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New Vice City

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from the magazine

New Vice City

Gotham’s post-pandemic economic-development strategy: gambling and weed Autumn 2022
New York
Economy, finance, and budgets

In August, New York mayor Eric Adams stood before a banner festooned with cannabis-leaf emblems, making what he billed as a major announcement. “Today, we light up our economy,” enthused the mayor. Referring to recreational pot sales, he continued: “The regulated adult-use cannabis industry is a once-in-a-generation opportunity. . . . Cannabis NYC will plant the seeds for the economy of tomorrow.” Standing with Adams, John Durso of the Retail, Wholesale and Department Store Union promised “good, union jobs.” Jeffrey Garcia of the Latino Cannabis Association predicted “one of the largest generators of wealth in New York at least for the next two decades.” Bertha Lewis of the Black Institute affirmed that “cannabis is an industry and not just a nickel bag.” Deputy mayor for economic development Maria Torres-Springer promised “hundreds of millions in revenue” for the city.

Welcome to New York’s post-pandemic economic-development policy: the promotion of vice. In this New York, vice isn’t something to tolerate, operating on the edges of the law, in a black market in a dense, wealthy city; it’s a premier growth industry.

And pot isn’t the only vice that New York is encouraging. Gotham is also eagerly courting multiple full-service casinos. It’s a path that struggling and far weaker American cities—including Atlantic City, New Orleans, and Detroit—took out of sheer economic desperation, born of policy failure. Adams is unabashedly cheering the expansion of “gaming,” as he calls it, to “create at least 16,000 good-paying jobs.”

New York’s new emphasis on pot and poker—even as the city ignores the day-to-day quality-of-life concerns of its core high-paying industries in finance and business and its highest-earning individual taxpayers—comes despite decades’ worth of evidence that vice-oriented cities don’t thrive.

The public sector’s embrace of vice as a moneymaker started more than 50 years ago. In 1963, New Hampshire faced a problem: government spending was rising, as war veterans sent their baby-boomer kids to public school, but voters were stubbornly tax-averse. Democratic lawmaker Laurence Pickett proposed an alternative: a state lottery. Residents and visitors could buy tickets for a regular, state-run sweepstakes, tied to a horse race. Religious groups were aghast. As one bishop put it: “Just think what it will do to the minds of young people when they realize their parents would rather indulge in gambling than meet their obligations in an honorable way.”

Arguments backing New Hampshire’s first-in-the-nation state lottery, though, will sound familiar to anyone following today’s push for marijuana and gambling expansions. People were already playing illegal, local “numbers games,” and the profits were going to the underworld, lottery proponents observed. Since people would engage in this activity anyway, why not eliminate corruption, via state administration? And the states could put the profits toward a good cause: education. Despite religious opposition, New Hampshire residents approved the effort, by four to one.

New Hampshire’s idea gained national traction, as many other state governments sought to defray the cost of more spending without driving taxes up too high. Just a few years later, New York became the second lottery state. In 1967, supporters promised half a billion dollars a year for education, through the proceeds of a once-a-month lottery drawing. Again, opponents fretted about the moral implications. “We are confessing we have reached a point in this state where we cannot provide for our needs by legitimate methods,” said State Senator Samuel Greenberg of Brooklyn. “It means we are bankrupt.” Across the aisle, Republican senator Thomas Laverne, representing Rochester, charged lottery backers with cynically “beclouding” the issue by tying it to education, “something everyone cares about.” The beclouding worked. Voters approved the necessary amendment to create the lottery as an exception to the state’s constitutional prohibition against gambling.

The lottery performed as advertised. It raised money for schools, without, apparently, debasing the populace, as opponents feared. The streets were not suddenly filled with broke gamblers. Demand bred supply, and vice versa. By the early 1980s, New York’s lottery system, far from a once-a-month contest, offered a choice of different weekly games, all heavily marketed to working-class and middle-class players with the promise of life-changing sudden riches: “All you need is a dollar and a dream.”

