Steven Pearlstein
Steven Pearlstein
Columnist

Steven Pearlstein: And now, in local news . . .

I suspect Gov. Martin O’Malley spoke for most Marylanders last week when he explained why he was backing legislation to expand casino gambling in the state — for more than a decade, a divisive political issue that just wouldn’t go away.

“For crying out loud, aren’t we all tired of this by now?” asked the governor.

Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.

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I enjoy the occasional evening at the blackjack table more than most, but over the years I’ve developed a healthy skepticism when the gaming industry or politicians argue that gambling would be a big new source of revenue for the state, or that it would spur economic development or — in the case of Maryland — that it would save the horse-racing industry. The reality rarely lives up to the promise.

For starters, the revenue and economic projections done by the same handful of “independent” consultants routinely used by the industry invariably ignore the possibility that new competition will come on line, dividing a limited market even further and ensuring that nobody makes money. Anyone who doubts the industry’s tendency toward over-optimism and over-capacity need only look to the sorry case of Atlantic City or the reliable flood of bankruptcy filings by casino properties and operators any time the economy takes a downturn.

The studies also ignore that the money people spend (lose) on gambling isn’t spent or invested in some other way that would also generate sales or income tax revenue for the state. As in the case of Maryland, the assumption is often that the new revenue will come either from people in adjoining states or from Marylanders who are now going elsewhere to gamble. So Maryland increases the number of casinos, encouraging Delaware and Pennsylvania to do the same, forcing Maryland to up the ante even more. And it is precisely such a casino arms race that the gambling industry is thrilled to instigate.

Another rationale for this year’s legislation is that it will help provide a needed boost to the struggling development at National Harbor in Prince George’s County, which is expected to win the competition for the new license. A new casino/hotel, on the northern edge of the property next to the Beltway, will be operated by MGM Grand.

I’m a big fan of National Harbor and its developer, Milt Peterson. Over the years, I also have admired Peterson for resisting entreaties from state and county politicians to include a casino as part of the project.

These days, however, it’s no secret in the real estate world that National Harbor isn’t exactly performing according to expectations. Long delays caused by the county’s permitting process meant that by the time the project finally came on line, the real estate bubble had burst and Peterson had missed the top of the cycle. A long-planned investment by Disney in a theme park fell through, while new requirements put in by the Obama administration for Metro access to government offices dashed any hopes that National Harbor could pick up federal tenants.

Given that history, it’s hardly surprising that Peterson, who has personally invested hundreds of millions of dollars in National Harbor, has now agreed to include a casino hotel in the project.

The danger, it seems to me, is that once the novelty wears off and revenues and attendance begin to wane, the casino won’t add much to the overall success of the development. I seriously doubt those seniors bused in from Richmond for an exciting day playing the slot machines will be taking river cruises or spending their winnings at National Harbor’s restaurants and shops. Nor do I imagine there will be large numbers of high rollers from Dallas and Dubai flying in for a few days of high-stakes Poker on the Potomac. The potential really comes from Washington’s convention and meeting visitors — the tourist crowd is too family-oriented — along with Washington’s well-heeled locals on an evening out. But that’s a more limited audience than Peterson is counting on, as well as one that would respond better to a high-toned facility featuring table games and nightclub entertainment than row upon row of noisy, flashing slot machines.

As it turns out, National Harbor’s strongest draw may be as a residential development for empty-nesters and childless couples who appreciate the waterfront ambience, the walkable village feel and the proximity to the District and the Beltway — many of the same attributes that have made Old Town Alexandria so sought-after and successful. The townhouses at National Harbor quickly sold out. Going forward, Peterson’s challenge will be to ensure that the presence of casino gambling — or for that matter, any of its tourist components — do not overwhelm the project to the point that they undermine the potential for a vibrant community in which Washingtonians live and work.

We know gambling can work economically in destination resorts given over to gambling (Las Vegas, yes, but alas not Atlantic City). Or it can work on Indian reservations that are far away from other casinos but close enough to urban areas. There are precious few examples of casinos anchoring, or even co-existing with, successful mixed-used developments.

***

As a recent regular (reverse) commuter on Interstate-66, I have developed a newfound appreciation for the inconvenience and economic damage that the transportation nazis in Arlington have imposed on the rest of the region.

For two decades these zealots have successfully blocked any highway construction in the county that might result in even one additional single-occupancy vehicle on the road. Even the investment of billions of dollars in the extension of Metro along the Dulles corridor has not shaken their self-righteous determination to impose their values and force every last one of us to move closer to where we work or abandon our single-occupancy vehicles in favor of buses, carpools and bicycles.

One of their favorite tactics is to file a lawsuit to prevent even a shovel of earth to be turned unless a full-blown environmental impact study has been done, knowing that the study will significantly delay any project, increase its costs and provide the basis for further lawsuits alleging that said study was faulty and must be done over. This tactic comes straight out of the NIMBY handbook. And it was just such a suit that forced Virginia to abandon plans for an additional toll lane on Interstate-95 on the heavily-traveled segment between the Beltway and the Pentagon.

Last month, however, in passing the new highway reauthorization bill, Congress included a provision directing the secretary of transportation to provide a categorical exclusion from the environmental impact review for any highway project that is done within an existing right-of-way. That would surely include the disputed segment of I-95 and possibly even I-66 through its many Arlington bottlenecks.

Sean Connaughton, the state’s transportation secretary, warned against getting too excited by the new provision.

“Given so many worthwhile non-Arlington projects in Northern Virginia, we are using our limited resources to fund them,” he told me in an e-mail.

Translation: Even for Republicans, life’s too short to spend it fighting the Arlington zealots.

 
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