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Nevada's Crises Viewed as Challenge for Casinos

LAS VEGAS -- The fiscal crises now facing states affords the casino industry big opportunities but also substantial risks, American Gaming Association President Frank Fahrenkopf believes.

Fahrenkopf said state budget problems have the industry in a state of flux.

The flip side of the cash crunch can help or hurt the major Las Vegas-based casino operators, he said last week.

Fahrenkopf spoke about the casino industry as he prepared to host this year's association-sponsored Global Gaming Expo, which opens today at the Las Vegas Convention Center.

Big budget shortfalls in many states make gambling expansion likely, the casino industry's top Washington, D.C., lobbyist said.

But the states' fiscal problems also make the casino industry an inviting target for tax increases, a trend Fahrenkopf said is likely to continue for the foreseeable future.

"Tough economic times for state governments have lawmakers looking for funding alternatives," he said.

The funding alternative the casino industry opposes, of course, is tax increases.

Illinois raised its top casino tax rate to 70 percent this year and Indiana raised its top rate from 20 percent to 35 percent last year, but offset the added cost by allowing casinos to operate from dockside barges.

The two longest-standing domestic casino markets, Nevada and New Jersey, raised rates slightly this year as well.

The recent tax increases and the prospect for more spurred industry executives to ask Fahrenkopf to expand his role beyond federal lobbying.

"The industry's always looked to me to be a spokesman, but as the taxation thing has (become more pressing) I've been asked to increase that role," he said. "These taxation increases have bubbled to an unbelievably unacceptable level. Most of our (association-member) companies are publicly held, and they're responsible to their shareholders."

The new Illinois rate was clearly over the top, he said, and operators are concerned that the industry is viewed as an inexhaustible source of funds for cash-strapped states.

"Whether it's killing the golden goose or wringing its neck, these guys are going too far," Fahrenkopf said. "Governors and state legislators have to understand that they need to balance sufficient return to the state with fair return to the companies."

Fahrenkopf said he doesn't lobby state lawmakers to allow casino gambling in their states as a way of solving budget problems.

Association policy used to prevent him from lobbying at the state level, but the association's board authorized him about one year ago to appear before state panels.

"The only way I go is if I'm invited by the legislature or by a special governmental committee," he said. "I don't go to advocate (casino gaming) but to answer technical questions."

In such appearances -- and Fahrenkopf's made a handful, in Massachusetts, Rhode Island, Pennsylvania and Maryland -- he discusses the results of studies on the economic benefits and jobs that accompany casino gaming as well as counters the arguments of the anti-gaming movement, he said.

The brightest domestic expansion prospects for the casino business are in the Mid-Atlantic states, with New York, Pennsylvania and Maryland the likeliest venues to allow some form of new casino gambling, he said.

"These states and others are considering changing the mix of gambling they now have by adding slots or (video lottery terminals) at racetracks or allowing casino resorts," he said. "This is a big change from just a few years ago, when most of the big operators were putting their money into proven markets, like Las Vegas. Now the big domestic opportunities are in some of the jurisdictions that already have some forms of gambling, like racetracks and lotteries."

Fahrenkopf said the expo, which merged with the former top industry convention, the World Gaming Congress, two years ago, is continuing to grow.

"It's blowing the roof off this year," Fahrenkopf said.

Last year G2E, as the Global Gaming Expo is known for short, occupied about 188,000 square feet of space at the Las Vegas Convention Center.

"This year we planned on 200,000 (square feet) but we'll be at least 223,000, with more than 700 exhibitors," he said. An estimated 14,000 attendees are expected at this year's show, about the same attendance as last year.

The G2E Training & Development Institute was held Monday, and the Global Gaming Expo show itself opens today and runs through Thursday.

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