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Best of Liz Benston

Gaming Guru

Liz Benston

Taxes Irk Casino Execs

7 October 2004

LAS VEGAS -- MGM Mirage will concentrate future casino investments in only three markets nationwide -- Las Vegas, Mississippi and Atlantic City -- in large part because of "unreasonable" casino taxes in other states, Chief Executive Terry Lanni said Wednesday.

Penn National Gaming Inc. Chief Executive Peter Carlino expressed frustration about layoffs triggered by a tax hike in Illinois and said his company expects to someday do business in Las Vegas and Atlantic City where it does not yet operate casinos.

And Harrah's Entertainment Inc. Chief Executive Gary Loveman accused some state governments of having a "widespread misunderstanding" of casinos and said the company's bid to acquire Caesars Entertainment Inc. is in part a plan to retrench into more welcome gaming markets such as Las Vegas, Mississippi and Atlantic City.

The executives' comments came as part of panel discussions at the Global Gaming Expo, the industry's premier trade show that ends today at the Las Vegas Convention Center. The panel was moderated by CNN's Larry King.

Casinos should not be targeted to pay high taxes just because legislators consider gaming a "sin industry," Lanni said.

He also said some investors in states considering gambling are making promises of tax riches to state legislators that aren't realistic.

Carlino said the Illinois tax increase hurt the casino's home city of Aurora because it translated into half as many customers and therefore less tax revenue. The tax hike resulted in hundreds of layoffs at the casino, a drastic measure which allowed the company to make back about half of "what we got taken from us by the state."

Illinois Gov. Rod Blagojevich has accused Illinois casinos of deliberately reducing their profits in order to curtail their state tax bill.

Casino bosses also pointed their fingers at state lotteries, accusing state governments of restricting casinos and other forms of gambling while lottery tickets fund basic state services.

"That's terribly misplaced public policy," Loveman said.

Frank Fahrenkopf, president of the American Gaming Association, said his group lobbies federal officials effectively but needs to do a better job explaining to state officials how casinos operate.

Some officials and residents will remain morally opposed to casinos no matter what but others simply view it as a cash cow for the state, said Fahrenkopf, who represents the major commercial casinos.

In Detroit, for example, a recent tax increase from 18 percent to 24 percent passed the state legislature with little debate, while Detroit casino owners are limited in how much they can contribute to political campaigns, he said.

Companies such as MGM Mirage and Harrah's say their pending megamergers will yield more investments in Las Vegas and Atlantic City. MGM Mirage has a bid for Mandalay Resort Group and Harrah's has agreed to merge with Caesars Entertainment Inc.

Atlantic City is on track to become a more competitive resort destination even though Pennsylvania -- which is legalizing slots -- will siphon off some business, executives said.

Carlino, whose Pennsylvania properties will compete with Atlantic City, said the city will eventually have more non-gaming attractions that will remake the town into a "powerful force."

Boyd Gaming Corp. President Don Snyder said Atlantic City must have at least 25,000 hotel rooms to reach its potential as a resort town on par with Las Vegas. The city now has at least 14,000 rooms.

Boyd and business partner MGM Mirage are planning an expansion of their Borgata resort in Atlantic City, and MGM Mirage expects to build a second major resort nearby, he said.

Snyder also said Las Vegas is witnessing a bull run and that companies have only begun to reap the rewards of using convention business and more non-gambling amenities to draw visitors. International tourism also is expected to grow, he said.

Las Vegas has only "scratched the surface" on entertainment offerings and will someday have offerings that rival New York theater, for example, Snyder said.

Several trends are helping the acceptance of gambling, executives said.

The popularity of poker and a flood of television shows on Las Vegas have "furthered intense interest in our industry," Loveman said.

As gambling spreads nationwide, more members of Congress are willing to accept and support the industry, Fahrenkopf said.

Loveman, one of the industry's most aggressive promoters, predicted at the conference that the United States will eventually have casinos in every major city alongside other kinds of businesses.

Historians will someday look back on this period as a time when states tried to impose restrictions on casinos similar to the prohibition of alcohol in the 1920s, he said.

Taxes Irk Casino Execs is republished from