Voters in four cities will decide in November's election whether to allow casinos in the Old Dominion
Danville once stood tall as a driver of Virginia’s economy, an epicenter both for textile production at Dan River Mills and for tobacco when it was still the commonwealth’s golden leaf.
Both industries came crashing down in the 2000s. A rising tide of public sentiment led to tobacco’s decline, and the federal quota system that guaranteed crop prices ended in 2005. Globalization moved textile production to other countries with lower labor costs, and the mills closed in 2007.
“At one point, Dan River Mills employed approximately 14,000 people just within the city limits of Danville,” says Corrie Teague Bobe, Danville’s economic development director. “You can imagine the transition that our community went through when the mills closed.”
Danville struggled with relatively high unemployment for most of the aughts, spiking at 15% during the 2007-09 Great Recession. The city’s unemployment rate rose again to 16% during this year’s pandemic.
But this November, Danville voters are casting ballots on an economic prospect that could bring approximately 900 construction jobs and 1,300 permanent jobs — all without any traditional economic development incentives. No tax exemptions. No land giveaways. No forgivable performance “loans.”
Instead, Caesars Entertainment Inc. proposes to pay the city more than $20 million for the opportunity to bring a $400 million casino and accompanying resort to Danville. That includes a flat $15 million payment and $5 million for the building site. The company also will pay property and meals taxes, as well as sliding scale taxes on its net gaming revenue. According to a December 2019 study by the state’s Joint Legislative Audit and Review Commission (JLARC), the proposed Danville casino would generate at least $190 million in direct revenue and $51 million in tax revenue annually by 2025.
Danville is one of four Virginia cities where voters this month will roll the dice and decide whether to allow casino gaming. On the Virginia-Tennessee state line, Bristol hopes the proposed Hard Rock Bristol Hotel and Casino will help replace decades of jobs lost in coal and other industries. Norfolk and Portsmouth may bring two casino resorts to an already burgeoning Hampton Roads region.
With four casinos being decided in local referendums in those cities, it’s highly likely that the Nov. 3 general election will result in at least one casino — and possibly all four — receiving a green light to operate in the commonwealth, with the first Virginia casino potentially welcoming guests as soon as 2023.
The Virginia General Assembly enabled the referendums through legislation passed during its 2020 session that authorizes the economically challenged cities of Bristol, Danville, Norfolk, Portsmouth and Richmond to each designate a casino operator and let voters decide on whether to allow that operator to build a casino in their city. (Richmond isn’t holding a referendum this year but may do so in 2021.) Casino developers must invest at least $300 million into each project.
If approved, casinos in all five cities could be expected collectively to create about 7,600 jobs and bring in nearly $1 billion in total annual revenues, generating between $262 million and $367 million in net annual state tax revenue, according to projections by JLARC.
In comparison, the Virginia Lottery brought in $595 million in profit and $2.15 billion in gross revenue during its most recent fiscal year. JLARC estimates that competition from the casinos would reduce Virginia Lottery proceeds by $30 million per year.
Not everyone is all in
The prospect of legalized casino gaming in the Old Dominion has attracted three of the industry’s largest players — Caesars in Danville, Hard Rock International Inc. in Bristol and Rush Street Gaming LLC in Portsmouth. Norfolk is partnering with the Pamunkey Indian Tribe, the first of seven Native American tribes in Virginia to be federally recognized.
All four casino projects on ballots this November bring a similar set of conditions: They’re not asking for tax breaks or economic incentives, and they’ll share their revenue with the state and their respective cities. Each casino’s first $200 million in revenue will be taxed at 18%, with 12% going to the state and 6% to the host cities. The combined tax rate increases to 23% for the next $200 million, and 30% for revenue exceeding $400 million. The state’s share is intended to go toward construction and maintenance of public schools.
There’s no guarantee that voters will approve any of the casinos, however, especially in this topsy-turvy year with a global pandemic and chaotic presidential election.
“This is an election season like none other,” says Jay T. Smith, a partner at Richmond’s Capital Results, who is a spokesperson for the Pamunkey tribe.
Casino boosters have invested heavily to offset that uncertainty, though. Political action committees associated with the four casinos raised $765,656 and had $527,565 on hand as of Aug. 31, according to the Virginia Public Access Project.
