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Panel likely to recommend casinos on land, more live dealers

October 8, 2014

Live dealers in race-track casinos. Riverboat gambling operations rebuilt on land. And more assistance for a resort in French Lick.

Those are among the ideas that a panel of lawmakers appears increasingly likely to recommend to try to prop up a gambling industry rocked by competition from Ohio and other states. The group is expected to vote at an Oct. 30 meeting.

But even if the Public Policy Study Committee endorses the proposals, they’re far from a done deal. The full state legislature would have to approve the changes when they meet again next year – and the panel that has discussed the tweaks to Indiana’s gambling laws is considered friendlier to casinos’ interests than the full House and Senate.

Still, the study committee endorsement would matter, especially because the proposals include some that have been pushed by the casino industry unsuccessfully for several years.

“Whether we like it or not, we’re partners” in the industry,” which produces about $400 million annually in revenue for the state budget, said Rep. Matthew Lehman, R-Berne. That’s down from $600 million a few years ago, before casinos opened in Ohio and siphoned customers away from gambling operations in Southeastern Indiana.

“We need to try to take a pragmatic approach” aimed at keeping the casinos competitive, Lehman said.

Chairman Tom Dermody, R-LaPorte, said consensus is building for several ideas the gambling industry has been pushing for years.

“I think you saw a lot of support for some reform,” Dermody said after the meeting. “That could lead into some momentum into the (2015) session.”

Among the proposals is one that would let the state’s 10 casino boats rebuild operations on land – as long as the new buildings remained in the resorts’ current footprints. But defining the latter is key.

The operators of several casinos testified Wednesday they have plans that would include rebuilding on property they already own that’s close to their existing pavilions or hotels. But some lawmakers said they want to ensure that a casino in Northwest Indiana couldn’t buy land in Indianapolis and then claim that’s part of its footprint.

“We are entering some areas that could be very gray,” Lehman said. “These definitions need to be very firm.”

But officials from Majestic Star – which operates two casino boats in Gary – eased lawmakers’ concerns a bit by announcing they had abandoned plans to relocate their operations several miles away to a spot just off Interstate 80/94. The casino had been pushing that proposal for several years, but lawmakers have been reluctant to OK the change.

On Wednesday, Majestic Star President Pete Liguori said the new plan is to combine the two boats into one land-based operation that would sit in front of the casino’s hotel. “We think of it more as a relocation than an expansion,” Liguori said.

He said the change in plans is a reflection of the existing political reality. “Sometimes you want to swing for a grand slam,” which would be the location near the interstate, he said. “But what you really need is a single or double. We decided to go for the single or double.”

Building on land – rather than on a boat – allows for larger casinos, generally on one floor, eliminating the need for customers to traverse stairs or use elevators. It also allows operators to incorporate more restaurants, bars and other amenities into the casinos. That makes the operations feel more like casinos in Las Vegas.

It’s also cheaper and easier to add more gambling positions and potentially generate more revenue.

But lawmakers are eager to avoid using the term “expansion” to define any changes they’re considering. That’s in part because a number of legislators have pledged to oppose any gambling expansion – as has Republican Gov. Mike Pence.

“Because these would be in the same footprint as the existing operations, this would not be an expansion of gambling,” said Sen. Ron Alting, R-Lafayette.

Neither would adding live dealers at the state’s horse track casinos in Anderson and Shelbyville, their managers argued.

The legislature originally sought to authorize the so-called “racinos” as slot machine-only gambling operations. But the way the General Assembly wrote its definitions, the racinos were able to install electronic table games. They look and feel much like a typical blackjack, craps or poker games but cards are dealt and dice are thrown on a computer screen as players make their bets.

Centaur Gaming, which owns both racinos, now wants live dealers, a move they say would add about 600 jobs – a number that includes positions added in Shelbyville and Anderson minus those that would be lost at other Indiana casinos with reduced traffic under the change. Centaur President Jim Brown said the addition of live table games could also boost state revenue from gambling by some $75 million annually.

“This is a tremendous opportunity for us,” Brown said. “And it would help Indiana’s gaming industry respond to a real and viable threat.”

But the folks at the French Lick Resort, home to one of the state’s smallest casinos, say they’ll likely lose half their table game players if the racinos get live dealers. That’s because a large share of their customers come from the Indianapolis area and Shelbyville and Anderson are closer.

Still, Steve Ferguson, chairman of Cook Group, which owns the French Lick Resort, said he’s not necessarily opposing the racinos’ request for live dealers. Instead, he said he wants lawmakers to consider reducing the French Lick casino’s tax rates to compensate it for the losses.

“I understand their business model and the state’s business model and I’m not going to oppose it,” he said. “But if in in fact it’s done, we have to have some concession.”

Dermody said after the meeting that it’s less likely the state would cut French Lick’s tax rate than provide it with other incentives or assistance with tourism or other issues. Still, Dermody said the state must do something.

“We can’t just forget about French Lick,” he said. “But that issue might be bigger than just what this committee can do.”

Some gaming lobbyists and executives are also seeking changes in how they are taxed. One proposal calls for deducting free play, or promotional play, credits from the amount casinos are taxed. Ryan Soultz, lobbyist for Boyd Gaming Corp., which owns Blue Chip Casino in Michigan City, argued that free play makes it easier for casinos to attract customers.

"Every dollar of promotion adds $3-$4 of spending," Soultz told the panel.

Indiana casinos long had a monopoly on large-scale gambling in the region, but Ohio began opening casinos just across the border two years ago. Kentucky, which legalized slot machine gambling a few years ago, is considering adding a casino.

Taxes on Indiana's gambling industry at one point made up one of the state's largest sources of tax collections, generating almost as much money as personal income taxes. But that number has dropped precipitously recently, contributing to state budget woes.

Collections on the wagering tax — which ranges between 15 percent and 40 percent of the amount gambled at each location — dropped from $686 million in 2013 to $596 million this year. The amount collected through the admissions tax dropped from $67 million in 2013 to $58 million at the close of the state's most recent budget.

Overall, Indiana's tax collections dropped slightly from 2013 to 2014, and budget leaders have cautioned agency heads to prepare for another year of tight spending. Meanwhile, Gov. Mike Pence has sought cuts in various areas to maintain $2 billion in cash reserves left to him by former Gov. Mitch Daniels.

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