Executive Summary

The Governor's Blue Ribbon Commission on Michigan Gaming was created by Governor John Engler by executive order on September 8, 1994, to assess the issue of expansion of gaming in the state.

The Governor's executive order pointed out that some forms of legalized gambling already exist and that the state derives revenue and other benefits from the economic activity and entertainment value of the legal forms of gambling, including horse racing, lottery, bingo and charitable gaming.

Besides the benefits associated with gaming, the unplanned and uncontrolled proliferation of gaming as well as gaming itself holds the potential to cause social and economic harm, the executive order noted.

Voters in the City of Detroit and the City of Highland Park have approved advisory measures on expansion of gaming, which contributed to prompting creation of the Governor's Blue Ribbon Commission on Michigan Gaming.

In his executive order, Governor Engler charged the Commission with 12 specific issues to which he desired definitive answers and recommendations. The charges (and the Commission's responses) were:

1. Whether additional gaming is desirable and beneficial and should be authorized by the Legislature or Governor.

   Limited expansion of casino gaming in Michigan would be beneficial since it could add significantly to the state's economy, contribute additional tax revenues to local and state governments, provide an additional attraction for tourism, and help to capture Michigan gaming dollars now being exported. Casino gaming already exists at several Native American facilities in Michigan and in neighboring Windsor, Ontario, Canada. Riverboat casino gaming exists in neighboring Illinois. The State of Indiana soon will have riverboat gaming in even closer proximity to Michigan than Illinois.

   Expansion of gaming can be limited in Michigan by restricting any privately owned casinos allowed by law. The geographic and square- footage criteria described in the Deloitte & Touche report, Economic Impacts of Casino Gaming on the State of Michigan should be used as a guide to limit expansion.

   Approval of the voters should be received before any casino may be constructed in a local community. Riverboat gaming should be prohibited, and any privately owned casinos should be land-based to stimulate economic development in the community.

   Since off-reservation, Indian-owned casinos require approval of the governor, the chief executive has the power to control the number of such casinos in the state.

   Admission to casino gaming areas should be restricted to adults.

   This conclusion was reached by majority consensus. There is a minority point of view within the Commission. On the specific issue of prohibiting riverboat gaming, there is a minority point of view within the Commission.

2. Whether the legalization and establishment of land-based casinos and/or riverboat casinos in Detroit or other proposed locations around the state would cause any social harm or any substantial economic harm to the state in the form of lost state lottery or Indian gaming revenue, or would cause harm to the state's horse racing industry and Michigan agriculture.

   The establishment of casinos in Michigan can be expected to cause social harm, primarily because problem and pathological gamblers would have easier access to gambling facilities. An increase in crime can be expected. The divorce rate, spousal abuse and child abuse all can be expected to increase.

   The key to minimizing the growth of crime is two-fold:

   1. Adequate and advance planning to identify potential problems and to begin development of solutions; and
   2. Obtaining funds "up-front" from casinos for the cost of additional police officers, equipment and other essential requirements.

   Funds from casino tax revenues should be earmarked to address the social ills caused by gambling, such as treatment programs for compulsive gamblers.

   Economic harm to the Michigan Lottery can be expected. Any economic loss to the Michigan Lottery should be offset by state revenues derived from casino gaming.

   The probable harm to Indian gaming would be moderate and would appear to be dependent on the relative distance between the casinos.

   The horse-racing industry already has suffered significant economic harm, largely because of Indian-owned casinos and the Windsor, Ontario, casino. Limited expansion of gaming in Michigan could contribute to the decline in attendance and handle that has afflicted the industry over the past 20 years, a decline that started even before casino gaming was introduced.

   This conclusion was reached by majority consensus. There is a minority point of view within the Commission.

3. Whether the economic benefits from the legalization and establishment of land-based casinos and/or riverboat casinos in Detroit or other proposed locations around the state would outweigh any potential social or economic harm that may result.

   Limited expansion of gaming in Detroit and other possible locations, as suggested in this report, would provide potential economic gains that outweigh potential social or economic harm.

   Social ills linked to gaming already afflict Michigan citizens because casino gambling currently is within easy reach of all the state's residents in Windsor, Ontario, and at Indian facilities within the state. Riverboat gaming has been authorized in the nearby State of Indiana and now exists in Illinois. The easy accessibility that Michigan citizens now have to land-based and riverboat casino gaming gives rise to the belief that the state is exporting gambling dollars while importing, and being financially responsible for, the social harm resulting from gaming.

   This conclusion was reached by majority consensus. There is a minority point of view within the Commission.

4. If the establishment of now casino locations in the state is deemed to be in the state's best interest, should they be privately-owned and operated; state-owned and operated; state-owned and privately-operated (e.g., Windsor Casino); or Indian-owned and operated?

   The Commission recommends approval of Indian-owned, off-reservation, land-based gaming in the City of Detroit, subject to satisfactory negotiations between the State of Michigan, the City of Detroit and the owner-operator of any proposed casino. The agreement shall maximize the financial return to state and local governments.

