Gambling's 'Big Trickle-Down' Boost or Simply a Way to Shuffle Economic Dollars Around?

This is the second in a three-part series on economic development in Upstate New York. Read Part I here.

NICHOLS, N.Y. — Tourists and jobs. Residents, business owners and elected leaders in and around this rural Upstate town are cautiously optimistic that a pending casino expansion might bring both, providing a shot of adrenaline for the sputtering local economy, which once drew its strength from manufacturing and farms.

“Everyone is in favor,” said Kevin Engelbert, the Nichols town supervisor, when asked about the proposed expansion at Tioga Downs. For nearly a decade now, the horse racing facility has had a casino with about 800 video lottery terminals, which are akin to electronic slot machines.

Located just north of Pennsylvania, Nichols is about 30 miles west of Binghamton in New York’s Southern Tier. The region is generally seen as one of the more economically downtrodden parts of the state. Tioga Downs is on the western fringe of Nichols, out past agricultural fields and a gas station, not far off State Route 17, the Southern Tier Expressway.

Under loosened casino laws New York voters backed in a 2013 referendum, “The Downs” is now on the verge of an expansion that would include 1,000 slots and 50 gaming tables, along with a 161-room hotel. If the expansion is completed as planned, Nichols would become one of four localities in New York to see a new full-fledged casino soon open its doors.

There are five Indian casinos already operating in the state, along with nine video lottery parlors, including the one at Tioga.

One of the goals in allowing the new casinos is to keep more taxes from the gaming industry in New York, rather than letting that money go to other states.

But there is another objective as well.

Gov. Andrew Cuomo, and lawmakers who supported the legislation that led to the voter referendum, have also touted casinos as a way to spark tourism and job growth in parts of Upstate New York that have struggled economically.

There is a significant void, however, in places like Nichols, and Tioga County, left behind by the jobs and employers that have gone away. One that a casino can only go so far toward filling.

And some who are familiar with the gaming industry in the Northeast offer tepid assessments when it comes to the benefits the new casinos might provide for local economies Upstate.

“The dream of it trying to rejuvenate an area, I doubt that’s going to happen,” said Richard McGowan, a professor at Boston College, who has written extensively about the gambling industry. “It’s going to help, don’t get me wrong. There will be some economic benefits,” he added. “Is it going to be a tourist attraction? I doubt it.”

Other critics warn that casinos can create deleterious “social costs," particularly in the form of problem gambling.

But in over a dozen conversations with people in Nichols and Tioga County, opposition to the Tioga Downs expansion was more-or-less nonexistent and concerns about the ills associated with casinos were scant. If anything, people were eager for the project to proceed.

Gail Murphy has owned Gail’s Diner, on Main Street in Nichols, for nearly nine years. She said she already gets customers who are passing through on their way to The Downs. The casino expansion, she believes, is likely to bring in even more people. “Any new people, any extra people can’t hurt,” Murphy said. “I’ll be glad when it’s here.”

That said, residents and community leaders tend to be clear-eyed about the proposed expansion, and do not view it as a silver bullet.

“We are realistic enough to know that the world is not going to change because there is a casino,” Martha Sauerbrey, who chairs the Tioga County Legislature, told Route Fifty by phone in early November. “I don’t think it’s going to be the saving grace for the overall economy.”

But Sauerbrey, who was raised in Nichols, noted that the casino expansion would create new job opportunities, and will ideally draw in tourists who are on their way to New York’s Finger Lakes Region, which is north of Tioga County.

“It’s a win,” she said. “We’re happy with it.”

‘Everybody Had a Job’

Looking back at how the Tioga County economy used to be, and what it is like now, helps shed light on why people there are enthusiastic about the jobs the casino expansion could provide.

There was a time when IBM’s Federal Systems Division employed thousands of people in Owego, the Tioga County seat, which is about 10 miles northeast of Nichols.

“The biggest, biggest thing that happened to Owego was when IBM came in,” Tioga County's historian, Emma Sedore, explained during an interview at the county historical society’s building in late October.

Sedore and her late husband moved to the county in 1958 to work for the company, and she has now lived there for 57 years. “In the ’60s and ’70s it was going crazy,” she said of Owego. “Everybody had a job, and almost everyone worked at IBM.”

