Pros and Cons of Government-owned Gambling Operations

October  25, 2012

Gambling expert on government casino ownership

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"The potential for increased revenue is good, but it's not risk free." That's what an expert on the gambling industry says about Davenport's proposal to buy the Rhythm City Casino from Isle of Capri. Mark Nichols is an economics professor at the University of Nevada, Reno, the home of the Institute for the Study of Gambling and Commercial Gaming.
    Nichols says if he lived in Davenport, he'd have reservations about the city owning a casino.

"Often times the thinking is 'well this is a casino, you, I mean, they just print money, they have a license to just print money' and they don't. It's a business like any other business and it is one that is becoming increasingly competitive and, obviously, you've got Illinois right across the river and it's hard to know how they'll respond.  Illinois is already, to my understanding, slot machines in bars and taverns and things like that. You know, what happens down the road if Iowa decides to expand gambling in that capacity."

    The economics professor also says in competitive markets, people go to the casinos with the latest "bells and whistles." And private companies have to re-invest constantly to keep up.

"In Iowa you still have restricted licenses; you still have a set number of them. That, to some extent, gives you some market power unlike here in Nevada where licenses are relatively unlimited and that should have some economic value that someone would be willing to pay for. Andy if at the price that they're asking there's no private investors who are willing to pick it up, I would say that the city is overpaid because there should be some competing bits going on if the license is truly that lucrative."

    Other casino owners may object to a government-owed casino in their market, saying it's unfair because of access to the city's coffers. And Nichols says there's also a philosophical question - should a municipality operate a business that's normally owned by the private sector?