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Rod Smith

Gambling Beyond Nevada: Betting's Spread Sputtering

30 May 2005

The spread of gaming across the country has slowed recently to a crawl, the victim of greedy local officials in wannabe gambling towns and the boom in Las Vegas, industry insiders and experts said Thursday.

He might As recently as the 2000 and 2002 election cycles, a majority of the states had serious proposals pending to legalize casinos, slots at tracks and new riverboats.

Today, only eight states have even slim prospects for expanding gaming, and of those, only Illinois is a realistic prospect for serious expansion in the near future.

On top of that, American Gaming Association President Frank Fahrenkopf said the political climate is discouraging further expansion of both tribal casinos and Internet gambling.

Sen. Jon Kyl, R-Ariz., is expected to introduce a new proposal with a good chance of passage that would essentially keep Internet gaming offshore and also make it much harder for U.S. residents to participate in online wagering, Fahrenkopf said.

In addition, Sen. John McCain, R-Ariz., chairman of the Senate Indian Affairs Committee, is pushing for tighter regulations on recognizing new tribes, clamping down on tribal bingo machines that mimic slot machines and allocating more money for the oversight of American Indian gaming operations.

University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies, said investigations now under way in Washington are likely to slow the expansion of tribal casinos.

"I think the (Bush) administration is about to say no new tribes and that'll be a big stopper," he said.

Deutsche Bank analyst Marc Falcone, however, warned not to count American Indians out.

Although it could be increasingly difficult for tribes to obtain recognition, tribal casinos still retain some of the best lobbyists in Washington and state capitals and spend substantially to protect their interests, he said.

MGM Mirage spokesman Alan Feldman said jurisdictions' thirst for revenue has been scaring off casino operators.

"If you look at the growth opportunities for companies like mine, we don't need other states to access incredible growth opportunities for the foreseeable future," he said.

MGM Mirage, the world's largest gaming company, is fully focused domestically, concentrating on development prospects in Nevada, New Jersey and the Mississippi Gulf Coast.

In addition to not needing new jurisdictions, Feldman said many states are defining gaming simply as a generator of added state revenues rather than a force to drive development and tourism.

Feldman said since the 1990s, new jurisdictions have been lobbying to attract gaming operations.

"Our question is what are they trying to do," he said. "If the answer was raise taxes, that alone would dampen our enthusiasm."

At UNLV, Thompson agreed local officials have been greedy, especially over the past five years, as they faced shortfalls in state coffers.

"Casino companies are tired of being treated like cash cows, but the slowdown is really more the fact that the country has been covered," he said.

"There aren't that many places where there are good markets. North Dakota and Nebraska, who cares? And places like Colorado already have voted it down," Thompson added.

Also, Fahrenkopf said, as a practical matter, most American Gaming Association member casino companies are publicly traded and have to pay careful attention to rates of return for investors and Wall Street.

Therefore, the companies are focusing on established jurisdictions with stable and predictable tax rates and regulatory environments.

Gaming foe Tom Grey, executive director of the National Coalition Against Legalized Gambling, said Illinois is the only state with plans for serious expansion in the near future, and he expects an agreement to be worked out between Gov. Rod Blagojevich and state legislators over the Memorial Day weekend.

Blagojevich has proposed expanding the number of slots at existing sites from 10,000 machines to 30,000 machines, which Grey said could increase Illinois gaming revenues to more than $6 billion a year.

At the same time, Chicago Mayor Richard Daley recently dusted off his proposal for a city-owned casino which Blagojevich opposes.

Wrangling between Daley, who says his plan is "more comprehensive" than the slots-for-schools proposal in the Legislature, and Blagojevich could kill action.

In Florida, a proposal to legalize slot machines in Broward County is headed to the courts for resolution. Broward County anti-casino and pro-pari-mutuel interests Tuesday filed competing lawsuits, each asking a judge to settle a dispute over whether three racetracks and a jai-alai fronton may install slot machines this year.

A new initiative petition in Ohio seems headed for the November ballot.

Racinos in Pennsylvania are tied up in the courts as the governor and legislators wrangle over the distribution of revenues.

Similar gaming revenue-allocation conflicts have stalled progress on racino development in Maryland.

In Rhode Island, chances dimmed Tuesday for a special-election this year on the proposed Harrah's-Narragansett Indian casino when the state Supreme Court announced it wouldn't consider the constitutionality of the proposal until mid-August.

In Louisiana, legislation is proceeding to allow slot machines at the Louis Armstrong International Airport and inside paddle-wheel excursion boats on the Mississippi River.

In Texas, gaming expansion took a hit Tuesday when the Senate narrowly defeated a bill to legalize slots at tracks, on Indian reservations and in gaming districts. Race track operators and owners are expected to resurrect issue in the next gubernatorial election.

In state after state, Grey said gaming's spread is faltering because it was oversold as fostering economic development and because it was sold on the promise that it was nothing more than entertainment like the movies.

After 13 years, however, the gaming industry has not been able to hide the bodies: addictive behavior, crime, corruption and bankruptcies. And it hasn't been able to deliver on its promises, Grey said.

The result, he said, is that gambling's best days are behind it, in the 1990s, and the gaming industry is moving on to real entertainment, including the theater, dining, shopping and art.