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Gambling has always polled well

In addition to their self-reported efforts to work together, the pro-gambling expansion forces have released a poll showing public sentiment on their side.

A poll paid for by Let Texans Decide, a pro-gambling group made up of interests that wanted slot machines at racetracks last session, asked 1,001 registered voters in Texas: “Regardless of your views on gambling, would you support or oppose allowing Texas voters to decide on a constitutional amendment to allow the expansion of gaming in Texas?”

The answer was a loud “yes.”

Of all respondents, 82 percent said they’d support being able to vote on a constitutional amendment to allow gambling, and 78 percent of Republican primary voters — the folks that, let’s face it, decide our statewide elections — also supported the idea of putting gambling to a public vote, according to poll results.

[…]

The poll was conducted by Wilson Perkins Allen Opinion Research, the same firm that did the surveys for U.S. Sen. Ted Cruz during his run for the Senate last year.

Respondents were contacted by phone between Jan. 27 and Jan. 30. The margin of error is ±3.1 percent, with an oversample sufficient to achieve 511 Republican primary voters with a margin of error +4.4 percent.

You can see the poll memo here, and crosstabs can be found here. There are two points to note. One is that asking people whether they favor voting on something is not the same as asking them if they favor the thing they’d be voting on. I suspect most propositions would get a favorable response to the question “should the people be allowed to vote on this”. Two, previous polls on the subject have generally shown a positive response from Texans towards expanded gambling. This 2009 Baselice poll found that 63% of respondents favored allowing slot machines at horse and dog racetracks, with 82% being in favor of being allowed to vote on the question. This 2010 Texans for Economic Development poll found that people preferred slot machines at racetracks as a way to raise revenue by a 57-22 margin over increasing taxes. None of that has made any difference in the Legislature in the past, and the safe bet is that this poll won’t make any difference, either. But there you have it anyway. Hair Balls has more.

One big happy pro-gambling expansion family

If the pro-gambling forces in the state all join hands and agree to work together, will this finally be the year that gambling expansion gets a vote? Maybe.

John Montford, chairman of Let Texans Decide, a coalition of gaming companies, track operators, trade groups and others who want Texas to legalize casinos, has met with groups representing casino and slot machine interests and is optimistic that they could agree on potential legislation that would bring a constitutional amendment on gambling before Texas voters.

“We’re working hard to build coalitions in favor of a referendum,” said Montford, a former state senator from Lubbock and the author of the legislation that created the Texas Lottery. “The members of the Legislature don’t have to be pro- or anti-gaming to support a referendum. We want people to have a fair say so.”

Efforts at such collaboration are not new in the industry, though they haven’t proved successful in bringing a proposed amendment to voters on creating casinos, allowing slot machines or other such gambling measures.

But those interests haven’t always been on the same page. Some previous efforts have come undone when race track and casino proponents battled to get a competitive advantage built into proposals pending in the Legislature.

In recent sessions, conflict between bills that would have allowed slot machines at horse racing tracks and those that would allow resort casinos have been part of the reason no such legislation made progress. Competing lobbyists and dollars sent mixed messages to legislators who may not have been keen to promote gambling in the first place out of fear of alienating anti-gaming voters.

See here for the story so far. Hard to know what to make of this, since Montford appears to be the sole person speaking on behalf of Let Texans Decide. The story notes that Sen. Rodney Ellis’ SJR6, which would allow a vote on various forms of gambling, is what’s being talked about now. It also notes that the horse racing interests are pursuing their own bill, though they may be willing to support SJR6. So yeah, not clear whether this session represents a change of tactics or just more of the same and hoping for a different outcome.

The racetracks have given up on gambling for this session

Here’s a clear answer for those of you who may have been holding out some hope for an expansion of gambling.

Retama Park officials have all but lost hope that lawmakers will act before the end of the regular legislative session to let voters decide whether to legalize slot machines at state racetracks.

While a gambling bill could be taken up in a special session this summer, any delays only would prolong the agony for money-losing Retama and other racetracks.

The tracks depicted this legislative session as do-or-die time for saving Texas’ racing industry, while pitching video-lottery terminals as one answer to the state’s fiscal problems.

“The real question to me is how long would the industry be able to survive without getting legislation?” Retama Park CEO Bryan Brown said. “I don’t think the industry will go away tomorrow or next week or next year or two years from now. But little by little, it (will).”

[…]

A spokesman for Sen. Juan Hinjosa, D-McAllen, who co-authored a resolution to expand gaming at 13 racetracks, confirmed that proposals are “effectively dead.”

