Although we don’t have free markets, market forces still prevail eventually in spite of all the interventions wrought by government. The laws of economics are as immutable as the laws of physics - ignore them at your peril. Like gravity, supply and demand and competition in the marketplace are forces that cannot be circumvented by the best laid plans of mice and men.

Atlantic City, New Jersey, is learning this lesson the hard way. As of this writing, two of its casinos have recently closed their doors and another is scheduled to cease operations this week. The Showboat and Revel are now history and by the time you read this, Trump Plaza will have followed suit. Atlantic City’s economy is reeling. It started the year with 12 casinos - it will end the year with 8. Since 2006, gaming revenues in the city have decreased by 45% from $5.2 billion down to $2.86 billion - meaning that future closings are quite possible.

This will mean that more than 8,000 jobs will disappear from the local economy - jobs that were considered “safe”, meaning that local budgets had taken them for granted; revenue assumptions are now out the window. According to an article in the Associated Press published on August 30th, “a mass unemployment filing due to begin Wednesday is so large it has been booked into the city’s convention center.” The article quotes one of the many who are now out of a job, “We never thought this would happen…they just want to eliminate competition”. Adding, “Everyone’s in favor of a free market until it doesn’t exactly work for them.”

The fact is that they couldn’t “eliminate the competition” - competition is an economic fact of life. The competition in this case eliminated them. As the AP article goes on to say, “New casinos popping up in an already saturated Northeastern U.S. gambling market aren’t expanding the overall pie but are slicing it into ever-smaller pieces.” In other words, competition meets supply and demand and the result is that the market place adjusts causing a significant amount of pain for those involved. There aren’t enough gamblers to support all of the casinos so there are some that will have to close.

This should serve as a wake-up call to all of us in Jefferson County. In 2012, the number one employer in the county was the Hollywood Casino at Charles Town Races. While I don’t know if that is still the case, competition is mounting from new casinos that have opened in nearby Maryland and Pennsylvania. I have heard anecdotal reports that revenues at the Hollywood Casino are down precipitously.

In West Virginia, casinos don’t get taxed in the same manner as other businesses. Instead, the gross revenues are taxed at the rate of 60 percent. Out of what is left, the casino pays its overhead and the rest becomes its net profit. In my view, this makes the industry a sort of de facto “public-private partnership” with the state receiving more than half of the gross revenue. It also leaves the state and participating local governments particularly vulnerable to any changes regarding the economics of the industry. As an aside, tax policy also has an effect on operations. I’ll cite one example. It has been explained to me that because of the taxes it pays, it is not economically feasible for the casino to have a $3.00 or $5.00 black jack table. This forces players to play for higher stakes or not at all. In effect, tax policy makes it impossible for the casino to serve a particular segment of the market, the casual player that doesn’t feel comfortable playing for larger stakes.

Government does not as a general rule respond well to changing market conditions. When table games were finally approved after the so-called “better deal” increased the revenue potential for the county, there should have been a realization that policies needed to be revised and reformed to allow for a diversification of the local economy. Instead, complacency set in. Now things may not be working out as planned.

Budget woes abound. On the state level, some estimates are predicting a $200 million shortfall for the next fiscal year and lower gaming revenues is cited as a contributing factor. Here in Jefferson County this year there were significant budgetary issues as well with the shortfall coming in at $3.9 million. Again, declining gaming revenues were cited as one of the reasons. Gaming revenues for the county peaked in 2012 at $5.8 million declining the following year to $4.3 million. This year’s revenues are projected to be “lower than county officials were expecting”, according to the Herald Mail. So much for the better deal.

Elected officials never seem to be able to see these things coming. In fact, the economic projections that were presented during the Envision Jefferson County 2035 exercise as provided by West Virginia University still assume that our problems center on how we are going to be able to accommodate increased economic growth. Most of us hope that will happen, but local government needs to embrace the policies and make the decisions that give it a fighting chance. In my humble opinion, current growth projections are unrealistic and relying on assumptions such as these ensure that more policy mistakes will be made.

Case in point is the new ambulance fee that has caused a bit of an uproar in the county. Earlier this week the County Commission issued a FAQ regarding the fee - apparently in reaction to the uproar. It has a defensive and indignant tone to it - I encourage you to go to the Commission website and get a copy. I’ll have more on that in my next offering.

Our elected officials need to look at what is happening in Atlantic City. The gravy train that has been the gaming industry is beginning to show signs of losing steam. Economic reality is setting in and it needs to be faced. Increasing the size and scope of government at this point in time is not a good policy decision. Instead what is needed is to scale local government appropriately in response to current economic conditions. Families have to adjust their budgets to match their income. That often means having to do without. Most people can’t just march into the boss’s office and demand a raise - and the new ambulance fee amounts to a decrease in disposable income for each and every tax paying family and business in the county. Oh, by the way, did I mention that the County Commission after imposing a new fee on you, voted themselves a raise in pay?