Opposition has been fragmented but persistent. Critics of the Norfolk project have complained about the process, details of the deal with the Pamunkey tribe and the location of the project. Jackie Glass, who first became politically involved with an unsuccessful 2018 run for the city school board, says the lack of a competitive bidding process and a less-than-transparent process for establishing the casino should give voters pause.
“If you don’t like the deal, vote no,” Glass says. “If you don’t like the process, vote no. And if you don’t like the location, vote no. That doesn’t mean no to gaming in Norfolk; it’s a no to the process, the deal and the location.”
Glass is one of the organizers of a citizens group opposed to the casino. The group has been receiving free assistance from the Washington, D.C., office of Florida-based public relations firm Red Banyan. Glass says she wasn’t aware who was funding the PR company’s work, but a report by WAVY 10 revealed that it’s being funded by a rival casino developer, Baltimore-based Cordish Co. The operator of Norfolk’s Waterside District, Cordish threatened the city with legal action early in 2020, claiming Cordish’s existing agreements with the city should have given it priority to build a casino.
In Danville, the only locality that used a competitive bidding process to select its preferred casino operator, local opponents to the casino are concerned about the potential for traffic jams and crime. (The 2019 JLARC report found that crimes such as credit card theft and burglary tend to increase “in the immediate vicinity of casinos, due primarily to the increase in visitors to an area,” similar to increases associated with other large venues such as malls or sports stadiums.)
“I think it’s a bad location,” says Terry McPeak Jr., who lives near the proposed casino site. “You’re putting it right in the middle of a middle-class community. I wish they’d have put it out on the bypass, with highway infrastructure right there.”
If any of the four referendums fail, those cities can go back to the General Assembly and request another chance during the 2021 legislative session. Richmond, which is taking more time to research the idea and choose a preferred casino operator, may hold a referendum next year as well. (The Pamunkey tribe has also proposed building a casino in
If this November’s local referendums succeed, the casino operators will formally submit applications to the Virginia Lottery, which will be responsible for licensing and regulating the casinos. (The Virginia Lottery also regulates the newly legalized sports-betting industry in
No strings attached?
Should Danville voters approve the deal with Caesars Entertainment, the casino’s 1,300 jobs would immediately make it one of the city’s top five employers. (The city’s largest employer is Goodyear Tire & Rubber Co., which employs about 2,300 people.)
“Based on what we’ve seen and what we expect to happen, here are the benefits that the community can expect to see,” says former Caesars Entertainment CEO Tony Rodio, who now serves as strategic adviser to Caesars Entertainment CEO Tom Reeg. “First of all, 900 to 1,000 construction jobs over the course of two years. We think the business will operate with approximately 1,300 jobs. The average salary will be $50,000, and the lowest will be around $15 an hour. There’s going to be tax revenue generated for the cityof Danville, as well as for the state
According to JLARC, casino jobs in Virginia are expected to pay a median wage of $33,086, with about 19% of the jobs comprised of managerial and supervisory positions paying more
Casino boosters emphasize that the multiple amenities that come with the project — which includes 300 hotel rooms; multiple restaurants and bars; 35,000 square feet of conference space; a 2,500-seat entertainment venue; a spa; and a casino with slot machines, table games, a poker room and a sports book — will attract visitors in such volume that there will be ancillary benefits to other regional businesses.
“There will be dozens or hundreds of local businesses who will benefit,” Rodio says. “Whenever we can source something from a local supplier, we do that first. There will be other local businesses that we don’t formally partner with, but they get the benefit of the additional traffic: restaurateurs, gas stations, other hotels.”
Casino backers in the other three cities promise similarly big benefits, with no strings attached.
“We’re one of those industries that shows up and says, ‘We’re going to create a lot of great jobs and great pay with tips and benefits, and on top of that, we’re not asking for anything. In fact, what can we pay you?’” says Jacob Oberman, senior vice president of development for Rush Street Gaming, the partner for Portsmouth.
Rush Street Gaming has opened six casinos since it started in the late ’90s, and it still operates four in Chicago, Philadelphia, Pittsburgh and upstate New York. Oberman says the company is excited about the opportunity in Portsmouth.
“These projects don’t come along very often,” Oberman says. “Virginia is such an important market. Not only is this a strong, economically growing area, but it also has access to attract visitation from North Carolina and South Carolina.”