   Ways may exist for the state to form an alliance or partnership with one or more Indian tribes that would allow a joint operation with hired, private operators in Detroit. It is recommended that such an arrangement be explored and legal questions answered. The joint arrangement could prove more economically advantageous to the state and local government.

   In addition, the Commission recommends legislation to provide for limited expansion of privately owned and operated casino gaming in the State of Michigan, subject to satisfactory negotiations between the State of Michigan, the local government and the owner-operator of any proposed casino.

   The Commission recommends against state-owned and state-operated casinos and against state-owned and privately-operated casinos for a variety of reasons. The reasons include state-ownership would preclude private ownership, involve the state too directly in the gambling industry and increase the size and scope of state government.

   This conclusion was reached by majority consensus. There is a minority point of view within the Commission.

5. Whether the state's pari-mutuel horse racing tracks need to have the ability to offer electronic computerized games of chance (video gaming terminals and video slot machines) and/or other forms of casino gaming in conjunction with pari-mutuel wagering on horse race results, in order to compete against existing and future casinos in and around the state and in order to continue in business.

   The state's pari-mutuel horse racing tracks should not be given the ability to offer electronic computerized games of chance (video gaming terminals and video slot machines) and/or other forms of casino gaming in conjunction with pari-mutuel wagering on horse race results.

   This conclusion was reached by majority consensus. There is a minority point of view within the Commission.

6. Whether the legalization of electronic games of chance at Michigan's licensed pari-mutuel horse racing tracks could cause any social harm or any substantial economic harm to the State of Michigan either in the form of lost state lottery or Indian gaming revenue or other impacts on state revenue.

   Introduction of video-gaming devices would cause extensive social and economic harm. The effect would be to create a casino at each racetrack, adding significantly to the proliferation of gambling in Michigan. Severe economic harm to the state lottery and Indian gaming revenue could be caused. The devices would be difficult to regulate and control and would be too easily accessible to minors.

7. Whether the likely economic benefits to the State of Michigan, the horse racing industry and Michigan agriculture from the legalization of electronic games of chance at licensed racetracks outweigh any loss of Indian gaming revenue or economic costs to the state lottery and any social harm that could result from this enhancement of legalized racetrack gaming activity.

   The benefits to the State of Michigan, the horse-racing industry and Michigan agriculture from the legalization of electronic games of chance at licensed tracks would not outweigh any associated loss of revenue to other gaming activities and any social harm.

8. Whether the legalization and placement of a limited number of gaming terminals at establishments that sell liquor by the glass would cause any social harm or any substantial economic harm to the state in the form of lost state lottery or Indian gaming revenue, or would cause harm to the state's horse racing industry and Michigan agriculture.

   The Commission recommends against legalization of video-gaming devices in establishments that sell liquor by the glass.

   Extensive social and economic harm would be caused by legalization and placement of electronic games of chance (gaming terminals) in establishments licensed to sell liquor by the glass.

   The terminals would be difficult to regulate and control, and they would be too readily available to minors. Broad-scale legalization would amount to excessive proliferation of gaming in the state. Significant social harm would result because the persons most likely to be addicted to such devices tend to be Michigan's poorest and youngest citizens. Substantial economic harm could be caused to state lottery revenues and noticeable but not dramatic harm to slot-machine play at Indian casinos. Moderate economic harm could be felt at racetracks.

9. If the placement of a limited number of gaming terminals at establishments that sell liquor by the glass is authorized, which establishments should be permitted to operate the terminals and how many terminals should be permitted at each establishment? What role, if any, should the Michigan Liquor Control Commission play in the regulation of such gaming?

   No terminals should be allowed at any establishment. The Michigan Liquor Control Commission would not have any role.

10. If legalized gaming is expanded, what additional regulatory and administrative responsibilities and duties would the state be required to assume and what additional administrative and regulatory costs would the state have to incur?

    If Indian gaming is expanded, the regulatory and administrative responsibilities and duties would be articulated in compacts between the State of Michigan and Indian Tribes, with the approval of the governor and in accordance with the Indian Gaming Regulatory Act of 1988.

    If legislation to permit privately owned land-based casinos becomes law, it is recommended that a Michigan State Gaming Board be established by law to handle attendant administrative duties and provide regulatory oversight.

    The compacts and any enabling state legislation should require the gaming establishments to be responsible for all administrative and regulatory costs.

11. If legalized gaming is expanded, what regulators structure would be most appropriate? Should the state merge its existing gaming regulatory bodies into a new gaming commission or should another approach be followed? What regulators models have been used in other states and which have been most effective? What are the advantages and disadvantages of various regulators approaches?

