-quoted-locally figure of $3 million per year to the town, you need to have 60,000 “average” gamblers annually.

That’s a lot of wear and tear on our infrastructure. Twenty thousand more cars a year on the highway and on local roads. Or forty, even sixty thousand. And more…

Twenty thousand people at a year-round slot barn averages to 55 people a day. Not very many, especially for 300 slot machines. Forty thousand means 110 gamblers a day. But of course the visits will not be homogenized, but bunched at holidays and weekends (yes, these facilities are open Christmas and Easter…).

And of course averages are just snapshots of the middle ground. there will be people who spend less, other who will spend more. Some will come for a couple of hours of entertainment and spend $25. Others will spend a full day in front of a machine pumping quarters into its ever-hungry mouth.

A municipality needs to plan for the days when the slot warehouse will be full, with people coming and going 24 hours a day. We’ll need every penny of that revenue to upgrade and widen roads, install traffic lights, hire more police and bylaw officers to control parking and speeding…

I have yet to be convinced by any argument that a “gaming facility” offers any significant benefits to the town aside from a handful of hospitality-sector jobs.

Gambling cycle
~~~~~

* According to the OLG, it already takes approx. $6 million a year in Collingwood from net sales of lottery tickets at the 22 locations that sell them here. This would be on top of that.

 

10/27/12

Public meeting re possible casino, Monday


Slots Council will hear your comments about a possible gaming facility, Monday, October 29. This is a venue change: the meeting has been moved from Council Chambers to accommodate an expected large audience. Rogers Cable TV will be recording the meeting from 5 p.m.

Monday’s meeting will be held at the Leisure Time Club, 100 Minnesota St. An open house to meet the OLG representatives and see some information boards will start at 4 p.m. and run until council starts at 5:

OLG Reps present to answer questions, picture board displays around the room with pertinent information, staff distributing questionnaires, Q&A’s, and requesting those wishing questions to be addressed by the OLG to be submitted on the form provided.

The public meeting (a formal council meeting) will start as usual, at 5. Survey forms will be provided. Please fill in all the questions.

  • Mayor will call Council to Order: begin with the public planning meeting deal with those matters expeditiously before the OLG presentation.
  • OLG Presentation (3 reps – total 15 mins)
  • Mayor and staff will review any questions received on the forms provided, to the OLG for response
  • OLG will not entertain questions directly from the public
  • Once the public’s questions are answered – the OLG will leave
  • Public questions and comments will be entertained from the audience. Staff will record all comments/concerns.
  • Once public is finished, the regular meeting agenda will resume.

This is an important issue for the community. If you wish to comment on a possible gaming facility (a “slot barn” with up to 300 slots) being built in Collingwood, please attend the meeting and have your say. You can also comment on whether you want to see such a gaming facility located elsewhere in the region.

If you can’t attend, you can still provide a written comment to the clerk. Please submit your comments in writing to:

 “Gaming Facility Comments”
Town of Collingwood
97 Hurontario Street, PO Box 157
Collingwood ON    L9Y 3Z5
Attn: Sara Almas, Clerk
More information here: www.collingwood.ca/node/5916
Information about gambling and problem gambling is here: nsmhealthline.ca/listServices.aspx?id=10309&region=CollingwoodArea
10/19/12

Gambling: money and statistics


gambling cartoonNo, I’m not going to write about the morality of gambling.* I’ll save that for another post. This is about money. And numbers.

I attended the OLG four-community presentation in Wasaga Beach, Tuesday, and it got me thinking about what gambling means to the economy, what it means to the government, what effect it might have on things like growth and recession. It also made me wonder how governments became addicted to gambling revenue, but that, too, is for another post.

I also found some of the statistics presented interesting enough to do some extrapolation, which I’ll get to at the end.

What does gambling contribute to our economy? Well, the OLG and the province always like to tout the benefits: the OLG paid more than $2 billion profits into provincial coffers, in 2011. They’ve given more than $34 billion since 1975. That’s an average contribution of $149 per person in the province per year. OLG’s plans are to build that payment to the province up to $3.3 billion by introducing more and newer forms of gambling.

