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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Texas casino expansion suffers a blow in the state's election

4 June 2012

The prospects for casino expansion in Texas apparently took a hit this week, according to one gaming analyst.

Three prominent allies of Republican Texas House Speaker Joe Straus were defeated in their re-election bids by anti-gaming conservatives.

Straus is considered a moderate who supports expanded gaming. His family owned the majority interest in the Retama Park racetrack near San Antonio, which was acquired in April by Pinnacle Entertainment for $22.8 million. His family still owns a minority stake.

The Texas Legislature, which meets every other year, was expected to revisit the casino gaming issue during the 2013 session.

Union Gaming Group Principal Bill Lerner said with lawmakers becoming more conservative, gaming proponents could find Texas casinos to be a tough sell. In 2011, gaming legislation failed as a bill never gained serious traction.

“[This] certainly doesn’t bode well for future passage of a gaming expansion,” Lerner said.

Gaming approval is onerous. It requires a change to the state’s constitution through a two-thirds majority vote in the legislature plus passage of a statewide voter referendum.

Pro-gaming interests are also divided. Two major groups lobbying for gaming are split between pushing for slots at racetracks and allowing destination casinos.

“All in, there are a host of roadblocks standing in the way of Texas passing gaming expansion anytime soon,” Lerner said.

Pinnacle can have it both ways.

The company bought Retama Park in case gaming was legalized, and to protect its interest in L’Auberge du Lac in Lake Charles, La., which could be hurt by Texas gaming expansion. Pinnacle draws about 37 percent of its annual cash flow from L’Auberge.

“In our view, the acquisition was a defensive move in case Texas passed expanded gaming,” Lerner said. “The fact that Texas legislature lost three proponents of gaming and became more conservative in the process is an overall positive for Pinnacle’s stock along with other Louisiana operators who pull significant visitation from the state.”