    If legalized gaming is expanded, the regulatory structure would be pursuant to either the Indian/State compacts or the proposed Michigan State Gaming Board. Existing Michigan gaming regulatory bodies should not be merged into a new gaming commission. There is no need to commingle various forms of gaming into one regulatory body. Many state regulatory models are very effective, and the Illinois Gaming Board would be a good model for Michigan. It was established by state law to administer, regulate and enforce the casino-gaming system in the state. The advantages of this approach would be a focus of strict regulatory control funded by the gambling establishments. A multi-focused approach (i.e., all existing Michigan gaming regulatory bodies in one component) has the disadvantages of an easily diffused focus and the cost of funding the body must be borne by taxpayers.

    In addition, the Commission recommends that the City of Detroit should have the primary responsibility for law-enforcement activities involving gaming in the City of Detroit and should cooperate with county, state and federal agencies as necessary.

12. If legalized gaming is expanded, what should be the state's share of the resulting new gaming revenue? Should local units of government share in gaming revenues?

    The current share of Indian gaming revenue received by state and local governments is unacceptable. The state and local governments' share should be based on a rate that is competitive with other states that have casino gambling. The range throughout the United States now is 20% to 27% of "adjusted gross receipts" (gross receipts minus the payout of winnings to wagerers). In addition, any casino, whether off-reservation, Indian-owned or privately owned, should be subject to all state and local taxes that apply to any other business establishment. Contracts should be negotiated to provide maximum revenue to state and local governments. Tax revenue derived from casino operations should first be used to offset the incremental costs incurred by state and local governments as a result of expansion of casino gaming.

Economic Impact of Expansion of Gaming in Michigan

Expansion of gaming in Michigan, especially in Detroit, offers the opportunity for vitally needed economic development as well as additional revenue for state and local governments.

And if gaming is not expanded, Michigan will continue to watch $350 million to $400 million a year flow out of the state to the Windsor, Ontario, Canada, casino without any tax benefit to the state.

These are conclusions of the Economic Impact Committee of the Governor's Blue Ribbon Commission on Michigan Gaming, which noted that much of the "million-dollars-a-day" outflow to Canada comes from the Detroit area.

Besides the Windsor operation, casino gaming in neighboring states of Illinois and Indiana and at Indian-owned casinos within Michigan will attract Michigan residents and their gaming dollars without providing tax revenue to the state.

Michigan is in the untenable position of having casino-gaming readily accessible to its residents within and near the state, of having negative impacts, yet being without gaming revenue or benefits to help counter the problems, the Committee said.

Deloitte & Touche, in a report directed by the Commission's Economic Impact Committee, pointed out, "At present, with Michigan residents going out of state to game, Michigan is exporting much of the positive economic impact of casino gaming, including job and tax-revenue creation, and importing the associated social costs."

The Committee recommended that expansion should focus on recapturing gaming dollars being spent by Michigan residents outside of the state and on ways to achieve maximum revenue from out-of-state residents who would be attracted to Michigan casinos.

The Windsor casino is the prime draw of Michigan gaming dollars now, the Committee pointed out, so a Detroit location is a natural choice to stem the outflow of Michigan dollars to Windsor.

Deloitte & Touche estimated that expansion could amount to a $1-billion-a-year boost to the Michigan economy through recapturing more than $700 million being spent by Michigan residents on gaming in other jurisdictions and more than $300 million from residents of other states who would visit Michigan.

Depending on the level of gaming taxes set by the Legislature, tax revenues of $231 million a year or more could be generated, the Committee said. The total of $231 million was estimated by Deloitte & Touche, based on a 25% tax. The range currently is 20-27% in states with casino gaming, with some types of gaming activity such as video gaming devices taxed as high as 40%.

Edward M. Gramlich, director of the Institute of Public Policy Studies at the University of Michigan, in another analysis authorized by the Committee, agreed with the economic analysis of Deloitte & Touche. He said the main reason for wanting casino gaming in the state is so that it can be taxed.

Gramlich pointed out that some government costs, such as policing, will rise, but government revenue produce by taxes on gaming will be higher than associated costs. "The most important single change of casino gambling in Michigan then seems to be the rise in government revenues," Gramlich said, because casino gaming already exists in and around the state.

Tax revenue derived from casino gaming should be apportioned among state and local governments by the Legislature on the recommendation of the Governor. However, each governmental unit should receive adequate revenue to offset the incremental costs incurred as a result of expanded gaming, the Commission recommended.

During negotiations with prospective owner/operators, the state should consult with the local government involved, especially on matters dealing with law enforcement and zoning. The Economic Impact Committee, like the Commission's other committees, cited social problems as obstacles to be overcome. And like the other committees, Economic Impact recognized problem gamblers and the probable increase in crime.

Gramlich suggested that since problem gamblers will no doubt find a way to gamble, those living in Michigan are probably already feeding their habit, either in Windsor, in Illinois, at Las Vegas, in the state lottery or at the racetracks. "Putting up casinos here surely makes this problem worse, but probably not much worse than it already is."

On the question of crime, particularly crime in the streets, Gramlich said, "It is hard to imagine much higher crime rates in cities such as Detroit. Detroit street crime is already quite high, and one might even argue that putting more people on the streets of Detroit will lower, not raise, crime."