On a very basic level, that looks good. After all, at least some of that money would have had to come from taxes instead, so it can be seen as a user-pay system, or a self-tax system. Of that $2 billion last year, $120 million went to the Trillium Foundation, $10 million for Ontario Amateur Sport, and $41 towards problem gambling programs.

That’s an interesting ratio: four times the amount given to develop sports is given to treating the problems created by gambling. A point not missed by the audience.

The OLG made that profit from revenue of $6.685 billion. That’s a far more intriguing number. It’s just over one percent of Ontario’s GDP in 2011. As a former business owner, seeing a 33% profit margin is impressive. Extrapolating, it suggests OLG plans to increase net gambling revenues to almost $10 billion if the ratio remains the same. It will do this by expanding gaming sites, adding internet gambling, allowing bingo halls to run more games – making more gambling available to more people more often.

That doesn’t sit too well with me. The same people who won’t let grocery and convenience stores sell wine and beer because it might corrupt someone, will make gambling so ubiquitous it will be hard to avoid tripping over a slot machine (real or virtual). Online gambling will offer easy access, 24/7 from your home. Play in your jammies until the early hours. All you need is a credit card. Makes me wonder if the goal is to make gambling mandatory some day in the future, like taxes…

What happened to the rest of the money the OLG took in?

Online gamblingAccording to the OLG’s annual report, operating expenses were $4.975 billion. Of that, $1.835 billion went to payouts to lottery and bingo winners. Commissions ($648 million – this, I assume, was paid to operators ), marketing ($300 million – the amount paid for advertising is 7.5 times the amount paid to help problem gamblers), interest ($32 million), payments to the federal government ($228 million) and amortization ($226 million) gobbled up another 1.43 billion. Paying for the OLG and its 18,000 employees is one of those expenses. Six thousand of those employees got bonuses, too – $11.6 million worth. Not a large slice of $4.7 billion. Horse racing got $345 million; host municipalities got $92 million and First Nations got $117 million.

It almost looks like the OLG is on a drunken giveaway spree, handing out the bucks to everyone except, of course, the gamblers. Nice of them to give us back some of our money, though.

Who doesn’t want to get free money? That’s the attractiveness of hosting a casino: all you need to do is nod your head, zone some land, then sit back and watch the money roll in. Suddenly flush with cash, the town’s taxes plummet, everything gets rebuilt, new sports facilities sprout, downtown gets renewed, sidewalks rebuilt, streets paved with gold and the local politicians get halos.

Well, maybe not.

As an aside, based on media stories, all three seem worried that their slot machines will be removed from the tracks when the agreement ends, sometime in the next year.

The OLG presented the audience with examples from Hanover, Central Huron and Chatham-Kent: all three communities have an OLG money machine in a racetrack. Hanover has 130 slots; Clinton (Central Huron) has 123, and Hanover (Chatham-Kent) 130. All three are currently questioning whether the slots will remain in their raceways with the OLG’s new strategic plan. In 2011, Hanover received about $800,000; Central Huron $641,000 and Chatham-Kent about $700,000. Exuberant endorsements from their mayors, we were told.

Assume we could get, say, $1 million per year as a host community. That translates to just over 2% of our annual municipal budget. Minus, of course, what we would pay to our neighbours as per the memorandum of agreement we signed. We might end up with 1% of our budget as “free” cash. Does this mean your taxes won’t go up? Nope. The extra money would likely end up going to infrastructure improvements and maintenance required by the extra traffic, maybe to extra policing costs too.

Gambling and drinking cartoon
Even if we kept it all for ourselves (as one councillor has suggested), and damn the rest of the region, is that money enough to make us want a casino? If I’m going to sell our municipal soul, I think I want a bigger slice of that pie for the town. As Faustian agreements go, we’re not getting much from our side of the bargain.

Besides, we might think we’re agreeing for “just” 300 slots, but the OLG said it could expand the site’s licence to other games anytime in the future. The demographics change when you have other types of gambling, but I didn’t hear anything to suggest the town will have a say in that expansion.