A Senate resolution never got out of committee. A house resolution made it out of committee, but no further action has occurred.

The proposals could never muster much support despite polls that showed a majority of voters favored expanded gaming.

So much for that special committee. Modulo any conspiracy theories, we’re done here. As I’ve said before, if the racetracks really couldn’t survive without slot machines, then I don’t think they were truly viable for the long term anyway. Frankly, I expect to see them again in 2013 saying more or less the same things they’re saying now.

Horse racing folks feeling good about gambling’s chances this time

They always say that, but maybe this time they’re right.

The chief executive officer at Retama Park expressed cautious optimism Thursday that the state could one day allow slot machines at horse racetracks, a move that has long been deemed as critical to the financial well-being of a struggling industry in Texas.

Retama CEO Bryan Brown made his comments in the wake of legislation introduced in Austin earlier in the day.

[…]

Brown said he has never felt better about the prospects that the track in Selma, in operation since 1995, could build an alternate facility on site that would house slot machines.

“This has been a work in progress,” Brown said. “And, you know, a lot of times (during this process) we’ve been excited. A lot of times we’ve been down about the prospects. But we’ve never felt this good about what might happen.”

As noted before, I’m rethinking my pessimism about gambling. The budget issues may just be enough to overcome legislators’ resistance to it. I still think it’s an underdog, I still think the horse racing interests and the casino interests will ultimately work at cross purposes as they always have – see the last paragraph of this story for an example of what I mean – and I retain the right to my skepticism until someone shows me at least one legislator who’s flipped on the issue, but I do see a possible way forward now, which I had not seen before.

More on SHRP’s investment partner

I mentioned before that Sam Houston Race Park is getting an investor that will help them with the push to expand gambling in Texas. Here’s some more about the investor and the push.

The Philadelphia-area company [Penn National] is, at least, expert at shoehorning electronic gaming into existing race tracks. It has a glowing record of legislative persuasion in states where slots were illegal. The company also develops tracks for electronic gaming success, then operates the gaming well.

“This (50-50 venture) was more a business decision than anything else,” [SHRP CEO Shawn] Hurwitz said. “It demonstrated our fundamental belief that Texas should have and can have the best horse racing.”

He emphasized, “In our new partner, we have an organization with lots of experience in other environments. With authority, Penn National Gaming can tell us, ‘Here’s what worked here, and here’s what worked there. Here’s what people liked, and here’s what people didn’t like.’

“When Penn National looked at us, I think their people started to get very excited about coming into Texas. I think they also see opportunity to have the best in racing here.”

As always, there’s an annoying lack of anything specific. What do they think will work in Texas? I presume at this point it’s a lobbying strategy, since it’s a bit late in the game to try to swing elections. I don’t really expect them to spill their game plan to a reporter, but some clue of the general outline would be nice to know.

Many roadblocks and obstructions lie ahead. One committed foe will be other states’ gambling interests.

“If casinos or tracks near Texas borders have parking lots filled 80 or 90 percent with Texas license plates, you know they will work hard to keep those customers,” Hurwitz said.

The world’s third-largest casino is WinStar. It’s just inside Oklahoma, about 75 miles from the Dallas-Fort Worth area. Casinos and racinos (horse tracks with gaming devices) could collapse without Texas revenue.

“Nevada will also be involved in the resistance,” Hurwitz said. “Texas is second to California in gaming at Nevada casinos.”

I assume we’re now talking about the battle that will come after the legislative victory, which is the battle to get all those Texans who cross into neighboring states for their gambling fix to stay at home and lose their money here. I note this just as a reminder that however much gambling money leaves the state, not all of it will come back. Be careful when reading projections about the size of the potential windfall.

SHRP gets an investor

File this under “general gambling news”.

Sam Houston Race Park will announce today it has entered into an ownership and operations agreement with racetrack and gaming giant Penn National Gaming Inc. as Texas track owners prepare to push for expanded gaming options from the Texas Legislature next year.

Penn National will acquire a 50 percent interest in the joint venture, which operates Sam Houston, Valley Race Park in Harlingen and a planned racetrack in Laredo. The value of the transaction, which is subject to approval by the Texas Racing Commission, was not disclosed.

Today’s announcement comes as the financially troubled Texas racing industry gears up for a full-scale lobbying effort before the 2011 Legislature to approve slot machines and other gambling options that industry observers say will benefit the racing business and the Texas economy.