Besides producing tax revenue, expansion of gaming could lead to an annual employment increase of 4,782 full-time equivalent jobs at an average wage of $27,400 year. In addition, Deloitte & Touche reported, casinos are expected to spend an estimated $91 million a year on Michigan goods and services, primarily in business services, wholesale and financial services.

The Committee found that expansion of casino gaming could have an economic effect on other gaming venues in Michigan.

The Deloitte & Touche report said the average expenditure per person on legal gaming has increased in absolute terms, largely because of two major factors.

One is that lotteries and other gaming devices have become more accessible and more popular with people. The other is that as more and more forms of gaming have been introduced (lotteries, charitable gaming, pari-mutuel betting, riverboats and Indian casinos), people have become more comfortable with, more accepting of, and more likely to try gaming.

Expansion of casino gaming would have only minimal impact on the Michigan Lottery and be temporary, the Committee found. The reduction in sales would be in the range of 1% to 3%, the Committee said, because with the already noted expansion of casinos within and near the state, much of the effect has been felt.

Another reason for the minimal impact is that the casino is not a direct substitute for lottery play. The lottery and a casino vary considerably in their entertainment value, price of play, odds of winning and size of the typical prize.

Video gaming devices, if allowed at racetracks and establishments licensed to sell liquor by the glass, would have a devastating effect on the lottery, the Committee said. Initially, the video devices could cause a loss of lottery sales of up to 20%. Over the long term, the lottery would suffer a 10% loss of sales each year.

Charitable gaming could expect an overall loss of 3% to 5%, if casino-gaming expansion occurs. Bingo, the largest of the charitable gaming activities, would suffer little economic loss, while millionaire parties would be hurt the most since they more closely resemble casino activity.

Casino gaming would cause the greatest economic damage to horse racing, but much of the damage already has been done by Indian-owned casinos and the Windsor casino. The Committee said total negative impact on horse racing is in the 30% to 35% range, most of which has been felt by the racetracks. If limited expansion is allowed as recommended, the Committee said, the incremental negative impact attributable to the new casinos would be in the range of 5% to 10% for the Detroit-area tracks. Other tracks could be hit harder, the Committee said.

The Committee strongly felt that allowing video-gaming devices at racetracks effectively would create eight new, arbitrarily located casinos, an action that would run counter to the Commission's recommendation of limited expansion of gaming.

Several changes can be considered for the horse-race industry, the Committee said, including expansion of simulcasting, telephone wagering and reduced tax rates. Horse racing and slot machines are different businesses and should remain separated, the Committee said.

The effect on Indian-owned casinos would vary by location of the facility in relationship to the casinos set up under an expansion plan. The Soaring Eagle Casino operated by the Saginaw Chippewa Indian Tribe in Mt. Pleasant is the only Indian facility that would be affected directly by a Detroit casino, the Committee said. The Soaring Eagle already has felt some effects from the Windsor casino.

Other Indian-owned casinos could be impacted, depending on the location of privately owned casinos, and the Committee estimated loss of revenue to all Indian-owned casinos at up to $68 million.

The Committee reviewed the pros and cons of various ownership plans and suggested a hybrid plan of its own.

While Indian-owned casinos do not require legislative approval, they could be more difficult for the state to control and regulate, and the state-and-local share of revenue must be negotiated, the Committee said in its review of ownership plans.

Privately owned casinos allows for ownership by local residents and are free-market oriented. On the other hand, they concentrate wealth in a few individuals, require approval of the Legislature and could contribute to proliferation.

State-owned casinos would provide the most benefit to the greatest number, but they would limit local participation, expand the size of government and put the state into direct involvement in the gambling industry, the Committee said. The combination plan, which the Committee said would require more study to answer legal questions, would create a partnership or alliance between the state and one or more Indian tribes. Under the proposal, the state could contract for construction of a casino and hire an operator. The profits, instead of going to private owners, would be shared by the state and local governments and the Indian tribes. The tribes would not be involved in the financing or operation of the casino but would reap benefits similar to making an investment. State and local governments would gain because they would not be taxing the casino but sharing in the profits. Involvement of the tribes is desirable in order to speed construction of the project without having to wait for legislative action.

The Committee emphasized the need for economic development to occur around casinos, using casinos as the stimulus. The Committee recommended rejection of riverboat casinos, arguing that there would be no secondary development. A riverboat would need only a parking structure on the banks of a river or a lake, which would not stimulate associated economic development.

Land-based casinos, the Committee said, if properly designed and located, would lead to significant ancillary development. "Land-based casinos should not be located in office or residential areas but rather in an area that is entertainment oriented," the Committee said.

Casinos should be designed in a way to encourage foot traffic throughout the area in which the casino is located. "As casino gaming expansion occurs across the country, Michigan will need to distinguish itself from other casino locations if it is to draw tourist revenue. This can best be done by combining gaming with other forms of entertainment," the Committee said.

