FEIGENBAUM: Lawmakers belatedly turn attention to gambling

Ed FeigenbaumGambling legislation is finally moving to center stage.

After an interim study committee—stacked with lawmakers favorable to gambling interests—recommended a series of items to help Indiana’s casinos and racinos compete with expanded gambling options in Illinois, Michigan and Ohio, it took until Feb. 12 for the principal bill to be heard in a House committee.

Rep. Tom Dermody, R-LaPorte, scheduled a special hearing of his House Committee on Public Policy to address his own bill, a framework for what he views as necessary to replenish state and local coffers. Those storehouses have taken a major hit in recent years from tightened consumer purse strings, new Ohio land-based casinos and racinos, Michigan’s satellite Native American casinos, and almost 20,000 new Illinois video gambling terminals—which alone effectively match Indiana’s entire inventory.

Dermody, who chaired the interim panel, shares the concern of state gambling regulators about the likelihood of a new Native American land-based casino in South Bend by the end of the decade.

You shouldn’t necessarily expect the Dermody bill as it entered committee—or even as it emerges in coming days from the House Committee on Ways and Means after being recommitted there for its fiscal impact—to closely resemble the finished product.

Gov. Mike Pence has long expressed willingness to help the industry (he signed off in 2013 on $160 million-plus in direct tax credits over three years, and millions more in other tax breaks, but remained steadfast in opposing “expansion” of gambling, without elaborating on what constitutes expansion in his mind.

Lacking specificity, lawmakers have inferred it to mean he opposes land-based gambling and live dealers for table games at racinos.

But even these big-ticket items don’t find unanimity among Indiana’s 13 gambling properties—eight of which are owned by just four entities.

Companies that expanded under current rules in the past decade oppose letting neighboring properties that failed to invest in tough times gain a land-based advantage. Casinos are not amenable to giving nearby racinos table-game parity after racinos were granted slot-only land-based licenses.

Factor in local units of government so dependent upon the state’s long-standing commitment to returning boarding bucks that they have retained lobbyists to protect their share—which recently hit state caps—and things become tougher to resolve.

Riverboat employment levels and wagering tax receipts have plummeted precipitously in recent years. Gambling revenue last rose before recessionary impacts kicked in; even that year’s numbers were tempered by addition of the racinos. The five consecutive calendar years of revenue declines—the past two well north of $200 million annually—are viewed alarmingly as “the new normal” by veteran lawmakers in charge of fiscal policy, but might just be “normal” to the cadre of legislators elected since the recession and the plunge in gambling dollars and attendant tax receipts.

This group of solons now constitutes a majority and, given the ideology of many, they might be content with cash spun off by the gambling venues, unwilling to make tradeoffs necessary to ramp up revenue.

So what should you expect?

Look for deal-makers to cobble together a workaround.

To appease the governor on the expansion facade, expect any attempt to allow land-based gambling or live table games at racinos to be accompanied by a soft cap on the number of machines authorized under the new rules, set at July 1 levels. Such a cap means the Indiana Gaming Commission—composed exclusively of gubernatorial appointees—could boost the count.

A move to land would end gambling on a casino’s boat, and be limited to current property footprints.

Any tax breaks would be carefully targeted and likely finite in duration, with some major adjustments to the wagering tax, which would include an admissions tax-equivalent.

Should the changes too closely resemble “expansion,” expect them instead to emerge in the budget bill in late April, forcing Pence to sign an otherwise acceptable budget package.•

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Feigenbaum publishes Indiana Legislative Insight. He can be reached at [email protected].
 

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