If the cash doesn’t move me, the opportunity to create 80 to 90 jobs in the area is more attractive. Any job creation is welcome, but I get an uneasy feeling these aren’t the “quality” jobs some folks are expecting.

From what I understand, many of these jobs would be similar to what the hospitality industry already offers – janitorial, serving, cooking,security, valet parking, landscaping, counting cash. Whether these (non-union?) jobs would pay better than the hospitality sector or offer any benefits would be up to the private operator. They aren’t government jobs: the OLG won’t be running these new casinos.

Will a private operator pay more than $10-$12 an hour for someone to sweep the floor and polish the slot buttons? I wouldn’t expect so. Any new jobs are better than no jobs, but my passion to create more McJobs is somewhat less. Would you like fries with those casino tokens?

Back to the money. According to the OLG, the net revenue from adults to the gaming industry in Ontario is $459 per year. Doesn’t seem like a lot, but that’s money that doesn’t go directly into the economy – it doesn’t create jobs outside the gambling sector. It doesn’t buy anything from local merchants or restaurants. It goes directly to the government. Well, okay, two thirds goes to the OLG and its minions, and the remaining third gets into public coffers.

Most economists measure consumer spending as a yardstick to whether we are in or out of a recession – it’s called the consumer confidence index. See here for the Canadian index. It’s a simple measure of consumption – consumers who are confident in the state of the economy buy more stuff. Recessions happen when that confidence falls to a point where we stop buying and start hoarding (okay, it’s one reason; there are others, but it’s a big part of it).

A strong consumer confidence report, especially at a time when the economy is lagging behind prevailing estimates, can move the currency markets quickly. The idea behind consumer confidence is that a happy consumer – one who feels that his or her standard of living is increasing – is more likely to spend more and make bigger purchases, like a new car or home, leading to a stronger domestic economy and consequently a stronger currency.
Source: www.investopedia.com/walkthrough/forex/advanced/level8/consumer-confidence-index.aspx#axzz29kZLXgcV

Gambling cartoonIs gambling measured as consumption? Does the money pushed into slots contribute to the level of confidence? Is gambling measured in the index? I can’t find anything online to suggest that it is. So rather than spending that $459 on, say, a new TV, a shelf of books, a library of DVDs, new skates, skis or a bicycle, a purebred puppy, teeth whitening or any other goods and services – this money is spent on gambling. It bypasses the usual consumer channels. Gambling doesn’t add to the consumer confidence, even though the money is still flowing out of consumers’ pockets.

Yes, there is trickle down and spin-off - some of the money goes to suppliers, some to wages – and thus some gets back into the general economy. But how much? How much just ends up fattening the bank accounts of the operators? I don’t know, but clearly it’s not as beneficial as if it were all spent in a retail store.

Would $6.7 billion have a positive effect if it was spent in retail instead of gambling? Of course, but overall not as much as you might imagine. It’s about 4% of Ontario’s total retail sales (2011 figures). So it would help, but wouldn’t change the world. A few hundred people spending an extra $459 each every year in a local business could make a real difference to the local economy.

As a personal choice, I’d rather buy that shelf of books from local bookstores than pump quarters into a noisy metal machine and walk away with nothing. At the end of the day, I will have something to show for my money, not to mention many more months, even years, of enjoyment from the books.

It strikes me that putting the money directly into the economy helps buoy consumer confidence (thus the economy) better than spending it on gambling, and it might help keep us on the farther side of a recession. The OLG’s own statistics show that Ontario’s gambling revenue didn’t seem significantly affected by the last recession, so gamblers apparently don’t seem to feel the need to hoard as much as consumers when the economy tanks.**

Let me wind up with some thought on statistics. According to the OLG’s own estimates. 3.4% of Ontario residents have a “severe or moderate” gambling problem. In Problem Gambling in Canada (see footnote), the authors quote a 2005 study of Ontario residents by Wibe, Mun and Kauffman, that has a higher number: 5.8% are “at risk of gambling problems,” 2.6% have “moderate problems” and 0.8% have “severe problems” (the latter two combine to make the 3.4% OLG mentions).