“This industry is struggling, and so to have somebody with a national footprint is a great thing for us,” said Shawn Hurwitz, the track’s chief executive officer. “They have tremendous financial resources, which is a great thing from the perspective of our current operations and from an effort to get other gaming passed in the state of Texas, which ultimately is the answer not only for racing but to help Texas in this tough economy.”

The story has a lot of well-known background information on the upcoming legislative fight to expand gambling in Texas, but no new information about how proponents plan to win that fight. The way I see it, this is basically Penn National placing a bet that Texas does in fact expand gambling to include slot machines at racetracks, which obviously they think will be a winner for them. They may or may not have a strategy to facilitate this, and if they do it may or may not be anything more than “give more money to the people that already support our position”, I can’t tell from the story. Like I said, they’re putting their chips on expanded gambling happening next session. Make of that what you will.

Retama Park

Here’s another story about another horse racing track – Retama Park, which is northeast of San Antonio in Selma – hoping to hit the jackpot (as it were) with slot machines. The bit that interests me is this:

If slots pass, [Retama CEO Byron] Brown envisions a massive transformation at Retama with an investment of more than $200 million in new facilities, gaming terminals and other amenities.

Still, that isn’t likely to happen until late 2012 at the earliest if slots are approved. Approval requires a vote of two-thirds of the Legislature, with voters getting the final say.

It’s not clear what would happen to Retama if slots don’t pass. Gary Baber, board chairman of track owner Retama Development Corp., a municipal subdivision of Selma, fears it could become home to a flea market or motor racetrack.

Built in the early 1990s for a reported $80 million, Retama Park had trouble right out of the starting gate. It missed financial projections its first year and landed in bankruptcy a year later in 1996.

Joe Straus Jr., who is the father of Joe Straus, the speaker of the Texas House, is part of the group that got Retama built. Straus blamed the arrival of the state lottery, the rise of Internet gaming and the spread of eight-liner slotlike machines for hampering the track.

While Retama Development emerged from bankruptcy, it didn’t shed its financial problems. Since its reorganization, it has ended every year in the red. In each of the past 13 years, auditors have cited Retama Development’s recurring losses and growing liabilities for raising “substantial doubt about Retama’s ability to continue as a going concern.”

“It’s kind of a minor miracle, in my opinion, that we have kept (Retama) alive as long as we have,” Baber said.

I had thought that maybe the racetracks might have a bit of an edge in the forthcoming gambling expansion fight on the grounds that they could install slot machines and start generating revenue for the state a lot faster than casinos, which would have to be built from scratch. But if Retama is typical, then that isn’t necessarily the case. Point being, and I want to commend Sen. Rodney Ellis for being clear about this when I interviewed him, whatever the potential long-term revenue from expanded gambling may be, there will be almost no effect on the next budget.

I got a good chuckle out of Straus’ daddy’s excuses for Retama’s lack of profitability. I mean, the Lottery was created in 1991, five years before Retama was built. I suppose it could have had an effect on their bottom line, but it’s not as if they never saw it coming. Really, they should have seen the threat from online gambling back in 1996, too, but that’s a more understandable oversight. I have to ask, though – if online gambling is keeping people away from the tracks now, how much would the addition of slot machines really change that?

Retama is an example of an industry, once touted as a financial savior for Texas, now in deep distress. Yet here it is, touting the addition of slot machines to their businesses as an savior for Texas, and by the way for themselves. You do have to admire the tenacity, I’ll say that much.

The state of horse racing in Texas

It’s not very bright right now.

The Texas Racing Commission faced a packed house Friday in the enclosed confines of the Founder’s Room at Sam Houston Rack Park. They heard a tale of woe from an industry in rapid decline, a decline precipitated by a close escape of Texas dollars flowing across the Sabine and Red rivers to horse tracks with a racino attached.

You can imagine what they believe the solution to their woes is. Look, I’m not a horse racing enthusiast. The one only time in my life I’ve been to a racetrack was 1988 at Bandera Downs, which was back before you could place a bet on a race. But I sure do remember being told that allowing bets on races would be a financial windfall for the state. It’s primarily because of that that I remain skeptical about the claims now being made by “racino” proponents; that is, proponents of allowing video lottery terminals – slot machines – at racetracks. I do believe that will draw more people to the tracks, but I don’t see how it’s going to make more people interested in horse racing, and because of that I have doubts about its long-term viability. If the races themselves aren’t drawing people in, what’s to keep them from getting drawn away by some other shiny new object later? Anyway, this is an interesting story about something I generally pay little attention to, so check it out. Thanks to Hair Balls for the link.

