FEIGENBAUM: Historic milestone in gambling industry approaches

July 27, 2009

The Hoosier State will mark two decades of legalized gambling this fall with the 20th anniversary of the launch of the Hoosier Lottery. Pari-mutuel wagering on horse racing and riverboat casino gambling were a reality by the mid-1990s.

But “back in the day,” when gambling (no one called it “gaming” then) was authorized, the widespread nature of the phenomenon and its mega-impact on the economy, employment and state coffers were certainly not foreseen.

Paul Oakes, then an Indianapolis financial consultant who had unsuccessfully run for Congress, warned during the statewide “lottery” referendum in 1988 that the proposed constitutional change would not merely allow a state lottery, but would also permit lawmakers to legalize casinos.

His concerns were entirely ignored. However, just two months after that referendum passed, the General Assembly already was considering a land-based casino for Gary, seeking to alleviate long-running unemployment problems there. Lawmakers allowed city residents to vote on the concept in 1989, and they overwhelmingly favored a casino.

Legislation seeking such a casino was introduced and considered each year thereafter. Finally, in 1993, 10 casinos statewide were OK’d.

The explosion of casinos played out amazingly well for the state. The oligopical structure ensured that owners would make significant investments to generate profits, and all 10 riverboat casinos were on our borders, attracting dollars from neighboring states.

One legislator suggested during the 1993 casino debate that the state eventually would become “addicted” to the casino revenue, making it difficult to back off from the experiment. Rep. Charlie Brown, D-Gary, the father of casino gambling, acknowledged that certainly could happen, but reminded colleagues of the great accomplishments—and tax benefits—casinos would bring.

Fast forward to 2009: The state has made billions on gambling, funding key programs, cutting excise and property taxes, and avoiding tax hikes.

In fewer than two decades, the state has seen more than $2 billion in investment without any government incentives, and more dollars committed in our history than by any industry outside of steel, power and autos. Some 14,000 to 20,000 people were directly employed by gambling facilities at any one time.

And the state is addicted to gambling revenue.

We also have seen major industry changes. The riverboat casinos that once cruised Lake Michigan and the Ohio River are permanently moored. Local ownership shares are long gone. Indiana added an inland casino in French Lick, and slot machines and electronic table games to the horse tracks in Anderson and Shelbyville.

And despite the fact that gambling entities and their owners cannot make campaign contributions—and usually have disparate goals depending upon their geographic location, size and type—they are powerful lobbying interests.

What had once been a cash cow for the state and the host communities has now been buffeted by the same economic currents affecting all other industries.

When the racinos that debuted in Anderson and Shelbyville last June are subtracted from the mix, the state has seen same-unit revenues take a dive. Absent the record revenue boost from the $485 million platform at Horseshoe Casino Hammond that debuted last summer, the decline would be steeper and deeper.

But there is more to the big picture.

Indiana has benefited from the lack of casinos in Kentucky and Ohio, and from an 18-month-old smoking ban in Illinois. Hoosier lawmakers seriously considered a casino smoking ban this year under pressure from public health advocates.

And Indiana’s success in attracting gamblers across the Ohio River, combined with the same economic exigencies that prompted Indiana to legalize casinos, is pushing Kentucky and Ohio closer to allowing casinos.

Indiana Gaming Commission Executive Director Ernest Yelton flatly states such competition is a question of “when,” not “if.”

Much has changed in the two decades since Hoosiers made a major public policy commitment to gambling. But change is again on the horizon, and Indiana must brace for a less favorable environment.•


Feigenbaum publishes Indiana Gaming Insight and other newsletters. Views expressed here are the writer’s.


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