We have around 21,000 people in Collingwood. At 3.4%, we expect to have more than 700 people here with “severe or moderate” gambling problems. Another 1,218 (5.8%) are “at risk”. That’s about 2,000 local adults for whom gambling is or may be a problem. These are your friends, relatives, neighbours. That concerns me. These are the people most likely to be found in a casino that’s in our back yard – especially during the week when there are fewer visitors.

We have about 16,000 adults 18 and older here. That means about one in every eight adults who may have or who have a problem with gambling. If the government was to allocate funds to problem gambler programs by that percentage, they would have to spend more than $250,000,000!

Add in about the same number of people from Wasaga Beach, and more from Clearview, Springwater and Town of the Blue Mountains, and we have more than 5,000 people in our immediate vicinity who either have or are at risk from gambling problems. That’s a lot of people in our region who may find a casino an irresistible place to spend their money.

I just don’t see 5,000 people lining up at the problem gambling office to voluntarily disbar themselves from the irresistible urge to push quarters into that hungry metal mouth, while others shove past them to get at the seats they vacated. I guess they’ll still be able to enjoy the province’s online gambling sites, when they are launched. The government may not want you in the casino with your bad habits, but it still wants your money, and won’t even mind if you play in your jammies.

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As you might gather from the above, I am less than enthusiastic about having a casino here. I’m still open to debate and to having my mind changed, but it has to be a lot more compelling an argument than what I’ve heard to date.

Worth reading: Public Affairs 101 on gambling
The Walrus: story on Alberta’s gambling
Stats Canada report on gambling, 2011
The Social Effects of Gambling

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* In the book, Problem Gambling in Canada (Tepperman and Wanner, Oxford University Press, 2012), gambling is identified as a learned behaviour; like smoking, like watching TV, playing sports or reading. Adults often become gamblers because of how it is portrayed in family or social situations. Because gambling is legal, it gets advertised in mass media, making it appear on the same level as consumer goods and entertainment, banks, and music concerts. From buying lottery tickets to trips to Las Vegas, how gambling is perceived in the home affects how children will develop as adult gamblers; just as children brought up by smoking parents are very likely to become smokers themselves.
** While this was also noted in the UK, in the USA, the pattern seems different. Overall the US gaming industry lost about 5.5% revenue during the recession, with New Jersey reporting a 13% drop from casino revenue. How much of that was caused by an increase in online gaming or in the general increase in gambling opportunities as more and more states legalize it, is unknown. Also, the US was hurt more by the recession than was Canada.

10/2/12

Conducting a survey about a casino


Last night, Collingwood Council debated a motion about a possible casino in Collingwood, made by Counc. Joe Gardhouse that read,

WHEREAS the Ontario Lottery and Gaming Corporation (“OLG”) has requested individual Municipalities to respond to their RFP not later than November 16, 2012;
AND WHEREAS Collingwood has been identified as a potential host site for their Gaming facilities expansion within the C-7 zone;
AND WHEREAS the potential monetary and ancillary benefits to the taxpayers and businesses of Collingwood are significant;
AND WHEREAS this opportunity deserves and requires Municipal due diligence and public input as required by the OLG RFP;
THEREFORE BE IT RESOLVED THAT Council of the Town of Collingwood instruct Staff to identify suitable locations and/or zones for the potential gaming site not later than October 15, 2012;
AND FURTHER THAT Council schedule a Council/Public Information Meeting regarding the potential economic and social impact to the community not later than October 30, 2012;
AND FURTHER THAT an opinion survey/poll or other public forum be conducted to include a cross-section of citizens and businesses for their feedback on the gaming facility expansion to be completed not later than November 12, 2012;
AND FURTHER THAT Council shall notify the OLG of the Town’s position by not later than the November 16, 2012 deadline.

This was broken up into four motions – one about locations (defeated),the survey (passed five-four; I was one of those against this step), the public meeting (unanimous) and the notice to OLG (unanimous).

(The Whereas preamble statements were not voted on. I would have taken exception to the statement there there are significant “monetary and ancillary benefits to the taxpayers and businesses of Collingwood” had that discussion happened. What about the detrimental effects? What will they cost us?)

