Inside one county’s big casino bet: economic boom or Atlantic City bust?

When Toya Mitchell first learned MGM Resorts International had won a contract to build a new casino down the street from her house in Prince George’s County, Maryland, she...

When Toya Mitchell first learned MGM Resorts International had won a contract to build a new casino down the street from her house in Prince George’s County, Maryland, she was cautiously optimistic. Mitchell, the owner of Lord & Mitchell, a small, women-run business specializing in customized promotional and printed materials, was excited about the possible jobs and business opportunities the casino could bring, not to mention the much-needed boost to the county’s economy.

But she was also wary. Casino developers aren’t exactly known for their community spirit, and cities that have authorized casinos in the hope of reviving their economy in the past have not fared well. Atlantic City’s storied and troubled past is probably the best example of this – despite rigorous economic investment resulting in a strip of glitzy casinos and hotels, the local community suffered long and hard – high taxes, failing infrastructure the loss of tens of thousands of jobs – before it all came crumbling down.

“The big unknown when any company of this size and scope enters our community is what the overall effect would be on our lifestyle,” Mitchell said.

Mitchell is now one of MGM’s closest and longest serving community partners. She’s worked with the company on everything from branded sportswear to logoed umbrellas since MGM was first awarded the license to build a $1.4bn luxury casino resort on the banks of the Potomac River, a 10-minute drive from Washington DC, in December 2013.

MGM National Harbor opened last December to much fanfare: swanky hotel suites, a handful of upscale bars and restaurants, a live-music indoor venue and an indoor shopping strip featuring brands like Sarah Jessica Parker’s SJP shoe shop.

But the real success story is the company’s relationship with the local county.

In 2014, MGM entered into what’s known as a Community Benefits Agreement (CBA) with Prince George’s County – a list of socioeconomic benefits that the company had to adhere to between 2014 and its grand opening. This included ensuring that at least 40% new hires were county residents; creating at least 3,800 new jobs; providing opportunities in construction and local businesses; and contributing at least $1m to local charities.

While gaming licensees in Maryland are required to negotiate a CBA with the host county to mitigate future impacts a new resort would have on local infrastructure, MGM ended up exceeding most of the CBA’s requirements: more than 4,000 new jobs were created in the county; 48% of new hires at the time of opening were county residents; 27% of total labor hours to develop the resort were performed by Prince George’s County residents; and more than $1m was donated to charitable organizations in the local community.

During construction, the project hired more than 6,000 men and women and awarded construction contracts to 167 Minority Business Enterprises (MBE), representing more than $323m in spending. In addition, nearly 80 county-based businesses were involved in the project, representing a spend of $214.3m.

Outside of the CBA, the company also launched public infrastructure improvements, fixing local roads and initiating a new bus system to meet the expected demand for the casino, which cost in excess of $90m using a combination of MGM and National Harbor funds. MGM also commissioned local artists to provide much of the art inside the resort.

According to the Prince George’s County local government office, MGM National Harbor is projected to bring in between $40-$50m in yearly revenue for the county.

“With five other casinos in Maryland, we knew our residents were traveling north, so we knew our citizens would love a casino,” said David Iannucci, assistant deputy to the chief administrative officer for the county. “We wanted to capture some of that for ourselves rather than having them leave.”

At a celebration honoring the 1000th member of the construction workforce of Prince George’s County during construction of MGM National Harbor. Photograph: MGM

At first glance, Prince George’s County doesn’t present itself as struggling. The county, in a jurisdiction of 900,000 predominantly African American residents, is in the top 4% of wealthy counties in the US. It’s home to the University of Maryland and the NASA Goddard Space Center. But the recession hit the county hard – according to Iannucci, the county had a much harder time recovering than surrounding counties. New housing construction rates in the county dropped off and high crime levels became a problem; in June 2011, unemployment rose to 7.9%, the highest the county had ever experienced in a 21-year period.

But the county’s location – at the crossroads between “the DMV” (DC, Maryland and Virginia) – has made it desirable to investors and property developers.

“It’s one of maybe four or five sites in the Washington region that’s located on a very disinvested waterfront location,” said Uwe Brandes, faculty director at Georgetown University’s School of Continuing Studies’ Urban & Regional Planning Program. “More and more, people are engaging our waterfront and rivers, and that’s exciting – there’s a new sense of civic space, destinations, people are coming together, new economies being created, new opportunities.”

Unemployment in Prince George’s County is currently at 4.3%, slightly lower than the national average of 4.8%, and crime rates are steadily falling. “We’ve added 7,000 new jobs in last two years, not counting MGM,” Iannuci said. “We’ve also worked hard on schools and public safety.”

What makes the partnership between MGM and Prince George’s County unique is that there was no public money involved outside of the normal permit applications required in any county project (which MGM covered in a permit application fee that was determined by the cost and size of the project).

The county wasn’t responsible for granting MGM the casino license – that was done at the state level – so technically, MGM didn’t owe the county anything. Which leads one to question what, exactly, is in it for MGM.

“When you’re talking about bringing gaming into an area, one of the things that makes us more appealing [as a developer] is that we are interested in giving back,” said Danielle White, the regional vice president of community engagement for MGM. “Exceeding the CBA wasn’t something that we were required to do – but we did it anyway because we wanted to be a good neighbor. When you think about it, this is what’s going to encourage people to want to work with us.”

Prince Georges County’s location – at the crossroads between “the DMV” (DC, Maryland and Virginia) – has made it desirable to investors and property developers. Photograph: MGM

There’s another play here, too: MGM is interested in attracting millennials to lifelong careers at the company. “Young people now always look for socially minded organizations when thinking of the future,” White said.

Despite the success of the CBA, Brandes cautioned it’s still too early to measure the long term benefit of MGM National Harbor on Prince George’s County. After construction, the CBA also covers operational issues after the resort is up and running, which means it’s impossible to determine how the casino will perform relative to its operational obligations until it has been open for at least a year.

There’s also the issue of the social and health costs of legal gambling. Attracting economic investment is one thing, but what will the casino’s societal impact be if its clientele is made up mostly of retirees who come to gamble away their social security checks?

One argument is that casinos hardly encourage nearby economic development because they are designed in such a way as to keep people inside and gambling for as long as possible. A 2014 report from the Institute for American Values quoted a same-year study that found people who live within 10 miles of a casino have twice the rate of pathological and problem gambling as those who do not.

What is encouraging is that MGM says it has no plans to stop its community outreach now that the National Harbor casino is open. According to White, the company plans to issue several community grants in 2018 to Prince George’s County nonprofits aligned with public education, health and wellness or sustainability, as well as continue a volunteer program that allows MGM National Harbor employees to volunteer in community projects around the county. (MGM said the total figure for this is yet to be determined.)

For Mitchell at least, MGM’s presence represents a big step forward for the future of the county. “There’s lots of excitement [about] extensive economic development, improvements to our infrastructure, and a booming spirit of entrepreneurship within the county,” she said.

Source: The Guardian