In Owego, the Federal Systems Division primarily designed, developed and manufactured technology for the military, including systems for aircraft and ships. About 5,000 people once worked at the site, according to the “Encyclopedia of New York State.”

Thousands worked in Endicott as well, in nearby Broome County. Sometimes called the “Birthplace of IBM,” one of the company’s earliest facilities, “Plant No. 1,” was located in the village. Soil and water near the site were later found to be heavily contaminated.

IBM began downsizing in the early 1980s, and continued to do so through the 1990s, according to the local Press & Sun-Bulletin. The company would ultimately winnow thousands of positions in Owego and Endicott through early retirement programs, and some layoffs.

Loral Corporation, a defense contractor, bought IBM’s Federal Systems Division in the early 1990s. Lockheed Martin Corp. acquired much of Loral in 1996. According to Sheri McCall, supervisor of the Tioga Employment Center, Lockheed remains the No. 1 employer in Tioga County, with about 2,600 employees.

Over the years, the fortunes of the job market in the county mirrored what happened at IBM.

Employment expanded for decades. Between 1969 and 1988, the number of jobs in the county went from 15,026, to 19,917, estimates from the U.S. Bureau of Economic Analysis show.

Then, amid the IBM downsizing, the number began declining, dipping below 19,000 in 1990.

Total employment in the county would not rise above that 19,000-job threshold again until 2006, in the run up to the Great Recession. But that growth spurt did not last. By 2014 there were 17,544 jobs in Tioga County, fewer than in any year dating back to 1977.

Manufacturing has taken an especially big hit. There were 5,230 manufacturing employees in the county in March 1993, according to Census Bureau data. In March 2013, there were just 1,238.

“Manufacturing will always be here,” McCall said. “But it’s never going to get to the golden age it used to be.”

Farming, too, has eroded. Engelbert, the Nichols town supervisor, also runs an organic dairy farm with about 200 cows. It is on land his family has farmed since the early 1900s.

“Our agriculture is almost gone,” he said during a brief interview at the Nichols Town Hall.

In 1969, farm income in Tioga County was about $4.6 million, according to data from the Bureau of Economic Analysis. Adjusted for inflation into 2014 dollars, that is around $30.2 million—more than double the $12.8 million of farm income recorded in the county last year.

“Most of our key businesses have left,” Engelbert added, as he continued to discuss the local economy, citing taxes and regulations as main reasons for this. “We’re a poor area now.”

In some ways though, the Tioga County economy is not far out of line with what the U.S. looks like as a whole. Median household income there was $55,726, based on U.S. Census Bureau estimates for 2009 to 2013. That’s $2,680 greater than the median for the entire U.S., $53,046. September unemployment was 5.2 percent, consistent with the national figure that month of 5.1 percent.

“Last year's numbers were really good, this year's numbers are even better,” said McCall, referring to the unemployment figures. “It really seems that we're stepping out of the recession.”

Distribution centers and warehousing for companies such as Best Buy have picked up some of the slack left behind by manufacturing. Plans for a FedEx Freight facility, which could create about 70 jobs, were announced earlier this year. Also contributing to the moderate unemployment rate is a shrunken population. The county had about 53,237 residents in 1993, and roughly 49,870 in 2014.

'The Second- or Third-Largest Employer'

As it stands, Tioga Downs is fifth or sixth on the list of top employers in Tioga County. McCall said that as of early June there were about 300 employees working there, with closer to 370 during the peak summer season. That’s roughly the same number of people employed at a local scrap metal processor, Upstate Shredding.

The expansion plans would significantly increase the number of jobs tied to The Downs. Documents describing the expansion, which Tioga Downs submitted to a state gaming board earlier this year, estimate that the expanded casino resort would require the equivalent of about 748 to 807 full-time employees—roughly 400 or 500 more than the number working there now.

“It'll probably be the second- or third-largest employer in Tioga County,” McCall said.

Security guards, casino dealers and housekeeping staff could be among the new positions.

While these aren’t like the high-tech jobs at Lockheed, Sauerbrey, the county legislator, made the point that “not everybody can be an engineer and build helicopters or computers.”