Much of that enthusiasm stems from the proposed site: 52 acres just off Interstate 264, adjacent to Tidewater Community College.
“We really think it’s going to be a draw because of its central location in Hampton Roads, its accessibility to workforce and training opportunities through Tidewater Community College and the way it can become entrenched in the community,” says Robert D. Moore, Portsmouth’s economic development director.
The Portsmouth casino could be expected to generate $167 million in annual revenue, more than 1,380 permanent jobs and $45 million in annual gaming taxes, according to JLARC.
Moore says that the relationships that Rush Street Gaming has built with other cities gave Portsmouth confidence in moving forward with this project. Additionally, Rush Street has pledged to solicit 5% of the equity or $5 million, whichever is greater, from local minority-owned businesses or private investors who are minorities and accredited investors.
“Rush Street Gaming has a track record of giving back to the community, being a part of the community, and being engaged in the community, and not just a business here,” Moore says. “That’s a big thing for us. We want a true partner. We want someone who’s here for the long haul.”
‘We have to find something new’
The Pamunkey casino planned for Norfolk also aims to raise the naval and port city’s profile as a premier destination for East Coast vacationers.
“Having this allows us to compete with Pittsburgh and Nashville and Cincinnati. We’re going to get more conventions and really enhance our tourism attraction [ability],” says Smith, the Pamunkey spokesperson. “We see our project as being an economic boost to [Norfolk] and really the region. People don’t just go to a casino for three days and never leave the walls of the resort. They get out, they explore.”
The Pamunkey tribe is partnering with Tennessee billionaire Jon Yarbrough to build the $500 million casino, which is projected to attract an additional 6.2 million visitors to Norfolk each year, with a $754 million annual economic impact on the city, according to the tribe. All without any taxpayer-funded incentives.
The Norfolk casino would create about 1,500 permanent jobs and generate $185 million in annual revenue, with $50 million in annual taxes, according to JLARC projections.
“This is a $500 million investment with not a single penny of government subsidy or a tax break,” Smith says.
That proposition is attractive in most places — especially so in Bristol, a city on the Tennessee border that has been hurt by the coal industry’s downturn.
“I don’t see coal coming back,” says Jim McGlothlin, a longtime coal magnate and local businessman who is leading the casino effort in Bristol. “It means we have to find something new.”
Recent years have seen the closure of major employers such as Bristol Compressors Inc. The city’s experiment investing in destination retail at The Falls struggled to attract big-name tenants and left it mired in debt. Bristol’s tourism economy, built on its revitalized downtown and the Birthplace of Country Music Museum, has been a bright spot.
McGlothlin, CEO of The United Co., and his friend and business partner Clyde Stacy, president of Par Ventures LLC, plan to build on that momentum by partnering with Hard Rock International on the Bristol casino and destination resort. Hard Rock says the $400 million development would bring more than 2,000 jobs and between $16 million and $21 million in annual tax revenues for Bristol. (JLARC estimates the Bristol casino would create at least 1,070 jobs and generate about $130 million in annual revenue and $35 million in annual taxes.)
“As a destination-scale resort, the project will be a catalyst for economic development growth across the region, in Southwest Virginia and the Tri-Cities,” says Andy Poarch, spokesperson for the proposed casino. “Communities and residents on both sides of the border will benefit from the tourism dollars that 4 million annual visitors will spend with local entertainment, hospitality, retail and dining businesses in Bristol and across the region.”
Looming over all four casino proposals has been the coronavirus pandemic, which has devastated the tourism, lodging and restaurant industries. From July 2019 to July 2020, Virginia’s leisure and hospitality sector lost 91,300 jobs — more than a fifth of its workforce.
The gaming industry wasn’t spared the effects of the pandemic. Commercial gaming revenues fell 79% in the second quarter of 2020 compared to the year before, according to the American Gaming Association. By late September, 92 of the United States’ 993 casinos remained closed — a little less than a tenth. The rest had reopened with measures designed to maintain hygiene and social distancing.
The casino operators in Virginia say that the pandemic likely won’t factor heavily into their plans, since they’re eyeing buildouts that will extend at least a few years into the future — at which point COVID-19 will presumably be under control.
Says Rodio: “We look at this from a long-term perspective.”