Poll says people prefer slots to taxes

I don’t think that’s a great revelation – I’d think many people would claim to prefer a bout of the flu to having their taxes raised – but for obvious reasons, this is a noteworthy finding.

A new poll conducted for horse track owners indicates that Texans would rather legalize slot machines at race tracks than pay higher taxes to offset a projected $18 billion revenue shortfall in the next state budget. The poll of 801 registered voters in Texas, conducted by Austin-based Perception Insight, showed the preference for slot machines across the political spectrum – Democrats, Republicans and independents.

Results of the poll mirrored earlier surveys that found Texans generally would rather see new revenue raised in ways other than through increasing taxes. The new poll, conducted from June 8-13, was paid for by Texans for Economic Development, which represents horse and dog track owners in the state. Efforts to expand gambling in Texas have picked up steam as projections for the state’s revenue shortfall next year have continued to grow.

According to the poll, 57 percent of voters favor slot machines over higher taxes when given a choice, while 22 percent would rather raise taxes.

You can see the poll memo here. There’s a lot of context missing – these were a couple of questions from a larger poll, about which we have not been told anything, and there’s no crosstab data – so don’t read too much into it. In particular, I think any time you ask the question “Would you prefer for the state to raise taxes or do X”, I think “do X” is going to win handily most of the time. Not to put too fine a point on it, but even the most optimistic estimate of potential gambling revenue for the state is far short of the structural deficit caused by the ginormous unaffordable property tax cut of 2006, let alone the actual shortfall for this biennium. In other words, this isn’t an either-or choice, even if we assumed there were no other possible options. I understand there’s only so much you can do in a poll, but that means there’s only so much you can take from it, too.

To me, the more interesting finding is that there is no apparent downside for a politician who supports expanded gambling. That’s not going to stop hardliners like Empower Texans, who have been peddling the misleading claim that gambling expansion is a Democratic issue – someone should tell that to Rep. Ed Kuempel, as he was the lead author of the joint resolution and its enabling legislation to expand gambling last session – from trying to scare Republicans about it. It wouldn’t be any fun if it weren’t for stuff like that. Whether this changes anyone’s position or not, I couldn’t say, but it’s not likely to make anyone shy away from supporting more gambling.

Finally, note that the questions only asked about slots at horse racing tracks, not about casinos. As we know, those two interests are competitive and not cooperative, so there’s no guarantee that even if we do see some kind of gambling expansion move forward that it will take this specific form. Maybe casinos would be less popular than slots, I don’t know. Just something to keep in mind.

Filling the void

I’ve heard a number of reasons why we “need” video lottery terminals at horse racing tracks, but this one, espoused by Texas Racing Commission Chair Rolando Pablos, may be the most entertaining.

Though he does not gamble, Pablos studied gaming models during postgraduate studies at UH. He continues to study them. He perceives one disconnect with many horse race spectators — idle time between races. He understands that some spectators enjoy partying between races. Others bury themselves in handicapping the next race. Still, he contends, there’s “a void.”

“Horse racing needs to get more creative,” he said. “We see examples of creativity, like at Sam Houston Race Park with its programs and concerts. But revenue from horse racing is still declining. We need even more creativity.”

At Louisiana, Oklahoma and New Mexico tracks, Pablos noted, “People run to the slot machines between races. That (electronic gaming) model works well for our neighboring states. We don’t know if it will work here.”

Well, that is creative. Maybe they can adapt a line from the Weird Al Yankovic song “Horoscope” as their motto: “Fill that void in your pathetic life by playing VLTs seventeen hours a day”. I’ve not been to a horse racing track in years, so I can’t say if this “void” of which he speaks really exists. I do know that many other sports seem to manage their breaks in the action without the need for VLTs, so I trust you’ll pardon my skepticism here. The real question is whether or not allowing VLTs actually would be a net plus for Texas’ bottom line. Remember, the racetracks themselves were once supposed to be a financial windfall for Texas. Filling voids isn’t really a concern to me.

The gambling industry never sleeps

I confess, I hadn’t realized the Chron had a Horse Racing Notebook column, but they do and this one wants to tell you just how awesome slot machines would be at the racetracks if only we’d let them have them. I don’t have any particular interest in rehashing the arguments from the legislative session, when various gambling expansion bills tried but failed to gain traction; you can search my archives if you’re interested. I just wanted to note that the entire piece is given to the views of the racing industry, in particular Sam Houston Raceway Park, and a pro-gambling advocacy group called WinForTexas.com, which (as the piece fails to mention) you can follow on Twitter if that’s your sort of thing. Even though the next opportunity the gambling industry will have to change things is a year and a half away, that doesn’t stop them from getting the word out. You have to admire the tenacity, as well as the ability to get a media professional to pass on all their talking points. Whatever else you think of them, they’re good at that.

