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John G. Edwards

Analyst, Gaming Foe Disagree on Election Results

4 November 2004

UNITED STATES -- The Rev. Tom Grey believes Tuesday's election results show it's about time for the gaming industry -- which had been counting on several initiatives to expand its reach in the United States -- to fold its hand.

The gambling foe and executive director of the National Coalition Against Gambling Expansion noted on Wednesday that voters have rejected six gaming expansion proposals this year, including a Missouri issue that was voted on in August.

Gaming analyst Marc Falcone of Deutsche Bank, however, disagrees with Grey, even though voters in California, Nebraska, Washington, Michigan and, possibly, Florida took action on Tuesday that could curtail gambling's expansion.

In the case of Florida, one of the six examples also cited by Grey, a proposal to allow slot devices at racetracks and jai alai frontons in the Miami and Fort Lauderdale areas appeared to be headed for defeat by a narrow margin. The results were not official, pending a recount today, the Florida Elections Department Web site said late Wednesday.

Falcone viewed the election results as mostly the function of state political issues, not evidence of a national trend.

"A lot of voters tend to view gaming as a business that's still corrupted with crime, particularly (that view prevails) in conservative states," Falcone said. However, he forecasts that will change as people are educated about the jobs, taxes and economic boost that casinos can bring.

"We'll likely see more gaming over the U.S. over the next five to 10 years," Falcone said.

With the Bush administration continuing in office, he said he doubts there will be any changes in federal laws and rules on gaming.

Grey, however, suggested the tide has changed against casino gambling. Voters see the negative effects that the industry brings, including addictive gambling and personal bankruptcies, Grey said.

Casino advocates "can't deliver on their promises, and they can't hide the bodies," Grey commented.

"I think gambling is on the wrong side of where America is going," he said, noting President Bush made "communities of character and an ownership society" two of his goals in a second term. "I want to know where gambling fits into either of these."

Two of the larger gaming initiatives that voters rejected were in California.

Gov. Arnold Schwarzenegger opposed the two measures, which failed by big margins. Proposition 68 would have authorized 30,000 gaming devices at 16 racetracks and card rooms in exchange for one-quarter of the revenue, Merrill Lynch analyst David Anders said.

Proposition 70 would have allowed Indian tribes to sign 99-year compacts with the state that allowed unlimited gaming devices for any tribe that paid the current state corporate tax rate, 8.84 percent.

Still, Falcone doubted voter rejection of the two proposals will stifle gaming expansion in California. He predicted the tribes will try to renegotiate new agreements with the governor.

Billionaire Warren Buffett opposed a measure that would have allowed two casinos in Nebraska. The state Legislature and The Venetian, which was interested in entering that market, supported the ballot issue, but it failed. However, Ameristar Casinos and Harrah's Entertainment, Las Vegas-based companies that have properties in neighboring Iowa, may benefit from the restriction of potential competitors.

Florida voters considered a constitutional amendment that would allow residents in the Miami and Fort Lauderdale areas to vote on whether to allow gaming devices at seven locations, including dog tracks, racetracks and jai alai frontons. International Game Technology and other slot makers could benefit from placing some of the estimated 15,000 to 25,000 new slot machines if the South Florida gambling operations are permitted.

Grey attributed much of the opposition to the Florida proposal to animal-rights groups that opposed the mistreatment of dogs.

A measure that would have allowed about 18,000 new electronic scratch ticket machines in Washington state was also defeated.

The gaming industry got mixed results in Michigan, where voters approved a measure requiring both local and statewide voter approval of any new gaming expansion. Although the election results hurts some racetrack owners who were hoping the Legislature would let them install slot machines at racetracks, the requirement will provide some protection against new competition for operators of existing Detroit area casinos, such as MGM Mirage and Mandalay Resort Group.

Oklahoma voters bucked the trend and permitted three racetracks to offer gaming devices. Anders predicted International Game Technology will benefit by being able to take some market share from competitor Multimedia Games.

John G. Edwards
John G. Edwards