The lotteries did lure a small percentage of people into compulsive gambling; stories emerged of players who spent their life savings, or their families’ savings, on tens of thousands of dollars’ worth of tickets. But these aberrations could be chalked up to personal failings—they were the exception, not the rule.

Even fierce critics overlooked how quickly and deeply the lottery would entrench itself into everyday culture. The lottery didn’t instantly turn New York into a betting-mad mecca, but over time, it normalized low-grade, habitual gambling as respectable—even something good to do, in support of a good cause. Kids helped their grandparents pick out numbers and eagerly watched televised drawings. New York’s example spurred on neighboring states, and the concept spread nationwide. If a state didn’t create a government lottery, it would lose the tax revenue to its neighbors.

No one ever claimed that lottery betting would create tens of thousands of private-sector jobs. These promises, tied to full-service casinos, wouldn’t be heard until the mid-1970s, when states and cities outside Nevada began turning to casino gambling as a savior of public coffers and private-sector employment numbers. Over the past four decades, casino gambling has moved from being considered an undesirable underworld-linked activity to a key tenet of economic development for distressed states and cities.

“Even fierce critics overlooked how quickly and deeply the lottery would entrench itself into everyday culture.”

Desperation was behind these shifts, as it became clear in some regions of the country that abandoned resort towns and deindustrialized cities weren’t going to bounce back. New Jersey was an early adopter. In 1974, with Jersey residents already accustomed to everyday gambling via their own state lottery (launched four years earlier), Atlantic City officials pitched state voters on a proposal to legalize broader gambling, claiming that it would boost tourism and jobs. Voters defeated the proposal that year, but Atlantic City residents grew increasingly anguished over losing out on 20,000 promised jobs. “I pray to God for it,” said gas-station owner Irving Cohen. “If we don’t get it this time, you might as well . . . put up a sign, ghost town.” A hotel worker professed, “I believe, down deep, that casino gambling will give me a full week’s work, all year round.” State voters took pity and, reassured by state officials that gambling would be confined to Atlantic City, approved the proposal in 1976.

Atlantic City got its casinos—but not the promised long-term economic benefits. In 1990, after slightly more than a decade of casino operations, and with the industry at its local peak, casinos employed 46,700 people. By 2019, with casino after casino shuttering—the marquee 39-story Trump building literally fell, to controlled implosion, in 2021—the city claimed just 24,600 such positions, a drop of nearly half. Atlantic City had 3 percent fewer private-sector jobs overall in 2019 than in 1990, suggesting, too, that legalized gambling had no broader positive effect on prosperity. Casinos also brought with them the negative effects of gambling—not just addiction but public corruption. “More than 50 local officials and government employees here have bought or sold property for use by gambling casinos, have invested in casino stock or have formed other financial links with the gambling industry that is reshaping this resort city,” the New York Times estimated in the industry’s fledgling years.

These dismal results failed to deter other down-on-their-luck cities. New Orleans, reeling from middle-class population flight and the loss of port-related jobs, opened its downtown Harrah’s casino in 1999. Harrah’s swiftly went bankrupt and tried to get out of its promise to maintain a payroll of 2,400 people, winning major revenue concessions from the state and city to keep people employed. “The mystery is why anyone would keep operating a casino that loses money,” veteran Times-Picayune columnist James Gill cracked in 2001. Jobs in New Orleans’s “amusement, gambling, and recreation industries” fell from a peak of 11,200 in 2000, the year after Harrah’s opened, to 6,900 in 2019.

The bright-orange casino, just a block from the Mississippi River and the French Quarter, has hardly been a “job multiplier,” in economic parlance. Overall employment in the city has kept falling. As in Atlantic City, New Orleans’s casino industry was, instead, a multiplier of public corruption and complacency. Nineties-era governor Edwin Edwards, a big Harrah’s supporter, went to federal prison over a bribe connected to a different casino license. Similarly, Detroit’s three downtown casinos, authorized in the late 1990s, employed just 7,000 people in 2019, down from a peak of 8,300 in 2008, and they haven’t stemmed Detroit’s job losses over the same period.