Response from the racetracks

When I wrote my earlier post about how much revenue expanded gambling would generate for Texas, I said I’d be more than happy to do a similar exercise for someone on the pro-gambling side of things. Sure enough, I got an email from Mike Lavigne on behalf of Texans for Economic Development, who sent me a copy of a study done by TXP that examined the question for the horse racing interests. I’ve uploaded it here (PDF) for your perusal. The main thrust of the argument is as follows:

Texans are already gaming at a high level. Based on data from a variety of sources, including state gaming commissions, convention and visitors bureaus (CVBs), and other academic studies, TXP has estimated the current gaming revenue in a seven-state region that is attributable to Texans at approximately $2.3 billion during 2007, the equivalent of about 3.8 percent of the national total. This is the assumed universe of current Texan gaming; while there undoubtedly are individual instances of Texans gaming elsewhere in the country, it does not appear to be significant.

The Innovation Group was engaged by Texans for Economic Development to estimate the size of Texas’ gaming market. A summary of their results follows. As the table indicates, the total Texas market approaches $4.2 billion in gaming revenue at full implementation. However, there is still leakage out of state, as some Texans will continue to game elsewhere.

A significant share of the revenue that would occur in Texas with the implementation of racinos would be recaptured from other states where Texans currently game. Measurement of the volume of this spending is done through subtracting the leakage out-of-state ($840.2 million) from the $2.4 billion figure, yielding recaptured spending of approximately $1.8 billion.

They estimate a total of about $3.4 billion in gambling revenue, which when taxed at 30% (the rate for racetracks is higher than what has been proposed for casinos) yields about $1 billion a year for the state. They make other claims as well about related economic activity and employment, which I’ll leave to you to examine.

I remain basically skeptical of the claims made here – I think some of these projections are optimistic, especially the ones made separately about the economic benefits for other businesses that flow from expanded gambling. I also think it’s foolish to rely on gambling revenue for anything other than “found money” – the Texas Lottery should be an object lesson there. Finally, there is a moral case to be made against expanded gambling, and I think we greatly underestimate the social costs associated with it, which the state does precious little to mitigate. I’ve got a future post planned for that, since it’s outside the scope of this one. Having said all that, I can at least see where the racetracks’ numbers are coming from, and while I think they’re sunny, they’re comprehensible and reasonable. We can argue over these numbers because they’re here to be argued over, which remains more than I can say for the casino interests, whose claim that they would generate $3 billion for the state looks even more ludicrous to me based on this.

I also asked Lavigne in an email exchange after he sent this to me about the bleak picture the racetracks have painted for their industry today, and why they would be a better vehicle for capturing the “leakage” than regular casinos. Here’s what he said, reproduced with permission:

The Racing Commission did indeed paint a glum picture. There is no denying the shape the industry is in right now. The primary reason is that purses in Texas are so low, there is no incentive for breeders to breed in Texas. If they take the same horse and breed it in Louisiana, NM or OK they will be eligible for much larger prizes. A large chunk of the money made in this bill will go toward growing purses here that will be competitive with not only with our neighbors, but with the eastern seaboard, where racing has had a lot more success. This model is the reason our industry in Texas has fared so poorly. When parimutuel wagering was legalized in Texas, there were very few (if any) racinos in our bordering states.

We don’t oppose the proposal for regular casinos on its face, but we do object to the disparate tax rates. That would surely kill any chance racinos would have to be successful.

As to why we think racinos would better capture the money than casinos? I think that is the wrong question. Both would be able to get at that money. We do have to look at political reality though. What is more palatable to the legislature? Full on casino gambling overnight? Or a smaller expansion at existing sites with legal wagering already taking place.

The Governor and many Republicans have repeatedly said that they do not want to expand the footprint of gambling. We believe our proposal is a more modest one.

The most important thing to remember about these figures is that the Comptroller will ultimately make the decision as to how much money these proposals would raise. She will do her own math.

So there you have it, the case for racinos. My thanks to Mike Lavigne for engaging me on this. If someone with the casino interests wants to show me their numbers, I’ll be more than happy to do this for them as well.