"The Commission's recommendation of limited expansion of casino gaming means that a very limited number of off-reservation, Indian-owned casinos or licenses for privately owned casinos will be approved. It becomes very important that projects be judged on criteria that measures their competitiveness and their economic viability."

The casinos, the Committee said, should be situated so that they serve to stimulate economic development, to recapture Michigan gaming dollars now flowing out of state and to attract maximum revenue from out-of-state tourists.

Social Impact of Expansion of Gaming in Michigan

Social ills are associated with gambling, and there is no escaping them. They exist currently in Michigan, and they can be expected to increase as gaming facilities increase in number throughout the state.

The Social Implications Committee of the Governor's Blue Ribbon Commission on Gaming found gambling has pervaded everyday life of Americans. One study showed that 95% of all United States citizens have gambled at some point in their lives. The lottery is the most frequently used gambling device with 82% of the people having played the lottery.

Three-fourths of the people (75%) have played slot machines; 74% have visited casinos; 50% have bet on horse and/or dog races; 44% play cards; 34% play bingo, and 26% have bet on sports events.

No income or age group is immune from the social ills associated with gaming.

Gambling has a special appeal to low-income groups, who believe they can hit it rich with the lottery to escape poverty. Poverty-level blacks and Hispanics are twice as likely to play the lottery and spend three times as much money as persons who live in affluent communities. One study cited by the committee showed that residents of affluent communities in the Chicago area spent an average of $76 per person per year on the lottery, while persons in the poorest communities averaged $221 per person per year on the lottery.

Another group for which gambling has great appeal is youth. Addiction to gambling appears to be growing fastest among high school and college age young people with various researchers suggesting that as many as 7% of teenagers may be addicted to gambling. The U.S. News & World Report of June 18, 1990, referred to casino gambling as "...the teen vice of the 90s."

Howard Shaffer, director of the Harvard Medical School Center for Addiction Studies, compared youth gambling addiction with drug addiction in one study reviewed by the Committee. Shaffer said, "We will face in the next decade or so more problems with youth gambling than we'll face with drug use."

Youth gambling appears to grow in direct relation to the opportunity to gamble. Nearly 30,000 underage young people are turned away from Atlantic City casinos each month. Surveys suggest that despite attempts to stop youth gambling, the young people still will find ways to enter casinos. One survey of Atlantic City high schools shows 64% of the students had gambled illegally at local casinos. One-fifth of the students polled in another survey said they had gambled away their weekly allowance and had shoplifted to get money to continue gambling. Thirteen percent identified themselves as "regular players."

Counselors in Atlantic City high schools say they are finding that students are becoming active and compulsive gamblers. Children as young as 14 are skipping school to sneak into casinos.

The National Institute of Mental Health indicates the largest and most recent surge in addicts is among teenagers, many of whom bet sizable amounts on the lottery. The number of teenagers in the United States who have been identified with some sort of problem-gambling behavior has been estimated at 1.3 million.

Clearly, the compulsive gambler (also known as the problem or pathological gambler) represents the biggest problem.

The composite compulsive gambler, according to the committee's report, is a 39-year-old male who placed his first bet at the age of 13. He is generally hardworking and intelligent, a high school graduate who works in a white-collar job and who may be suffering from a major depressive disorder and a tendency toward suicide. He tends to bet on horses (85%), bet on sports events (79%) and play cards (74%). Some 42% of compulsive gamblers visit casinos. Typically, a compulsive gambler will seek treatment when his gambling debts are in the range of $36,000 to $43,000.

Gambling as a means of solving social and economic problems has a checkered history, and the Committee warns it should not be regarded as a "quick fix" for society's problems.

When gaming is introduced to a community, tourism can grow initially but then level off and remain steady. While more visitors may come into a community, existing business do not necessarily fare well. Hotels may profit, but restaurants off the casino premises and other retail business are hurt. The visitors apparently come to gamble and do not frequent near-by business establishments.

Crime can be expected to increase when gambling is introduced into a community. The Committee's study shows that bank robberies increase; prostitution rises slightly; drug-related crimes increase slightly; and drunken driving increases.

Political corruption can be a problem, and white collar crime increases. It is estimated that 40% of all white-collar crime is caused by compulsive gamblers.

Organized crime can be a factor in a gambling environment, even though it may not be directly involved in the casino operation. The Committee cited a study which took an in-depth look at organized crime infiltration of legalized gambling. It shows that direct organized crime participation in the gambling industry actually has decreased but that legalized gambling remains a vehicle for laundering organized crime funds. Organized crime appears to have its foothold in the video-game business, and one study reported that organized crime in West Virginia is reputed to control video-lottery terminals worth $280 million.

Public services provided by local units of government can suffer because funds are not made available to meet the increased demand on such services as streets and highways, water and sewage systems and schools. Families of casino workers tend to rent rather than purchase homes, with the result that there may be more children in school without a corresponding increase in property taxes.