Casinos don’t have much of an economic-multiplier effect for two reasons. First, the house always wins: casinos are extractive entertainment. People who lose money gambling have less to spend at competing attractions, such as restaurants or sports stadia. Surveying New York’s prospects for economic development through casino expansion, state comptroller Thomas P. DiNapoli wrote in 2014 that “such activity primarily represents substitution of gambling losses for other consumer purchases,” such as “entertainment or retail sales . . . rather than net new business.”

Second, casinos do not create, on balance, high-paying jobs. Nationwide, the average gambling-industry worker earns $18 in mean hourly wages, federal data show—not much above New York’s statutory minimum wage of $15. Gambling dealers earn $32,450 annually; gambling managers earn $89,190. The average private-sector worker in Las Vegas, the nation’s gambling capital, earns just $992 weekly, below the national average of $1,116, and well below New York City’s average of $1,369. Even in New York State, the highest-paying gambling state, dealers earn just $49,630 yearly.

Unlike the typical New York banker or white-collar manager, the average casino worker does not command the personal spending power to support jobs across other industries. Nor does the casino worker earn enough to be a significant source of state or city tax revenue in a highly progressive state dependent on top earners. In fact, a gambling-industry worker with kids, with a five-figure salary, is more likely to be receiving tax-supported benefits. Las Vegas, New Orleans, Atlantic City, and Detroit are hardly shining examples of cities offering well-funded, well-managed public services and social cohesion; all four cities have homicide rates, for instance, well above Gotham’s.

Thus, casinos don’t save cities economically. Siew Hoon Lim and Lei Zhang, professors in North Dakota State University’s agribusiness and applied economics department, summed it up in a 2016 survey of the effects of establishing a casino in a particular area over three- and ten-year periods: “We found the effects of casinos on economic growth to be positive but relatively small”—less than 1 percentage point. “After controlling for spatial or neighboring-county correlation effects, the effects of casinos on . . . long-term income growth disappeared.” Cataloging the negative effects—from higher personal-bankruptcy rates to higher crime—the authors caution that “if the economic benefits are short term and small, but the harm to society is long term and potentially irreversible, rather than focusing on the temporary gains, one must weigh the benefits and costs.” One might argue that for distressed, badly governed cities such as New Orleans and Atlantic City, courting casinos, and with them a few thousand additional jobs, is better than nothing, but that’s debatable.

A racetrack casino in Queens: promising thousands of jobs for New York City, Mayor Eric Adams wants to expand gambling. (JULIE JACOBSON/AP PHOTO)

All this makes the latest news on New York casinos alarming—and not just because of the mayor’s recent rhetoric. In mid-September, even as more than half of well-paid Manhattan office workers regularly stayed away from their desks, in part to avoid street and subway crime, the developer behind Hudson Yards announced that it would bid for a state license to build a casino there. (A major Times Square developer is also interested in competing for the same license.) When, more than a decade ago, New York City heavily subsidized the development of Hudson Yards as a high-end office and residential district, no political official ever warned that the future there would be poker tables, not trading floors.

Indeed, Governor Kathy Hochul, as part of her first state budget in the spring of 2022, accelerated the long-dormant process for awarding three such casino licenses in downstate New York, no doubt partially swayed by casino-development lobbyists, who were spending hundreds of thousands of dollars a month to convince her. It’s not just those lobbyists, though. The vote-rich Hotel Trades Council, which represents unionized hotel workers and was once a heavy supporter of Mayor Bill de Blasio, has officially renamed itself the “Hotel and Gaming Trades Council.” The union, desiring gambling-supported union-hotel jobs, endorsed the governor early in her election bid this November.

If New York joins Detroit and New Orleans in giving a full-service casino pride of place in its core business district, the concept won’t have come out of nowhere. The precedent isn’t New York State’s three-decade-old tribal casinos, run by Native Americans on semi-sovereign land, which have made little impression on downstate residents. Rather, a Manhattan casino would be the culmination of incremental expansion of state-sponsored gambling—from the lottery a half-century ago to sports betting during the pandemic. As DiNapoli wrote in 2014, “expansions over more than four decades have been driven, in part, by the imperative to balance the state budget, and have typically taken place in years when the state needed additional revenue to close projected gaps.”

