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Lure of easy revenue stokes gambling's spread

Local officials say out-of-state competition may be good for Las Vegas 

By ROD SMITH 
GAMING WIRE 



Economic border wars for gaming revenues are breaking out all over the country as the November elections approach. 

The elections offer states a chance to cash in on gaming that is proving irresistible, said Bob McIver, investor relations officer for Reno-based International Game Technology, one of the country's biggest manufacturers of slot and video poker machines. 

Without gaming, he said, "you're going to have to raise taxes or cut programs. And you know how politicians feel about that." 

Politicians are looking for quick fixes to spreading fiscal crises -- and for campaign contributions -- as the November elections approach. 

That has set off skirmishes in 25 states and Mexico for territory once exclusively claimed by Nevada. 

In the short run, the moves to add slot machines at racetracks or expand casino-style gaming could siphon off revenues and visitor interest in Nevada even as officials here grapple with their own fiscal crisis. 

In the long run, expanding gaming opportunities nationwide may build interest in gaming here, and the competition could goad local operators into being more aggressive in terms of development and marketing, industry officials agree. 

In the meantime, half the states are looking to some kind of gambling expansion to help solve their budget woes. 

The scenario looks like the rush to legalize gambling that cropped up during the last major recession in the early 1990s, McIver said. 

New York state is the "first and foremost" active in the first broad expansion of casinos and slot machines in a decade, he said. 

It is proceeding with plans to install a central monitoring system to operate slot machines at racetracks and has issued a request for proposals for equipment manufacturers. 

Last year, the New York Legislature voted to bring slots to several racetracks and Indian casinos, though the law is still subject to serious court challenge. 

Elsewhere, Indiana legislators this year relaxed restrictions on the state's billion-dollar riverboat casino industry. 

Other states expected to liberalize casino regulations and legalize slots at tracks as a result of fiscal problems and the impending election include: Indiana, Kentucky, Maryland, Massachusetts, Ohio and Pennsylvania. 

"There's a history of popular sentiment in favor of slots at tracks" in Pennsylvania, McIver said. 

Retiring Pennsylvania Gov. Mark Schweiker has opposed liberalized gaming, but both candidates to succeed him support it as a route out of the state's fiscal problems. 

Calling it a classic example of the "border war syndrome," McIver said Pennsylvania is surrounded by states with legalized slots at racetracks, and it faces the choice of liberalizing its laws or losing revenues to those states. 

Similarly in Maryland, government officials want to save troubled Pimlico from forgoing slot revenues to neighboring states such as Pennsylvania. 

The result in an election year is that gaming foe Kathleen Kennedy Townsend is said to be reconsidering her opposition in light of the aggressive push to allow slot machines at racetracks launched by U.S. Rep. Robert L. Ehrlich Jr., her likely Republican opponent. They are competing to succeed Parris Glendening, an ardent foe of gambling who cannot seek reelection because of term limit laws. 

In addition, voters in Tennessee, Nebraska, Arizona and Idaho will likely find gambling initiatives on their ballots in November, although McGiver said the measures are relatively technical and unlikely to have as much impact as legalizing slots at racetracks. 

Meanwhile, legislators in at least half the states are expected to debate some form of gaming expansion this year or next, said Thomas Grey, executive director of the National Coalition Against Legalized Gambling. 

There is a strong chance that even reluctant politicians will relent in the current economic climate, Grey said. 

He plans to warn his group's members during their annual meeting in Texas next month. 

"We could get overrun depending on what happens in the elections, especially governor races," he said. 

Grey said opponents succeeded in turning back gaming initiatives in 2002, but political contributors have been greasing the skids for 2003. 

The outcome could be a feeding frenzy next year, said Grey, depending on the results of key elections. 

The last big effort to legalize gambling beyond Nevada and Atlantic City came in the late 1980s and early 1990s. 

"It was only when the economy picked back up that states began saying no again, Grey said. 

The impact on Nevada, just as the state Legislature here is turning to the question of added taxation for an escape from the economic doldrums, is much in doubt, said Chuck Brooke, IGT's vice president for government relations. 

Still, competition could serve Las Vegas well, said Rob Powers, vice president of communications at the Las Vegas Convention and Visitors Authority. 

"In some ways, the spread of gaming can actually benefit Las Vegas because it exposes people to gaming for the first time. It creates even more excitement in our market," Powers said. 

"Gaming has never been more widespread in the United States," he said, "and still Las Vegas has prospered. It would be hard to argue that an expansion of gaming (nationally) would hurt Las Vegas." 

Keith Schwer, director of the the University of Nevada, Las Vegas' Center for Business and Economic Research, said without competition, "any area can get fat, dumb and happy. Instead, competition can help reinvigorate Las Vegas." 

Las Vegas' major casino operators can also benefit from expanded gaming opportunities by taking part in the expansion. 

Most of the major companies are already positioning themselves to share in the larger pie. 

Harrah's Entertainment, for instance, announced last week that it plans to buy the Louisiana Downs racetrack in Bossier City, La., the only land-based gaming facility with slots in northern Louisiana. 

Park Place also has a deal to open a tribal casino in the Catskills near New York City, pending legal hurdles challenging the governor's authority to negotiate Indian gaming compacts. 

Still, gambling itself runs in a cycle that may be ending, Schwer said. 

Legal gambling in the United States has traditionally been used for fiscal relief, but has run in 75-year cycles, waning after interest reaches a fevered pitch, he said. 

Popular in the late 17th century, wagering on games of chance and cockfighting ran into a puritanical upsurge around the turn of the century. 

The Colonies used a lottery to finance the revolution in the late 18th century, but the betting binge ended in another puritanical resurgence of the 1830s and 1840s. 

Then the Confederacy used a lottery to fund operations in the Civil War. Gaming came back into vogue after the fighting and then was again made illegal by the first World War. 

Today's resurgence began with Nevada in 1930, and today some form of gambling is legal in 48 of the 50 states, but Schwer said history suggests the cycle may be coming to an end. 

There also is some evidence opposition to legalized gambling is being spawned by its own expansion. 

Grey said he can count on community opposition wherever a new casino is proposed. He credited that trend the the higher rates of addiction, personal bankruptcies and crime attributed to gaming. 

Scott Harshbarger, the former attorney general of Massachusetts and current president of Common Cause, said one of his goals this year will be to encourage the public to look closely at the pros and cons of gambling wherever expansion efforts crop up.