Finally, on a related note, whatever reservations I have about casino and/or racetrack gambling, I do support an expansion of legalized poker in Texas. HB222, introduced by Rep. Jose Menendez as the Poker Gaming Act of 2009, would establish poker as a “game of skill and not a lottery or gift enterprise prohibited by the Texas Constitution” and would thus allow for the creation and regulation of legalized games. In particular, it would allow establishments that hold a license to serve alcoholic beverages issued by TABC or a license issued by the Racing Commission to have the ability to host the game of poker. There was a hearing for this bill yesterday in the House before the Licensing and Administrative Procedures committee. I have no issues with this bill and support its passage.

How much money would expanded gambling generate?

Throughout this session, every time the subject of expanded gambling in Texas comes up, along with it comes some kind of projection of how much revenue it might generate. Those estimates always come from the proponent of that form of expanded gambling, and as expected are wildly optimistic. For example:

Texas Insider, February 13:

“Our breadth of support cuts across all lines of gender, race and party,” said Tommy Azapardi, Executive Director of Texans for Economic Development. “In these economic times, voters are very motivated by the 53,000 new jobs and the billion dollars a year for state coffers racinos could generate for the state.”

Texas Politics, February 23:

Proponents say casinos in Texas could generate anywhere from $3 to $4.5 billion per year.

Houston Chronicle, February 25:

Backers of Joint Resolution 31 and Senate Bill 1084, the broad gambling legislation, said their proposal would bring in at least $3 billion a year in new state and local revenue.

So how realistic is any of this? Well, consider this.

During 2008-09, the [Economic Forum] expects gaming taxes to drop from $804 million to $715 million, an 11 percent decline. Gaming revenues will increase by 3.3 percent to $739 million in 2009-10, and by 3.9 percent to $767 million in 2010-11, according to the forum.

That’s from Nevada, a state which has more gambling than we do or would even if HJR 31 passes. The $715 million in gaming revenue comes from a gross gaming revenue tax of 6.75% (it’s actually slightly less than that, but this is close enough), which in turn implies statewide gambling revenues of about $10.5 billion. If you assume the casinos’ margin is seven percent – that is to say, a total 93 percent payout on all bets – that means gamblers dropped a total of about $150 billion at Nevada casinos.

So the question is, do we think Texas casinos will generate more than Nevada’s? HJR 31 sets the revenue tax at 15%, so we could generate as much tax revenue on less than half the amount – about $4.8 billion, or $68 billion in bets at the same payout rate. To get all the way to $3 billion, though, you’d have to have the casinos take in $20 billion, which in turn is about $270 billion in bets. I don’t think that’s going to happen.

By the way, a little further Googling led me to this article, which suggests that gross casino revenue in Louisiana is about $2.5 billion. That strikes me as a better comparison to Texas – note that Louisiana has 13 riverboat casinos and one land-based casino, while HJR 31 would call for 12 casinos in Texas – and would generate $375 million in gambling taxes at 15 percent.

Now of course, the casinos have other ways to make money for themselves (food, drink, hotel occupancy, entertainment, etc) and for the state (sales taxes, hotel taxes, alcohol and cigarette taxes (assuming smoking would be legal in the casinos, which I’m guessing would not be the case), property taxes, business margins taxes, etc). I don’t know what the components are to that $3 billion figure for the casinos, or the $1 billion figure for the “racinos” (I still hate that word). It’s entirely possible – likely, really – that I’m not comparing apples to apples. But at least you can see where my numbers are coming from. It would be nice if the gambling industry could do some of the same kind of calculation, and show their work, so that a proper comparison, as well as a judgment of their projections, can be made.

Full disclosure: The two Nevada links came to me from Teresa Kelly of Texans Against Gambling, after she commented via email about an earlier post of mine. That was the inspiration for this post, though the rest of the research is mine. I’ll be more than happy to do a similar exercise for someone on the pro-gambling side of things if they want to as well.

Two stories about gambling

The Chron’s David Barron talks to some experts about putting slot machines at horse tracks, which is one of several major proposals to expand gambling in Texas this legislative session.

William Eadington, an economics professor at the University of Nevada and director of the university’s Institute for the Study of Gambling and Commercial Gaming, questions the accepted wisdom in racing circles that video slots are a magic bullet for racing.

“The official argument is that this is a way to save racing and increase purses, which will attract better horses,” Eadington said. “The only thing wrong with that is that it hasn’t really held up.

“Racing continues to be in decline. If you look at handle and on-track attendance and net revenue after payment of purses — any of the standard measures — it has been stagnant for 20 years.”

While track operators stand to benefit financially from state licenses for video slots, granting such licenses during an economic downturn and limiting the field to racetrack owners cuts into potential state tax benefits by eliminating the large casino operators as competing bidders, Eadington said.