The state has also used lottery and gambling revenue to save politically favored industries. In 2003, for instance, New York was struggling to recover from the 2000 Wall Street downturn and from 9/11, even as a state court impelled Albany to spend more money on education. The state’s fabled racetracks were also losing money as their customer base aged. The solution: allow racetracks to install “video lottery terminals.” These terminals looked and behaved suspiciously like slot machines, a casino mainstay. But the state insisted that they were no different from paper lottery tickets, just in computerized form. The Aqueduct Racetrack in Queens, near JFK Airport, installed thousands of such VLTs, and promptly renamed itself a “racino.” The lottery and the “gaming” commission let the new marketing stand, despite the state constitution’s ostensible ban on casinos. (Now owned by Malaysian gambling giant Genting, the racetrack will likely bid for one of the three Hochul licenses to become a full-service casino.)

In 2013, after New York had grown accustomed to slot machines, then-governor Andrew Cuomo presented further gambling expansion as the solution to a perennial challenge: reviving upstate New York’s deindustrialized economy. This time, he would make it official by asking voters to amend the constitution. “It’s a major economic development vehicle . . . for upstate New York,” the governor said. Referring to New Yorkers who traveled out of state to try their luck, he added, “it will keep the money in this state.” In vying for constitutional approval, he noted, “the truth is, we do [already] have casinos. We call them racinos because we took a long way to circumvent . . . the Constitution.” New Yorkers, heavily influenced by a multimillion-dollar industry advertising campaign promising upstate jobs, approved the measure, allowing for four casinos immediately outside New York City and, later on, three additional facilities.

Once again, casinos proved a bust, even with their higher-than-average wage for the industry. Of the upstate casinos, “none . . . have met projections,” noted DiNapoli in late 2020, “collectively generating approximately two-thirds of the amount forecasted.” A facility in the depressed Catskills fared worst, yielding barely half of what it expected. Part of the problem was “cannibalization of revenues from existing gaming facilities,” with two nearby racinos shutting down their slot-machine facilities, barely a decade after opening them.

The idea of a casino in the middle of Manhattan might be somewhat less objectionable if Manhattan streetscapes were bustling. Yet it’s hard not to see the faint echoes of New Orleans and Detroit in this eagerness to award a casino license. New York City is still missing more than 2 percent of its pre-Covid jobs, even as the nation has fully recovered—a reversal of decades during which New York City outperformed the rest of the country. The leisure and hospitality industry, still missing 15 percent of its jobs, is particularly hard-hit, explaining the hotel union’s name change.

Heavily pursuing tourism-based gambling at a time when residents and commuters are down on the city risks further upsetting Manhattan’s long-fragile balance among uses. Even pre-pandemic, office commuters didn’t enjoy working in Times Square’s touristy atmosphere, with few offerings for lunch or everyday shopping. Will they want to walk through a new gambling district?

The only hope for a casino in Manhattan faring differently is that well-heeled visitors will come there to gamble, and gamble big—just as Prince Harry once went to Las Vegas. But Las Vegas boasts multiple competing casinos. Hard-core, high-roller gambling aficionados won’t be drawn by just one casino.

The city could, of course, do the tough work of cleaning up midtown, improving public safety, and upgrading public transit in hopes that more people return. Instead, it’s going for the easy money, hoping to lure New Yorkers and tourists into a windowless, world-unto-itself casino where private security will manage these functions.

New Yorkers have had more than a year to grow accustomed to a pervasive gambling culture that goes far beyond the lottery. In 2021, the state legalized online sports betting, courtesy of a Cuomo-instigated change in that year’s April state budget. New Yorkers went from virtually no hard-core gambling presence in their day-to-day lives to the constant presence of sports-gambling ads.