The Committee points out that Aid to Dependent Children has increased each year in some gambling communities and that auto-insurance rates go up because of increased traffic and accidents.

Casinos appear to have only marginal impact on unemployment rates in a community, the Committee pointed out, and the jobs they do provide are mainly in the semi-skilled or unskilled job categories.

Social implications of compulsive gambling include a higher suicide rate among compulsive gamblers and a breakup of the family structure, including a higher divorce rate and increased incidence of spousal-and-child abuse.

Children of compulsive gamblers are at high risk and may suffer from abuse, lack of child support and greater addiction to drugs, alcohol, gambling and over-eating.

Society now tolerates gambling, which has entered everyday lives in many ways including lotteries, bingo, horse-race betting and illegal sports betting. Because of society's toleration of gambling, the Committee suggests that if extension of gambling represents a shift of the moral compass, it is a small one.

Gambling attracts dollars. According to one report, the amount of money spent on gambling in 1992 was greater than the amount of money spent on films, books, amusement and music combined. And part of the reason gambling is gaining greater public acceptance may be the revenue it produces to support government activities.

Gaming has increased significantly all around Michigan, putting the state and its major city in a peculiar situation, the Committee noted. "While there can be little doubt of the negative social impacts that accompany casino gaming, there is a unique situation in Southeastern Michigan with the Windsor Casino so near the Detroit border," the report says.

The Committee pointed out that research and market analysis by Deloitte and Touche and by the Windsor Casino itself suggest that the "casino across the river" is Windsor in name only. "The reality is a Michigan casino that happens to be located under the political jurisdiction of the Province of Ontario," the Committee said. Eighty percent of the customers of the Windsor Casino are American, overwhelmingly from Michigan.

The report declares: "Whatever negative impacts are occurring from the Windsor Casino are occurring in Michigan. At the moment, there are no efforts to assess the extent of these problems in Michigan and no concerted efforts to address them. No resources have been specifically committed to address problems of compulsive gambling in Michigan. No law enforcement resources have been specifically committed to deal with crimes committed by those who steal to support their gambling habits... At least in Southeastern Michigan, it is hard to see how the addition of casino gaming on the Michigan side of the border can do much to increase the negative social impacts of gaming. With Windsor in the process of tripling its gaming space and with no money committed in Michigan to deal with the consequences of gambling addiction, we now have the worst of all worlds."

The committee recommended that 1% of the state government's revenue from gaming be set aside in a fund that is earmarked for dealing with the problems of gambling addiction. The money should be used to design and administer programs to deal with problem gamblers and gambling addiction. The programs should have a well-publicized "hot line" to make them accessible to gamblers.

"It is our belief that if gaming is approved in Detroit, we can address some of the negative social impacts by dedicating funds for gambling addiction programs," the Committee said.

Impact of Expansion of Gaming on Laws & Regulation

A concentration of money and people will result from expanded casino gaming in Michigan, causing increased crime and posing serious regulatory problems. But the Legal and Regulatory Committee of the Governor's Blue Ribbon Commission on Gaming suggests that "preparedness" is the key to reducing the problems associated with expanded gaming.

Besides the increase in crime in general, the Committee said, there would be the potential for more violent crime. White collar crimes will increase, especially inside the casinos where bad checks, credit-card fraud, counterfeiting and similar white collar crimes can be expected.

People will be attracted to casinos, and more people equate to more crime.

Expansion of gaming in Michigan is likely to bring a myriad of problems, including more juvenile crime, a rise in the number of homeless near casinos and zoning issues such as preventing undesirable businesses from springing up around casinos.

"The key to minimize the growth of crime attendant with the establishment of casinos is preparedness and obtaining funds 'up front' from the casinos for additional police officers, police equipment, etc.," the Committee said in its report to the Commission.

A report to the Committee by Jim Harrington, a retired FBI agent who operates an investigative service business, pointed out that most of the crimes which cause a surge in a community's crime index when gaming is introduced are crimes committed on casino property. The most prevalent crime is larceny from a person. His report emphasized the need for planning in preparation of casino gaming.

Harrington interviewed law enforcement officials and members of gaming commissions in Illinois, Indiana, Michigan, Mississippi, Missouri and New Jersey. Police officials in Windsor, Ontario, Canada, also were contacted. The officials said crime was not a major problem and had leveled off after manpower was increased and law enforcement officials gained a better understanding of the crime problems related to gaming.

Gaming brought in needed revenue and created jobs but did not prove to be a catalyst for economic development, the report states. "Despite this factor, most of those interviewed believed gaming has brought more pluses than minuses to their area," the report says.

The Committee also took note of comments by the state's attorney for Lawrence County in South Dakota who cited the problem of compulsive gamblers who enter the criminal justice system and cannot pay for addiction-recovery programs. He said, "They have generally exhausted all of their financial resources. That's often why they have resorted to some type of criminal activity to continue their compulsive behavior. On a local, state and national level, we need to promote treatment options for the addicted gambler just as we have for the chemically dependent. To pay for these costly programs, we should promote the concept that a percentage of all gaming taxes should be earmarked for addiction-treatment programs."