Construction work is another perk of the casino expansion. According to the documents Tioga Downs submitted to the state, about $30.7 million in direct labor income will flow to New York residents during construction, including $10.4 million to those living in Tioga County.

‘There’s a Big Trickle-Down Effect’

It’s harder to estimate how much the expanded casino will help other area businesses. But local business owners do say they’ve already benefited from Tioga Downs, even as it is today.

Engelbert’s farm has a small shop where meat, cheese and other goods are sold. Like Gail Murphy, the diner owner, he said that Tioga Downs has provided a boost for business.

“We’ve seen an increase when the track is open,” he said. “There’s a big trickle-down effect.”

Redneck Boot Shop & Western Wear, a store in Owego, opened earlier this year and quickly built a strong relationship with the "racino."

“They’ve put a huge order in with us, and they’re going to be selling our products at their gift shop,” Irene White, who owns the shop with her husband Chris, said as she took a break from sorting a shipment of socks on an October afternoon. White added that “they have country concerts going on all the time.” These shows attract an ideal pool of potential customers for a western wear shop. The store also has a deal to have a sales booth at the existing casino during certain times.

“They’re very small business oriented,” White said of Tioga Downs.

Not far from The Redneck Boot Shop is Owego’s Parkview Restaurant & Pub. Built in the late 1800s, the building is allegedly haunted. There used to be a hotel on the upper floors, which was closed in the 1970s and fell into disrepair.

Beth Johnson and her husband have owned the Parkview since 2011. They have a 10-year business plan to get the hotel back up and running, with between 14 and 15 rooms. “It’s a very expensive project,” said Johnson. Eventually she and her husband would like to get a bank loan to complete the hotel restoration. What does Johnson think about the casino expansion? “It makes us feel better,” she said, “about going to a bank and finishing the hotel.”

‘It Just Shuffles Around Money’

When assessing the possible economic benefits of a casino project, understanding where the patrons will come from is a key consideration, according to Earl Grinols. An economics professor at Baylor University in Waco, Texas, Grinols is a critic of the casino industry, and is known for a book titled “Gambling in America: Costs and Benefits.”

“Is the casino going to bring in money from people who are outside the area you are interested in? Or is it merely going to create demand for its product from people who are already inside the area?” These are important questions to ask, he explained recently by phone.

Jeffrey Gural, the owner of Tioga Downs, told Route Fifty in October that he thinks most casino customers usually come from within 50 miles.

Draw a circle with a 50-mile radius, centered on Tioga Downs, and about half of it covers northern Pennsylvania. The other half is inside New York. The New York section covers all of Tioga County. It also includes parts of neighboring counties like Tompkins, where the poverty rate was 20.5 percent, according to the latest Census estimates, and Broome, where the rate was 17.4 percent. So the market for the casino overlaps with poorer areas it is supposed to benefit.

It’s also possible to debate how much of the cash spent in slot machines, or on rounds of blackjack at The Downs, or at businesses near the casino, would have been spent anyway on recreation in the region. For example, someone traveling to Tioga Downs, who stops and spends at the Parkview, or Gail’s for lunch, might have otherwise spent their money at a restaurant while visiting New York’s Finger Lakes.

“It just shuffles around money in the area,” said Grinols, describing what happens when this phenomenon unfolds.

If you only care about places near the casino, like Owego or Nichols, maybe the shifting dollars don’t matter much because businesses there are seeing new customers. But if you’re concerned about the overall development of the Southern Tier, you might question whether the new casino will siphon customers away from businesses elsewhere in the region.  

McGowan, the Boston College professor, said it would take time to fully understand the gains realized from a casino project like the one planned at Tioga Downs. “To really find out the eventual benefits of this,” he said, “you’re going to have to wait two or three years.”

‘There are Social Costs’

But, in the meantime, Grinols warns that “you just adopted an industry, which creates social damage.” He said his research indicates that the total costs of gambling are about three times higher than the value created. “There are social costs associated with gambling that are not associated with watching a movie,” he said, offering examples like crime and suicide.

Drawing links between social ills and casinos is an area that remains open to inquiry and sometimes-hot debate. In some cases, for instance, research prepared for the American Gaming Association has questioned academic findings that have linked gambling and suicide.