The ads are classic predation, luring customers with the hope of instant rewards: “Bet at least $5 . . . and get $200 in free bets instantly!” one promises. Another implicitly suggests that a sports superfan can turn his love of the game into financial accomplishment; a third presents group gambling as an opportunity for male bonding. The apps offer in-play bets, to keep bettors riveted during the game. Children and teens, of course, are interested in sports, and watch and hear the ads and find them on Internet searches as they peruse game schedules and scores.

New York, for all its progressivism, doesn’t seem interested in assessing whether the universal availability of online sports betting has created new problem gamblers. In 2019, the state legislature asked for an updated report on problem gamblers, but it isn’t due until late next year. A state study, though, was deeply troubling when released in 2007—and even more so now, considering how much has changed since then.

That study found that 5 percent of New Yorkers “suffered from problem gambling,” a condition more prevalent among young men, particularly single blacks and Hispanics, with a big overlap—28 percent—with people abusing drugs. Of course, nearly all young men have smartphones and free time, and young black and Hispanic men have proved most susceptible to antisocial behavior, from violent crime to deadly car crashes, since the pandemic began. Sports betting “has the potential to reach so many people,” says Ashley Owen, a licensed master social worker and team leader at the NYC Problem Gambling Resource Center. “It’s too early to tell the impact it’s had” because “with problem gambling, it takes people a while to reach out. In the next few years, we’ll have a better idea.” In Britain, aggressive sports-gambling marketing turned tens of thousands of people, mostly young men, into addicts.

New York is already experiencing another side effect of gambling: a New Orleans–style whiff of corruption. The governor’s husband earns his living at a company called Delaware North, which maintains a heavy presence in nationwide online “gaming” and has previously bid for a limited casino license. Earlier this year, a top Adams aide, Timothy Pearson, entered the dubious arrangement of drawing a city salary, even as he retained his primary job at the Genting-owned Queens racino, now called Resorts World. The racino announced that it was “parting ways” with Pearson when it learned of the double-employment arrangement.

The mayor already had some history in this arena before this latest mini-scandal. More than a decade ago, as chairman of the state senate’s gambling committee, Adams received a rebuke from the state’s inspector general for raising tens of thousands of dollars at lavish parties hosted by bidders who initially won the Queens limited-casino license, only to have the bid thrown out and rebid due to irregularities. The bidders knew exactly how to tempt Adams, given his penchant for high-end, behind-closed-doors night life: they hosted him at what The City news outlet called an “exclusive private club.”

If the case for casinos as drivers of economic growth is cynical and exploitative, the case for marijuana is even more so. How the rhetoric surrounding pot has changed in just a few years is telling: the changing arguments and promises reflect New York’s deepening economic straits and ever-shallower proffered solutions.

In 2014, as New York prepared to legalize highly regulated medical marijuana, proponents focused on compassion and harm reduction. “There are tens of thousands of New Yorkers with serious, debilitating, life-threatening conditions whose lives could be made more tolerable and longer by enacting this legislation,” Assemblyman Richard N. Gottfried, Manhattan Democrat, argued at the time. Even a half-decade later, in 2019, Bronx Democrat Jamaal Bailey, a state senator, talked of “individuals” whose “lives have been destroyed by marijuana possession.” Cuomo spoke of “the black and brown community that has paid such a high price,” in being saddled with criminal records for small-scale possession. The idea was not to encourage broad marijuana use as a mass-scale business but to reduce the penalty for existing users. No rational elected official focused on legalization as a powerful engine of jobs and tax-revenue growth in a major global city—a notion not just economically absurd but depressing. The city of finance, media, fashion, tech, and medicine is now, to paraphrase its mayor, the “lit” city?

Legal-marijuana cultivation and sale is not a high-income business. The only reason illegal marijuana is, and was, lucrative is due to the risk incurred, by drug merchants, of going to prison or being killed. Legal pot is, by contrast, a workaday farming and retail business. Many people make decent livings in farming and retail, but the industries are hardly engines of good-paying jobs. Even with the growth of a subindustry of expensive, hydroponically grown local lettuce and other vegetables, and with mass-scale urban “farmers’ markets” to bring produce from farming regions to affluent New York City consumers, New York State farms employ just 23,868 workers—less than half of 1 percent of the state’s workforce. The industry is notoriously low-wage, with an average crop-production income of just $38,000 annually, less than half the state’s $88,000 average wage across occupations. Much of the work—at least one-fifth—is done by itinerant migrants.