The concept of earmarking funds for treatment also was recommended by the Social Implications Committee and was included in the Commission's recommendations to the Governor.

Currently, the only legal way to expand gaming is under the federal Indian Gaming Regulatory Act of 1988. Expansion requires a compact between the Indian Tribes and the state, which must receive the approval of the governor.

For off-reservation, Indian-owned gaming casinos, the Committee urged more aggressive negotiations on points within the compacts, including:

• Greater money return to the state and local governments. Stronger state-level regulation and enforcement.
• Requiring state and local police collaboration on crimes that cross jurisdictional lines.
• Criminal reporting and intensive background investigations.
• Audits, accounting and retention of records.
• Oversight of closed-circuit television systems for monitoring such activities as movement of cash.
• Requiring casinos to pay the cost of regulatory and enforcement functions.

If privately owned gaming is legalized in Michigan, the state should, establish a state regulatory body (Michigan State Gaming Board) to provide the needed regulation of the casino-gambling industry. Appropriate points raised in regard to aggressive negotiations of compacts should be, applied to privately owned casinos.

Minority Report

The following minority report was submitted by two members of the commission.

A minority of the Blue Ribbon Commission disagrees with the majority consensus in their recommendations to the Governor regarding the expansion of casino gambling in the state.

We recognize fully that legalized gambling, including the state lottery, horse racing, and bingo, exists in Michigan. We do not believe a proliferation of gambling will be beneficial to the state in the long run and will not significantly add to the state's economy.

We believe it will be difficult to control the proliferation of gambling if the approval is given to expanded off-reservation, Indian-style casino gambling, not to mention land based.

The Deloitte & Touche recommendations should be viewed in light of the fact that the very accounting firm presenting the study was contracted by the National Indian Gaming Association to prepare a study "to gain public and congressional support for the expansion of Indian gaming." (Detroit News, January 29, 1995)

The firm of Deloitte & Touche is one of the primary firms used by pro-casino interests to advance casino gambling nationwide. Another example of hiring a fox to guard a hen house! We therefore challenge Deloitte & Touche's recommendations as self-serving and without factual basis.

The economic costs of gambling to the state was bypassed with the expressed explanation that "this was not within the purview of our study." In other words, economic gain must not take into consideration economic loss.

Further, we believe the report is flawed. For example, the expectation that a 100% recovery of gambling revenues being spent in Windsor could be expected to return to Detroit casinos is unrealistic and without any basis of fact.

Social Impact and Costs

One of the major concerns never addressed is the matter of teen gambling addiction. The far-reaching studies and surveys in Minnesota, Texas, and Washington along with research from academics, the gaming industry, and advocacy groups reveals compelling evidence of gambling addiction among teenagers. In an April 5, 1995, USA Today editorial (p. 8a): "Last year, Americans wagered $400 billion, and some of their kids... perhaps as many as 7%, or 1.3 million... became pathologically hooked. In extreme cases they resorted to theft, drug-dealing, even prostitution to support the habit. Some became desperate... suicide rates twice as high among teens with gambling problems." Without question, there will be an increase in crime in general and as the Committee reported, "there will be the potential for more violent crime. White collar crimes will increase, especially inside the casinos where bad checks, credit card fraud, counterfeiting, and similar white collar crimes can be expected." We can anticipate, according to Detroit's Police Chief in a speech to the Detroit Rotary Club, more spousal and child abuse as a result. This is only the beginning. The effects of compulsive gambling on the family will be devastating. This can be documented in place after place where casino gambling has devastated gambler's families. Not only is the loss of money required to pay for essentials a factor, but family members may be threatened by loan sharks, acquisitions may be repossessed, and evictions will occur.

The New Jersey Casino Control Commission has a budget of $23.5 million; if you include law enforcement costs, the figure jumps to $60 million. This high price tag to protect the public from abuse and corruption would reduce considerably any revenue gains anticipated by state government. Casino promoters dismiss the voices which disagree as "do-gooders" out of touch with economic realities. We believe as a minority on the Commission that Michigan has other economic alternatives and casino gambling is not the "window of opportunity that, if missed, will result in financial loss."

To ask the Governor to move with haste may create far more problems than we can solve. Gambling advocates want us to shut our eyes and worry about the consequences later. This is consistent with the approach of the gambler, but it does not make sound public policy.

In a statewide poll reported in the October 13, 1994, Detroit Free Press, 56% of the people supported the Governor's veto of the Greektown Indian Proposal and a majority of the people oppose the expansion of casinos in urban areas.

As Governor of the State of Michigan, you will speak for all of the citizens of Michigan, not just a few. Casino gambling affects everyone in the State of Michigan, even those residing outside the areas where gambling is currently permitted. While Detroit and Highland Park voters approved advisory votes, voters in Flint, Port Huron, Mt. Clemens, and Port Huron Township voted against casino gambling. On Tuesday, April 25, 1995, voters in Saginaw, by a vote of 5,301 to 3,938 (all but one precinct in), defeated a measure that would have authorized the city council to pursue a plan to open a casino. Opponents in Saginaw maintain, as we do, that casinos will hurt local businesses and will not provide the kind of jobs the city needs.