To put this in context, the Ontario Lottery and Gaming Commission (OLG) has identified this general area as one of the preferred locations for a new casino (basically a warehouse with 300 slot machines – Georgian Downs has 1,000, Rama has 2,500). Collingwood is one of four regional municipalities that signed a memorandum of agreement (MOU) this summer to collectively support a casino in Wasaga Beach, if the Beach wanted one. The Beach would share the revenue with its neighbours in return for our support.

Statistics cartoonThis motion essentially suggests Collingwood would ignore the MOU and apply on its own for a casino without the regional sharing or cooperation. If Collingwood was to get the casino, I would argue we should still share the profits with the other consignees, because to do otherwise would not be honourable.

Let’s look at what’s involved with the survey Council approved last night.

We want to get 400 qualified answers (a qualified sample for a population of 20,000 with 0.95 confidence level is 378. See www.berrie.dds.nl/calcss.htm. Our population with part-time residents is closer to 25,000 according to our staff estimates, and we get many visitors, so I’m rounding up a bit to simplify the math below.

An unqualified response is worthless. And a smaller sample is equally worthless because it reduces the validity of the results. We need a good level of confidence in the results to determine if they actually reflect the community’s wishes.

But what part of the community is bring asked? The respondents need to mirror our own local demographics. What if 75% of respondents are between 18 and 25, and the majority of that group wants a casino… is that more significant that if the remaining 25% unanimously reject it? How do you weight the results?

We also need to know in advance what’s the bar for acceptance or rejection? 51%? 60%? 66%? 75%?

What if it’s a 50-50 split? What is the criteria for saying yes or no? Is a simple majority enough (50% plus one) to decide either way?

We didn’t get into that, last night, but it is a significant topic for heated debate. And we can’t proceed to a decision without having established the criteria.

Someone with experience and education will have to design the survey - establish the methodology, then create the many questions necessary to qualify and quantify the results. You need a professional pollster to do this, probably someone with a university degree in statistics or public relations. It can’t be handed off to someone without at least some experience in poll and survey design and in data analysis.

Demographics cartoonStaff and council will have to be interviewed first to determine the appropriate methodology, the nature of the questions, the sort of result expected, the community profile, etc. And then the designer will need to get final approval for the proposed questions. So say at least a week for the design and interview phase.

Someone will also have to design a template for recording the answers. This is probably the easiest part: we could either buy pre-packaged survey software. We could have a staff or contract person code a rather complex, large Excel sheet, too, or an Access database template.

Based on my experience with Excel and database programming, that shouldn’t take more than four or five days once the questions have been compiled and approved. It’s quicker to purchase something and just enter the questions, and let the software crunch the numbers as they get tabulated. That might reduce the time for the template preparation to a day or two.

Let’s also assume the time per person to identify a potential candidate from a tax list or phone book, call them, ask them the qualifying questions to be sure they are in the target audience (not children, not employed by the municipality or a spouse of such an employee, or are employed by the OLG, are residents not visitors, own or rent property in the town, etc.), ask the necessary demographic questions (age, gender, income bracket, marital status, employment status, etc.), and then ask the actual survey questions is 10 minutes per person.

That’s not very long – about half of what professional pollsters usually allocate per call.

Add another five minutes per person for the caller to fill in the forms on the computer, check the person off the list, record the data in the paper record and so on.

That’s a mere 15 minutes per person now. That may be reasonable time for a survey of this sort, but it leaves no margin for error or contingencies.

There’s no leeway for wrong calls, for answering callers’ questions, for explaining the nature of the survey when asked, hangups, busy signals, no responses, pens running out of ink, computers crashing, invalid respondents, etc.

StatisticsThat’s 6,000 minutes to get 400 qualified answers: 100 hours. At the average 7.5 hours per day, that’s 13.33 days non-stop. Let’s give the caller and extra 1.7 days over that period as contingency for unanswered calls, bathroom breaks, talking to staff and supervisors, making photocopies, getting pens, making backups, getting a coffee… say 15 days minimum for one person, non-stop, to get a reliable sample with any statistical accuracy and validity.*

Four working weeks total time so far. Assuming, that is, there are no delays, and nothing goes wrong, that the washrooms aren’t busy, pens don’t run dry, and there’s no lineup at Tim’s. Plus a week to prepare the survey.