Retailing, too, is a low-wage, low-margin, long-hours business. Selling cannabis “edibles,” for example, isn’t much different from owning a bakery, requiring the creation of a desirable product and the management of a small workforce. (Location is critical as well, but the state has actually taken that part of the entrepreneurial process out of the hands of would-be legal marijuana vendors, choosing locations for them.) Owning a bakery is an honorable business. But the mayor and governor aren’t proposing small-business bakery ownership as the key to New York’s economic future. Nor are the people the state has tipped first in line to receive marijuana-sales licenses—convicted drug offenders—the most obviously qualified people to devote long hours to succeed at this work, which, theoretically, requires careful adherence to dozens of complex regulations, not brazen risk-taking.

“Proponents of ‘sex work’ use the same language that proponents of legal marijuana and casino gambling used.”

Outweighing the benefits of creating a few thousand more farming and retail jobs are the real costs—far worse than in the gambling business. A healthy industry needs to grow, which means that the state and city must encourage more people to consume pot regularly. And from a business standpoint, it’s best to create a new habit when a customer is young. The state and city are thus now in the business of encouraging people to become regular marijuana users as soon as they turn 21, the nominal legal age.

From a public-health perspective, the idea is catastrophic. Multiple studies connect marijuana usage with serious mental illness, particularly in young people. “Clinical studies reveal a strong association between the psychoactive effects of cannabis and the symptoms of serious mental illness,” wrote Bryan W. Jenkins and Jibran Y. Khokhar of Ontario’s University of Guelph last year. “Although some studies purport that cannabis may treat mental illness, others have highlighted the negative consequences,” including for “otherwise healthy users.” Noting that “the lifetime cannabis-use rates for patients with schizophrenia, major depressive disorder, or bipolar disorder are 80, 17 [and] 24 percent, respectively,” the authors observe that “cannabis use,” especially among the young, “increases the risk for developing a mental illness.” Increased marijuana use has also coincided with a sharp rise in deadly car crashes around the country.

Perhaps the strangest thing about New York’s cultivation of a legal marijuana market, though, is its refusal to crack down on the illegal market. Dealers selling joints and baked goods from trucks and from sidewalk card tables are a common sight in Manhattan; Washington Square Park is now an open-air drug bazaar. Illegal merchants decorate their trucks and packaging with cartoon characters. Days after Adams bowed to months of business-group complaints and ordered the NYPD to tow 19 “Weed World” trucks, a truck styling itself “Uncle Budd” was right back in midtown Manhattan, just outside Times Square, and similar trucks plague the Upper West Side. The state, by legalizing pot, has normalized the drug’s use. The lack of enforcement will ensure that teens and under-21s can participate in this mass-scale normalization.

The final vice frontier is prostitution. Proponents of openly marketed “sex work” now use the same language that proponents of legal marijuana and casino gambling used over the years to make those activities centerpieces of New York’s economic policy. First, harm reduction: people are doing it anyway, so why not let them do it without repercussions? “Rikers Island [is] an experience that I would not wish to anybody, not even my worst enemy,” Decrim NY advocate Cecilia Gentili said in 2019. Just like nobody should go to jail for possessing an ounce of marijuana, nobody should go to jail for desperately turning a trick for cash. Second, job creation (and normalization): “Sex work is work,” says Queens state senator Jessica Ramos.

It’s not hard to imagine, during a future budget crisis, a proposal for a dedicated tax on prostitution that could reap hundreds of millions of dollars a year. Young women (and men) unhappy with their job prospects in the casino-greeter and pot-laced-baked-goods industry may soon find another exciting new career option.

Top Photo: As has happened elsewhere, New York State’s legalization of cannabis use has led to an increase in black-market sellers, like this mobile pot dealer. (LEV RADIN/PACIFIC PRESS/LIGHTROCKET/GETTY IMAGES)

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