The issue before the Governor is not a Detroit issue; it is a statewide issue. The effects of the expansion of casino gambling, whether off-reservation Indian gambling or land-based, are long lasting and will haunt our children and plague this state long after we are gone unless we halt the proliferation now.

We call upon you, Governor Engler, to consider every angle. We believe all the registered voters of the State of Michigan have a voice in the expansion of casino gambling beyond its present boundaries. Nationally, statewide referenda have been held in the following states: Florida, Wyoming, Rhode Island, and Colorado where proponents of casino gambling lost. By close margins proponents won in Missouri, South Dakota, and New Mexico. The New Mexico Supreme Court upheld an appeal overturning a court order allowing gambling, and in Arkansas the Court ruled against allowing casino gambling. Despite the million's of dollars the gambling promoters spent and are likely to spend in Michigan, we believe there is no popular demand for expanded casino gambling in Michigan.

Voters in Detroit turned down casino gambling four times. Only the Windsor Casino and a massive pro-casino advertising promotion turned the last election. Even then, only 30% of the registered voters went to the polls and 60% voted yes. Translated into the total Detroit voting citizenry, 18% of the Motor City's registered voters asked for expansion. This is hardly the vast majority proclaimed by Detroit's most vocal pro-casino voices.

We appeal to you, Governor John Engler, to allow the citizens of this great State of Michigan to speak on this issue and having spoken to make your decision.

History of the Commission

To research and respond to the charges made to the Governor's Blue Ribbon Committee on Gaming, as outlined in Executive Order No. 1994-24 and signed by Governor John Engler on September 8, 1994, the Commission held two public hearings and met eight times. Members of the Commission were:

• Robert J. Danhof, retired Chief Judge of the Court of Appeals, Chair
• Victor G. Begg, President, Muslim American Alliance
• Dr. William C. Brooks, Vice President of General Motors Corp., Vice Chair
• Michael Duggan, Deputy Wayne County Executive; designated representative of Wayne County Executive Edward McNamara
• Dr. Maureen A. Fay, President of the University of Detroit Mercy
• Hal N. Helterhoff, Vice President-Corporate Security, Detroit Diesel/Penske Corp
• Rev. Jim Holley, Ph.D., senior pastor, Little Rock Baptist Church, Detroit
• Rev. Dr. William K. Quick, Senior Pastor, Metropolitan United Methodist Church, Detroit; designated representative of Michigan Attorney General Frank J. Kelley
• Patrick Shannon, Chippewa County prosecutor
• Alfred Taubman, Chairman, The Taubman Company, Bloomfield Hills
• Dean Turner, businessman; designated representative of Oakland County Executive L. Brooks Patterson
• Reginald M. Turner, Jr., attorney in the firm of Sachs, Waldman, O'Hare, Helveston, Hodges & Barnes; designated representative of Detroit Mayor Dennis Archer
• Geneva J. Williams, President and CEO, United Community Services of Metropolitan Detroit

The public hearings were held February 22, 1995, in Detroit, and March 3, 1995. in Lansing.

Meetings of the Commission were held September 22, 1994; October 20, 1994; January 12, 1995; February 21, 1995, March 15, 1995, March 23, 1995; March 27, 1995; and April 4,1995.

The Commission created three committees: Economic Impact, Social Implications and Legal and Regulatory, which met at various times to research and report on their assigned tasks.

• The Economic Impact Committee was chaired by A. Alfred Taubman, and its members were Dr. William C. Brooks, Reginald M. Turner, Jr., Reverend Jim Holley and Victor G. Begg. Under the direction of the committee, Deloitte & Touche LLP completed a report on the Economic impacts of Casino Gaming on the State of Michigan.
• The Social Implications Committee was chaired by Dr. Maureen A. Fay, and its members were Michael Duggan, Dean Turner and Geneva J. Williams.
• The Legal and Regulatory Committee was chaired by Hal N. Helterhoff and its members were Reverend Dr. William K. Quick and Patrick Shannon.

At its public hearings, the Commission heard from speakers representing a total of 50 organizations and/or individuals. In addition, the Commission received material and comments in writing from 54 organizations and/or individuals.

Staff assistance was provided by Mark A. Hilpert and Linda Worden, Department of Treasury, and Scott L. Matteson and Denise Cushion, Bureau of State Lottery. Matthew F. Leitman of the law firm of Miro, Miro & Weiner served as staff counsel to the Economic Impact Committee.

Contractual services were provided by Deloitte & Touche LLP, economic study; Edward M. Gramlich, director of the University of Michigan Institute of Public Policy Studies, research assistance; James S. Harrington, research and interview services, and Robert H. Longstaff, editorial services.