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Gaming Issues Advance Throughout US25 November 2002by Rod Smith WASHINGTON, DC -- The elections of 2002, combined with continuing state fiscal crises, have "unleashed the dogs of gambling," industry insiders and critics said. "When people look at budget deficits for 2003, they need to begin to figure out how to close the gap," Deutsche Banc Securities analyst Marc Falcone said. "When you have a chance to create a new industry that has the highest tax rate of any, why not give it a try? That logic is the driving force (behind expanded gaming)." Pro-gaming initiatives are moving rapidly forward in at least 16 of the 23 states nationwide where gaming became an election issue in 2002. "Gaming proliferation relates to the slowdown in business conditions," Bear, Stearns & Co. analysts Jason Ader said. "Gaming is such a successful tool for economic stimulus. The election wasn't about gaming. Gaming is about the economy. And the longer the recession lasts, the more (gaming venues) there will be." In California, Gov. Gray Davis' administration is picking up the pace for renegotiating Indian compacts to increase the number of tables and slots in American Indian casinos. Analysts are confident newly negotiated agreements will move gaming competition forward by early spring and that the number of gaming positions will double to 100,000 by the time Proposition 201 is fully implemented. Meanwhile, Arizona Gov.-elect Janet Napolitano is proceeding with expanded American Indian casinos and a state lottery to address the state's fiscal difficulties and blunt the coming increase in competition from California. Both are expected to adversely affect gaming business in Laughlin, downtown Las Vegas and Northern Nevada, analysts and industry insiders said. Tom Grey, executive director of the National Coalition Against Legalized Gambling, said such developments strengthen the hand of gaming foes like himself because expanded gambling is being driven forward not as "a good product but a service that's driven by scavenging opportunities." "There's a shift taking place in the debate. Gaming is exposed as strictly a last resort by government to cannibalize its citizens and (operations in) neighboring states," he said. "What's going on now is just a feeding frenzy to fill state budget deficits using gaming." Another antigambling activist said for now casino gambling is a zero-sum game and the short-term border wars are unlikely to produce long-term fiscal solutions. University of Illinois professor Earl Grinols said that if Native Americans are allowed to build a gambling casino in Maine, for example, nearby states such as Massachusetts and New Hampshire become sure bets to build their own. Similarly, a recent Bear, Stearns report has found that slot machines at racetracks in New York, Pennsylvania and Maryland likely will cannibalize $750 million, or 14 percent, of total Atlantic City gaming revenues by 2006. Nevertheless, American Gaming Association President Frank Fahrenkopf said there is tremendous interest, especially in adding slots at tracks. "There's great interest, particularly in the Northeast. A lot of state legislators are looking very seriously at it," he said. Even Florida's Gov. Jeb Bush, previously a gaming foe, is now putting gambling on the agenda to balance his budget. A driving force for state officials involves the fact that Delaware, for example, raises almost 10 percent of its total state revenues from taxes on racinos at three racetracks in the state, Fahrenkopf said. In New York, newly re-elected Gov. George Pataki is moving as fast as the courts allow on the law he signed in October 2001 authorizing six American Indian casinos. Also, New York law allows the installation of video slot machines at racetracks, including Aqueduct in Queens and Yonkers Raceway in Westchester County. Connecticut and New Jersey are upping the ante to protect their industries, and Kentucky, Maine, Maryland, Massachusetts, Ohio and Pennsylvania are moving fast to get into the game. The prospects of added competition in the form of slots at tracks has spawned added impetus in Pennsylvania for legislation to authorize slots at four tracks and a new track in Erie, all near the state border. Pennsylvania's efforts have worried Maryland, whose new governor-elect, Robert Ehrlich, campaigned for bringing slots to Maryland racetracks. They have also worried Ohio, where an "emergency" bill was introduced in the state Senate last week, getting around the possibility of a gubernatorial veto, to allow the state's racetracks to install slots. Maryland, Ohio and Pennsylvania, which are skirmishing with each other, have also reopened the debate in West Virginia where 14 percent of state revenues already come from video slot and lottery revenue. In turn, Massachusetts Gov.-elect Mitt Romney faces pressure from legislators to beat the prospect of budget cutting to help close the state's pending $2 billion deficit. And now, even Rhode Island is getting into the act with its Legislature recently declaring the state will lose millions in revenue yearly to nearby states unless additional gaming is authorized. Operators of New Jersey multiple casinos and Connecticut's Foxwoods and Mohegan Sun casinos have recently said they have expected other states to get into the act and that their respective legislators should get ready to compete. In the Midwest, Illinois, Indiana, Iowa and Missouri have a game of their own going for added gaming revenue. A gaming industry coalition group in Illinois Monday completed a plan to increase state and local tax revenues by removing statutory limits on the number of tables and games, or positions, authorized at each casino. It would also return to the gaming tax structure in place prior to last July, when the state increased what was already the nation's highest taxes on casinos, and imposed a top rate of 50 percent. The tax restructuring would not occur until the dormant 10th casino license is generating revenue for the state. The gaming industry in Illinois pays the highest gaming taxes in the country and faces the nation's only law restricting the number of games and tables at each facility. There's a new battle starting up in Illinois where "lobbyists are playing one state against another as gambling metastasizes," gambling foe Grey said. "(Gambling) breaks down states' regulatory systems, their immune systems. You can see it where betting limits are getting removed and river boats slither out of the water and onto the land," he said. "But now you also see the lobbyists persuading states (like Illinois) to lower tax rates to keep operators from moving elsewhere. "(If that starts happening) the states already will be hooked on gaming for revenues, but will be failing to solve the fiscal problems that unleashed the dogs of gambling." |