McGowan offered his own assessment of what happens when a casino sets up shop.

“The problem gambling goes up a little bit, because it’s much more accessible,” he said. “People who get themselves in trouble one or two times say ‘that’s it, I won’t do it again.’” Though he did caution that people who develop addictive gambling habits face more serious risks.

Slight increases in crime are not uncommon, he said, divorce rates usually go up a little bit, and so does the amount of drunk driving. But he also pointed out: “Where they’re opening up this casino, they weren’t all that far away from going to a casino anyway.”

That is true. In addition to the racino that’s already at Tioga Downs, the Yellow Brick Road Casino, and Turning Stone Resort Casino, owned by the Oneida Indian Nation, are both about a two-hour drive from Nichols. So is the Mohegan Sun Pocono casino, in Wilkes-Barre, Pennsylvania.

The video lottery terminals at Tioga Downs have been there for nearly a decade now, and people in the area say the machines haven’t caused problems. “We have not seen any negative results,” Sauerbrey said, referring to the racino. “There hasn't been anybody going for treatment,” she added. “There has not been an increase in crime.”

Christie Speciale echoed that view. She’s the executive director of the Tioga County Council on Alcoholism and Substance Abuse. Speciale said the group tries prevent any excessive gambling, but focuses heavily on doing so among youths who are underage. “Of course there’s going to be an effect on them,” she said, as she discussed the casino now at Tioga Downs. “But, with that being said, it’s not like there’s been any sort of gambling epidemic.”

'We’re Going to Win'

Asked if he has faced any criticism over locating a casino in an area he described as “depressed,” Gural said he had not. “And I’m pretty visible up there,” he said. He framed gambling as just another form of entertainment that people can choose to spend money on.

“When you’re 80 years old, there’s not a lot of things that you can do anymore. You’re not running marathons,” he said. “A lot of our customers are senior citizens and this is their night out, their day out. We cater to senior citizens. We have an early bird special on the food.”

He also said that he cautions patrons to be careful with their money. “I tell them, I say: ‘make sure you don’t come here too much, don’t lose more than you can afford to lose.’”

Residents in and around Nichols voice appreciation for how Gural has helped their community.

After severe flooding swept through the Southern Tier in 2011, he donated money to aid recovery efforts, crews from the harness track assisted with cleanup, and Tioga Downs offered $5 buffet meals to area residents.

Gural also committed to making a personal contribution of $294,500 to the Tioga Central School District in two budget cycles, covering school years from 2015 to 2017. If the casino expansion wins final approval from the state gaming commission, Gural has pledged the same donation for three more school years, running through 2020. All of the donations will be made on the condition that local taxpayers accept tax increases to help cover the strained school budget.

“I think everyone in Nichols gives that man an A-plus,” Jan Cole, a longtime resident of the town, said of Gural, while sitting at Gail’s Diner with others who live in the area.

What motivates Gural’s philanthropy? “It’s the right thing to do,” he said. “I’m reliant on people coming there and gambling and obviously, you know, we’re going to win.”

“There are people who hit jackpots,” he added. “But on an annual basis we come out ahead.”

Though they’ve received an initial go-ahead from New York’s Gaming Facility Location Board, the expansion at Tioga Downs, and the other pending casino projects, are still awaiting final approval from the state’s gaming commission in the form of a “gaming facility license.”

The commission is on track to make decisions about whether to issue licenses for three of the projects by the end of the year, spokesperson Lee Park said in an email on Nov. 13. But making a determination about Tioga’s license is expected to take until next year, he said, because the project was selected to proceed later than the others.

Gural expressed confidence that the license for Tioga would come through. Ground has already been broken on the expansion, and he anticipates having the full casino up and running by next July.

For now, the racino continues to hum along. Around 5 p.m. on a Tuesday in October, there were about 120 people there, trying their luck at video lottery terminal games like The Green Machine, Rich Girl, Copper Proper and Quick Hit. The machines filled the room with a chaotic mix of electronic noise—dings, jingles, falling coins.

While it may take time for the local economic benefits of the Tioga Downs expansion to be revealed, Grinols, the Baylor professor, noted that another aspect of casino projects tends to be more certain. “The owners of the casino,” he said, “are going to make money.”