Obviously we want it sooner than that, so let’s triple the number of workers to get it in one week: three people working non-stop for five days, calling residents, asking questions. Again, no contingency or leeway has been allocated – we expect 100% efficiency.

Then, once we have our 400 qualified respondents, we need someone to collate the responses and produce a report on the answers, breaking down the responses by the demographic criteria (are you a full or part time resident, are you currently employed, age, gender, family income bracket, etc.). And get it printed for council and staff, and make a public presentation to council. We may be able to get the report in a week after the survey has been completed, if we push hard.

That report and analysis will require someone experienced in statistics and demographics to analyse and break it down; maybe we can use the same person we used to design the survey.

So we’re at a minimum three weeks from the design stage to the final report, and no time or effort wasted in between. We need at least three full time staff and one professional pollster/statistician/report writer to do it in three weeks.

Who will we use to do the calling and which professional statistician will we get to write the report?

If we use staff for the calls, who trains them and how long will it take to train them? Which three people on staff have at least one week of uninterrupted time they can dedicate to this? (If we do have staff with that much free time, I want to raise this at budget time!)

Let’s say we also want to ask a qualitative, not quantitative question like, “Why do you think a casino would be good (or bad) for the town”? Something that requires more than a simple yes or no answer. That would add another several minutes per caller to take and record the answer. My time estimates above are very, very conservative, by the way. As it says on www.dobney.com/Research/MR_basics.htm:

In terms of cost, most market research is charged on a time basis plus a management/design fee. If you took a general face-to-face population study of 1000 people. You might allow 15 minutes for the interview, 20 minutes finding/contact time, 10 minutes for processing each questionnaire – so 45 minutes per interview or 750 hours of time (100 days), on top of which would be added time for questionnaire design, production and dispatch, interviewer briefing and management, creation of tables, analysis and presentation. Typically on a straightforward survey these elements should add about 15-20 days, although at a higher daily rate.

Can we use internet polls or Facebook instead, as Counc. West suggested? Sure – if you want the results to be entirely meaningless, and statistically and demographically worthless – simply a pointless “feel-good” exercise that gets trashed and humiliated in every media. It would be just as accurate to check the Magic-8 Ball for an answer as to conduct a typical online poll.

(You can read my personal comments on the validity of internet polls here: www.ianchadwick.com/blog/are-internet-polls-valid/ )

T shirtWe could hire programmers to write a secure website that has login and authentication controls on voters, and some data collection and analysis programs. We would still need to have qualifying questions and poll questions written by a professional to be sure people’s responses were valid, and someone equally qualified to write up the report later. It would add time to the exercise and what’s to guarantee that we will get the necessary number of qualified responses within the time frame before the deadline? None.

Or we could simply buy the services of one of the many online survey companies to collect and collate the data for us. We still need the professional to design the questions and create the final report. The disadvantage here is that to get a qualified response in an adequate sample may take months, because there is no incentive for users to complete the survey. Plus we’d have to advertise and promote the survey site to try and get residents to visit it. Radio ads, print ads… the costs keep mounting.

Whatever we chose, it will cost us in both time and money to achieve anything meaningful. To get those results before we have to make a report to the OLG (Nov 16) is unlikely.**

So I ask what I asked last night: does anyone have the slightest inkling of how much will this survey cost the municipality and how much staff time will be put into it? What if it cost taxpayers $50,000? $60,000? Or more? Will it be worth the money?
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* Say one in two people who answer the phone proves to be unqualified (i.e. a child or non-resident) and it takes five minutes to determine that and do the paperwork to record that call. That would add another 2,000 minutes to the total time to get 400 qualified respondents. Or 33.33 hours (another 4.4 working days). If only one in four is unqualified, but one in four is a no answer or busy signal (1 minute to record this), then it would add 22.8 hours or just over three days of work.
** I have already expressed my opposition to the process – I believe we should follow through with the MOU and support Wasaga Beach’s bid to be the host community.