Casinos bet $19M at Statehouse with mixed results

March 16, 2013

The power of Indiana's multibillion-dollar gambling industry is being tested anew within the halls of the Statehouse this year as the once-dominant industry faces new competition from neighboring states and declining collections amid a stubborn economy.

Indiana's 11 casinos and two racetracks with slot machines are seeking new concessions from the General Assembly in what they say is a do-or-die situation. Just how much they have spent this year pushing that message will not be available for months to come, but lobbying records compiled by The Associated Press show they have not hesitated to spend big at the Statehouse.

The gambling industry spent more than $19 million lobbying at the Statehouse from 2000-2012, according to reports filed online by the Indiana Lobby Registration Commission. The greatest spending came during wagering tax battles in the 2008 and 2009 sessions, when the industry spent $5 million combined. The commission only posts reports dating from 2000 in its online database.

In that time, those millions bought Indiana's riverboats the right to dock permanently, an exception to the state's water rule for the construction of the French Lick Casino and Resort and the installation of 4,000 slot machines at Indiana's two horse-racing tracks.

But gambling has largely been the product of Indiana's Democrats, growing most under Democratic governors and Democratic majorities in the House of Representatives. The shift to Republican dominance in the last few years has produced new leaders skeptical of any expansion of gambling.

New Gov. Mike Pence said recently that he opposes any expansion but would consider cutting taxes for casinos.

"I don't gamble on anything, except politics," he said, half-jokingly.

Gambling money is the state's fourth-largest source of tax revenue. Only the state's sales tax and personal and corporate income taxes bring in more. But the decline of the industry has lessened how much gambling money lines the state's coffers. The industry paid $614 million in state taxes last year but is expected to kick in only $520 million by 2015.

Pence's defense of the status quo may seem like a defeat for the gambling lobby, but even supporting existing gambling marks a victory for the casinos, said Ed Feigenbaum, editor of Indiana Gaming Insight and a veteran gambling analyst.

"If you look at the last couple of years, the Republican resistance on philosophical grounds has largely evaporated, and Governor Pence is a great example of this. Gaming is the accepted public policy of the state. It is a legitimate industry," he said.

A quarter century ago, gambling was banned in Indiana. But voters repealed that ban in 1988, and Indiana quickly rocketed to become the state with the third-largest gambling industry, trailing only New Jersey and Nevada.

"If you had told anybody 25 years ago that a casino company would be a sought-after client for a major law firm in this town, you would have been laughed at," Feigenbaum said. "Now they're a major source of revenue for all the big law firms."

The $19 million to lobby for the industry has been spent on everyone from the partners of Indiana's largest law firms to big names like Donald Trump. Average rates for most lobby shops run from about $40,000 to monitor legislation during one session to about $120,000 to push measures through the General Assembly.

But gambling interests routinely exceed those standards. The owners of Hoosier Park spent $524,000 lobbying during the 2009 session and roughly $1.2 million in 2008 during an unsuccessful effort to save $33 million on state taxes. Lobbyists for Centaur Inc. argued at the time that the state had gouged them by offering slot machine licenses for $250 million.

The price of the licenses, and the interest paid to finance them, forced both tracks into bankruptcy.

"I'm not sure the gaming industry has ever been able to get what it wants," said John Keeler, vice president and general counsel of Centaur Holdings, which owns both Hoosier Park and Indianapolis Downs as of last month.

The money spent on lobbying may seem like it gives his company and the casinos a bullhorn in the Statehouse, but that's only because gambling interests can't make campaign donations. Powerhouses like the Indiana Manufacturers Association or the Indiana State Teachers Association can spend on lobbying during the session and during the campaign season to get supporters elected, but casino owners have to funnel all their money into lobbying.

"Whenever you are in a highly regulated industry, created and sanctioned by the government, your fortunes are at the peril of the Legislature," Keeler said.

Centaur has spent the most of any operation in the last 12 years, pumping $6.5 million into the Statehouse.

Rep. Patrick Bauer, D-South Bend, said the casinos and racetracks might appear as one conglomerate industry, but they often quarrel among themselves as they compete for gamblers.

The former speaker, who shepherded much of the state's gambling legislation, said the industry should be careful not to ask for too much, like it did in 2009 when it lost an effort to reduce its taxes.

"I think there's a very big concern that everybody is just loading it up and they'll just blow it up again," Bauer said.

The latest test will be a Senate bill that would legalize full-blown casinos on land, allow the race tracks to install table games and allow casinos to withhold some of the aid they pay to the counties where they're located.

"They must have some power, because they're getting a tax bailout and the average Hoosier is not," said Micah Clark, executive director of the American Family Association of Indiana, referring to stalled efforts to approve Pence's 10 proposed percent income tax cut.

It won't be clear until the end of the year how much the industry spent at the Statehouse this year trying to win an expansion. But if previous battleground sessions are any indication, 2013 could be another pricey wager for the industry.


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