Monday, August 15, 2022

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Nanny state could save Madrid from EuroVegas

Las Vegas real estate developer Sheldon Adelson selected Madrid as the site of his next proposed casino project, EuroVegas, last month. The project is estimated to create 250,000 jobs in a country with 25% unemployment. On the one hand, this project may look like a good bet for the city, bringing both short term construction jobs and hopefully creating a long-term tourist destination.

However, EuroVegas will not be financed completely with private investment. Instead, Adelson wants to pay only 35% of the projects construction costs, asking the city to finance the rest. Additionally, he requires that the project receive property and business (IAE) tax breaks. Since most of the investment will be taxpayer funded, the risk is borne largely by the public and the project requires Madrid taxpayers to take on even greater debt. The tax-exempt project will not contribute to the tax base for public services. Adelson selected Madrid as the EuroVegas site after receiving better breaks there than Barcelona policymakers offered.

Carlos Ruiz, a retired engineer, heads the group EuroVegas No. He sums up the feelings of some who feel that the project would benefit Adelson at the expense of Spanish taxpayers who already have a high debt burden:

“Citizens from the whole of Europe are lending money to Spanish banks because they are in a bad situation — hoping that someday these banks will start to give credit to small enterprises, to families, to people,” Ruiz says. “But this money is going to go to Mr. Adelson, who is one of the richest men in the world. This is quite unfair.”

Madrid officials seem poised to offer Adelson all of the concessions he seeks, including subsidies, tax breaks, and exemptions to labor laws, except for one. The sticking point in the deal may be that the project requires an exception to Spain’s nationwide ban on smoking in bars and restaurants to go forward. Prime Minister Mariano Rajoy said that lifting the smoking ban for EuroVegas would give the development unfair political privilege over all of the country’s other establishments where smoking is not permitted. He said he thought that making an exception to the ban for EuroVegas would be unconstitutional.

Whether or not EuroVegas will go forward in Madrid remains to be seen. Either way, Rajoy’s approach to a level playing field is worth noting here. As Matthew Mitchell explains in his paper “The Pathology of Privilege,” creating special advantages for projects like EuroVegas tends to benefit well-connected people at the expense of the general interest and limits economic growth as resources are directed according to political favor rather than by the market.