“Most of the major companies, with a couple of exceptions, are in no position to be bidding on casino licenses. They have no money for capital commitments,” Eadington said. “In that sense, this is not a great time to be putting things out for bid. You foreclose the option of doing something better if and when the economy gets going again.”

Difficult times for the resort casino industry, of course, make this a perfect time for racetracks to seek state legislation that would grandfather them in as video slot operators.

“It’s all political,” the economist said. “What (the tracks) would like is an environment that preserves the possibility of long-term excess profits. If they can have exclusivity in slots in urban areas, they are potentially very profitable.”

Nice to hear a little balance to all the rah-rah stuff the gambling industry puts out every time we go through this. I feel like it should have run on the front page, rather than the front page of the sports section, but I’ll take what I can get.

Meanwhile, John Nova Lomax has a cover story in the Press about the history of casino gambling in Galveston and the debate today about bringing it back as a means to revitalize the place post-Ike. I think this is the key bit:

You can see arguments for and against casinos before your eyes. Both major Lake Charles casinos sport huge parking lots — which begs the question of where they could fit in Galveston.

Those lots are also jam-packed with cars with Texas license plates. When you couple that with all the signs touting the many shuttles offering dirt cheap transport from nine pickup points in Houston to the casinos, you realize the magnitude of the cash drain over the Sabine.

Both the Isle of Capri and L’Auberge du Lac are vast complexes that rise mirage-like out of acres of concrete in the middle of nowhere. Each offers in-house restaurants, shops, clubs and lodging, and that underscores one of [gambling opponent Harris] Kempner’s main anti-casino contentions — that [Allen] Flores and the Strand merchants are fooling themselves if they think casinos will bring them customers. Even in the old days, he says, the Balinese Room knew well how to lock down the junket trade. “When the casinos wanted to attract banquets, they undercut,” he says. “They could afford to do that because they can make food, drink, shelter and entertainment a loss leader, and they will do it again.”

That’s been the Atlantic City experience, and I tend to think it would be Galveston’s, or any other place’s that got casinos, as well. Lomax does a good job of presenting multiple perspectives on the issue, so check it out.

Reason #437 why I’m skeptical of the gambling industry

The regulatory agency that oversees horse and dog tracks in Texas is begging for a handout to make it through the end of the fiscal year.

Faced with a 14 percent, nearly $678,000 shortfall, the commission that oversees horse and dog racing in Texas has asked Gov. Rick Perry for a $250,000 emergency grant to finish the fiscal year ending Aug. 31 in the black.

In case that strategy fails, members of the Texas Racing Commission Wednesday signed off on a letter to Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus requesting a $250,000 supplemental budget appropriation.

Members acted shortly before representatives of horse and greyhound interests painted a desperate picture of the racing industry’s health at Wednesday’s commission meeting.

“Time is clearly running out,” said Bryan Brown, CEO of the Retama Park, a horse track north of San Antonio. “We can’t continue on as an industry and face all these issues.”

The agency attributes $70,000 of the shortfall to the impact of last year’s hurricanes on track revenues. It blames the rest on a factor likely reflecting decreased betting.

[…]

Brown told the commission that from 2007 to 2008, the number of Texans involved in horse racing dropped by more than 1,200 to 3,325. He also noted drop-offs in horses bred and raced in the state, live racing days at tracks and in total revenue. He said tracks also continue losing customers to online alternatives and illegal gambling parlors.

Earlier this week, Rolando Pablos, the commission chairman, told the budget-drafting Senate Finance Committee the racing industry is on the decline.

Remember when the introduction of the horse and dog racing industries, with their legalized betting on races, was going to be a financial windfall for the state? Boy, those were the days. But hey, let ’em have slot machines, or maybe just open the door to casinos, and this time we really will be swimming in the money. For sure! We mean it! What could possibly go wrong?

Expanded gambling: It isn’t just for race tracks any more

Here’s an update to the story about the big expanded gambling bill that was filed yesterday.

Slot machines also would be allowed at the state’s existing race tracks under the proposal by Sen. Rodney Ellis, D-Houston; Sen. John Carona, R-Dallas; Rep. Jose Menendez, D-San Antonio, and House Appropriations Committee Chairman Jim Pitts, R-Waxahachie. In addition, the three federally recognized Indian tribes could operate a casino on their tribal lands.

“Texans already are voting with their feet and going out of state” to gamble, Ellis said. Menendez noted that Texas is “surrounded by gaming.”

Opposition immediately arose from conservative and Christian groups and a racetrack group pushing more narrowly for slot machines at tracks. Backers of Joint Resolution 31 and Senate Bill 1084, the broad gambling legislation, said their proposal would bring in at least $3 billion a year in new state and local revenue.

