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INDIANAPOLIS –
Sixteen years ago, Indiana ventured into casino gambling for the first time, banking on the idea that riverboats in border communities would spur economic development and fill tax coffers. But now, surrounding states are catching up.
Ohio will have horse tracks with video slots next year, and Michigan is adding tribal casinos. It’s a threat to the nearly $1.1 billion a year in tax revenue the state reaps, and has grown to depend on, from legalized gambling. "In some respects we are playing defense, much more than we ever have," said Mike Smith, president of the Casino Association of Indiana. "The state could wake up one day and find out that $300 million of their revenue is gone. It’s time to take a look at how we built this industry and make sure the tools are there to allow us to compete."
That is the underlying theme behind an interim study committee assigned to analyze numerous gambling issues this summer and fall. And part of that discussion includes whether a Fort Wayne casino would help or hurt gambling in the state.
"This is a very dangerous process. It’s like musical chairs, where somebody gets left out," said Rep. Win Moses, D-Fort Wayne. "We are past the saturation point. This will be a tough business from here on."
Indiana’s gambling hierarchy has evolved over time. The state first got in the business with the Hoosier Lottery, which brought in $183 million in the most recent fiscal year – a drop of about 8 percent.
Then the state authorized riverboat gambling, and 11 sites on the Ohio River and Lake Michigan followed a few years later with a resort casino in French Lick. Riverboat gambling generated $766 million in taxes last fiscal year. There are also two horse-racing tracks that now have electronic gambling – frequently called "racinos" – that brought in $126.6 million.
In addition, there is charity gambling, such as bingo halls, and some small-stakes gambling in bars and taverns that combine to bring in about $7 million. Most of the gambling revenue is funneled into the state’s general fund alongside sales taxes and income taxes to provide state services.
A recent report from the non-partisan Legislative Services Agency said Indiana’s gambling revenue was up for the year, unlike elsewhere in the nation, largely because of the two racinos. But an analyst for the agency also estimated that the racinos are displacing about 4 percent – or $110 million – of revenue that otherwise would have been spent at the riverboats.
"Most observers believe that at least in the state of Indiana, the market is saturated," said Ernest Yelton, executive director of the Indiana Gaming Commission. And the growing competition coming from neighboring states isn’t helping. Smith couldn’t even identify the biggest threat to the state, saying, "when you are surrounded, you can attack in any direction."
Here is what is going on in other states.
Ohio – Gov. Ted Strickland and lawmakers recently decided to introduce 17,500 slot-like machines at Ohio’s seven horse-racing tracks. These racinos will have video lottery terminals and are expected to be open by mid-2010. Two of the tracks are in cities close to Indiana: Toledo and Cincinnati. On Nov. 3, voters in Ohio will be asked to authorize 24-hour casinos in Toledo, Cleveland, Columbus and Cincinnati.
Illinois – Gambling has not changed significantly in recent years, and some experts believe regulatory decisions and high taxes have kept the state’s gambling industry from affecting Indiana.
Michigan – The state continues to add tribal casinos at a rapid pace, with more than 20 in operation now. The newest is Firekeepers Casino in Battle Creek, which opened in August. Previously, the opening of Four Winds Casino in New Buffalo gave Indiana concrete evidence of what direct competition can do – cutting revenues for the nearby Blue Chip in Michigan City by 30 percent.
Kentucky – Some lawmakers are interested in gambling in the Bluegrass State, but there has been no concrete movement. A bill was filed in 2008 for a referendum putting casino games at the state’s horse-racing tracks, but the legislation failed. Yelton said it’s only a matter of time before Kentucky and Ohio get into the gambling business and that Indiana could face trouble when that happens.
"For about two years now, I have tried to consistently inform legislature and administration that competition was looming and it was real and it was going to happen," Yelton said. "It was just a question of when and what form it would take."
There is also talk of expansion or moving existing gambling facilities within Indiana, specifically moving one or two Gary riverboats to Fort Wayne. There are already four casinos within 120 miles of Fort Wayne, and that number could rise to six when the racino in Toledo opens and if a full-fledged Toledo casino is approved.
But several insiders say Fort Wayne is still the only major untapped market in the state, excluding Indianapolis. Bill Thompson, a professor of public administration of the University of Nevada Las Vegas, has studied the gambling industry for 30 years. He expects casino revenues to rebound when the economy does, but he said the Cincinnati-Louisville market is probably tapped out for growth. Interestingly, he said Fort Wayne development is needed to protect existing state revenue.
"You have to be mindful that Ohio is ready to open casinos in Toledo, and the Battle Creek casino is reaching into Indiana," Thompson said. "So Fort Wayne is a defensive move to keep the money from going to Michigan and Ohio, but not a growth area." Yelton said gambling in Fort Wayne is a policy decision for legislators to make. And Fort Wayne Mayor Tom Henry has asked legislators to allow a referendum on gambling in which city residents could decide whether they even want a local casino.
"Is it possible? Yes. Are there consequences to the state? Yes," Yelton said. "We might gain in Fort Wayne but you will lose elsewhere." And a Fort Wayne casino would be another example of relying on Hoosiers to gamble their own money. When the riverboats were first envisioned, they were placed on the borders to attract out-of-state gamblers.
According to the Legislative Services Agency, more than 6 percent of those gambling at riverboats on the Ohio River or Lake Michigan are from other states. But that has changed with the opening of the French Lick resort and the two Indiana racinos.
A Fort Wayne casino might continue that trend. "We would end up with more Hoosiers gambling, and that’s an important consideration," Moses said. "It is not going to be like Vegas where they fly in and leave their money." Smith can’t take a position on a Fort Wayne casino because it would affect members of his association differently. But overall, he said, the state needs to look at its taxing and regulatory structure to ensure the industry’s health.
For instance, he thinks the state should offer casino operators a tax credit for capital investment. He said casinos are transforming into entertainment complexes with hotels, spas, shopping and restaurants. A tax credit for investing in those types of additions could offset the high gambling taxes.
"When you look at the cards the state holds, they are a major factor in our partnership," he said. nkelly@jg.net