The legislation calls for $1 billion to be funneled to a trust fund for college scholarships and another $1 billion to transportation. Casino proponents also said their proposal would create 90,000 to 120,000 jobs.

I don’t believe any of those economic projections. Then again, I never believed the projections that the horse racing interests gave about their slots-at-racetracks proposals. I think there will be a net benefit to the state, at least in terms of revenues taken in – the bulk of the social costs will not be borne by the state, so the books will looks good – but $3 billion a year and 100,000 jobs is just crazy talk, as far as I’m concerned.

The way this is being done, as an alternative to slots-at-racetracks, will make for a fascinating dynamic in the sausagemaking process. I see it as lobbyist versus lobbyist, with some folks like the religious conservatives taking potshots from the sidelines. There’d be a hell of a reality TV show in there if someone had seen this coming early enough.

The legislation calls for $1 billion to be funneled to a trust fund for college scholarships and another $1 billion to transportation. Casino proponents also said their proposal would create 90,000 to 120,000 jobs.

Up to 12 casinos would be allowed statewide, with designated areas for nine of them: Galveston, South Padre Island, Bexar County, Tarrant County, Travis County and two each in Dallas and Harris counties.

A plan critic, Tommy Azopardi, of Texans for Economic Development, said the legislation would create a “widely disparate tax rate” between casinos and tracks (15 percent versus 35 percent), wouldn’t allow tracks to have the same games as casinos and would greatly expand “the footprint of gambling in the state.”

Casino backers said tracks could apply for one of the casino licenses but would have to go through the same process as other applicants.

I got a press release from Azopardi, not coincidentally sent by the same guy who sent me the earlier poll information, which I’ve reproduced beneath the fold. It’s going to be a bear trying to sort out the objective facts from the spin on this one, that’s all I know. Maybe I’ll get lucky and the CPPP or someone like that will weigh in. In the meantime, keep your hip-waders handy.

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Gambling poll

Got a press release in the mail on Monday that claims there is broad support for expanded gambling in Texas – in particular, allowing slot machines at existing race tracks and on Indian reservations. I’ll point you to Texas Insider for a reprint of the release, and to this Google doc that has the poll questions and responses; I also received a statement in response to the poll from Texans Against Gambling, which you can see here. I guess I’m not surprised by this – especially in tough times, expanded gambling will look like an easy way to add to the state’s coffers. I am a little surprised that the poll says that 68% of “conservative Republicans” favor the slots; given Governor Perry’s ceaseless pandering to GOP primary voters, you’d think he’d have been in front of that parade. Maybe this is a prelude to a softening of his position, I don’t know. What I do know is that I will never willingly use the word “racino” in a sentence, no matter how often the gambling industry repeats it. I mean, seriously, you have to draw the line somewhere.

Anyway, I’ve been saying that I expect there to be a push for expanded gambling this session. And now there’s word that a major gambling expansion bill is about to be filed.

Sens. Rodney Ellis, D-Houston and John Carona, R-Dallas, and Reps. Jose Menendez, D-San Antonio, and Jim Pitts, R-Waxahachie, are planning to file a bill tomorrow that would bring 12 huge destination resort casinos to the Lone Star State.

“We’re talking about very large destination casinos, with hotels and restaurants and other entertainment in addition to gaming, casinos that would bring in a whole new clientele, not just to gaming but people who’ll come just for the hotels or the restaurants,” said a spokesman for Ellis, who asked not to be named because he wasn’t authorized to speak publicly.

The bipartisan plan calls for placing seven casinos in urban areas, probably two in Dallas County, two in Harris County and one each in Bexar, Travis and Tarrant counties, according to a source. Two might go to the barrier islands, ie Galveston and South Padre Island. Three more might be awarded based on a showing of economic impact.

An expansion of gambling in Texas would need the support of two-thirds of the House and Senate and the approval of voters. Last year, only one gambling expansion bill left the House committee, only to die on the House floor.

This year’s bill evidently has something for the two casino-less Indian tribes, too. It would allow the Tiguas and the Alabama-Coushattas to also (re)open resort casinos on their reservations, a lobbyist who also asked not to be named, said.

This bill apparently doesn’t have a racetrack slot machine provision, so it may wind up being opposed by other proponents of gambling who don’t feel like they’re getting a piece of the action. Note that Rep. Pitts chairs the Appropriations committee, so having him on board is a boost. This ought to be fun to watch, if nothing else.