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Tuesday, February 13, 2007

Expansion on the Table in West Virginia

- Efforts are underway once again to bring racinos to the casino-laden state of Michigan, and to add instant racing machines in Virginia. But the endeavor that could have the most far reaching consequences is taking place in West Virginia, a state which already has slots, where racetracks are trying to gain the right to add table games, thus turning them into full-fledged casinos. In fact, West Virginia has had slots for so long now that it's old hat, and is no longer seen as sufficient in light of the ongoing transformation of Pennsylvania into one giant slots parlor with locations on and off track. (A Pennsylvania court ruling has cleared the way for Presque Isle Downs, a new thoroughbred track/racino being built by Penn National in Erie, to open their racino late this month and become the 4th such operation thus far.)

The addition of table games in the state would no doubt increase the calls for the same in Delaware, and could hasten their introduction in Pennsylvania, where many believe it's just a matter of time. As casinos and their accompanying hotels and entertainment centers grow and the revenue increases, the horse racing part will become more and more insignificant financially.

West Virginia track owners have been complaining long and hard about the new competition. Wheeling Island Racetrack and Gaming Center president Robert Marshall, who is particularly concerned about competition from the nearby Meadows Racetrack, slated to open later this year, was threatening to lay off workers a year ago, when Pennsylvania's plans were still on the drawing board. Past legislative efforts have stalled, but now, for the first time, a bill permitting table games has made its way to the floor of the House of Delegates, having passed through its Finance Committee by a vote of 16-9.

During a 4 1/2-hour committee meeting, committee members rejected 10 of 11 amendments offered to the bill. Those included one to require a statewide constitutional amendment to allow table games, and several to increase the state “tax” on revenues from table games.

Afterward, one of the leading House opponents to the bill (HB2718) was pessimistic about prospects to defeat it in the full House. [West Virginia Gazette]
Proponents claim that a constitutional amendment is not necessary because voters authorized gambling in a 1984 referendum that legalized lotteries. "We were amending the constitution to allow games of chance,'' said Delegate John Doyle, D-Jefferson and a lawmaker that year. [Wheeling News Register] But opponents feel that that's absurd. “Let these delegates go back and tell their constituents they believed they were voting for Las Vegas-style table games instead of a lottery,” [Delegate Kelli] Sobonya said. This editorial writer contends that it's just plain unconstitutional:
The state was prohibited from even conducting a lottery until a constitutional amendment was passed more than 22 years ago. It said, in part, “the Legislature may authorize lotteries which are regulated, controlled, owned and operated by the State of West Virginia in the manner provided by general law … .” Lobbyists and other proponents of HB 2718 have been convincing legislators one by one that casinos are just an extension of this amendment.

Hogwash. Did the people in 1984 think they were giving the green light to have table games at race tracks? Absolutely not. Table games are not the same as buying a lottery ticket. On the floor of these would-be casinos, the regulation, control, ownership and operation of these games would effectively not be done by the State of West Virginia, as the 1984 constitutional amendment requires. [Bluefield Daily Telegraph]
But even if the bill passes the House, and later the Senate in its present form, track operators will not be happy with the 35% tax rate on table game revenues. They were trying to hold the line at 24%, and Wheeling Island's Marshall argued before the committee vote that the higher rate would make the effort not worth his while.
Marshall, however, doesn’t see any expansion ahead with a 35 percent tax rate on table gambling. He claims his track’s effective tax rate would be 41 percent to 43 percent when the $2.5 million annual licensing fee is factored in.

“Even if the Legislature decides to permit table gaming, we would be forced to significantly reduce any plans for expansion if they set the rate of taxation higher than 24 percent. ... We simply will not be able to afford to provide more jobs and growth to this area without table gaming at 24 percent,” he said.
But by the time the bill got out of the committee, proponents actually had to fend off proposals to make the tax even higher than 35%!
“It’s called a gamble, but I think it’s a good idea to increase our take and see how much they scream,” Delegate Craig Blair, R-Berkeley, said of increasing taxes and fees on the racetracks.
Yeah, and why not? Because it's sure not about the racetracks or the horses or the horsemen; it's all about the revenue to fill the budget shortfalls. Sure, there are those in slots-less states such as Maryland and Massachusetts who are genuinely interested in saving the local industry by leveling the playing field with other states. But as racinos turn to casinos and expand to stand-alone locations and it all spirals out of racing's control, the sport itself, now just a cost of doing business, will become more of a nuisance to casino owners. And as time goes on, and casinos become part of the landscape, chances are, whether it takes 2 years, or 5, or 20, that we'll start to read from one state or another about casino owners questioning why they still have to subsidize a racing operation that contributes only a fraction of the bottom line (if it makes money at all). Either that, or casino gambling finally reaches a saturation point, and the bubble bursts. Either way, if the racing industry doesn't have a plan to survive on its own, its future could be as bleak as the Chester Downs slots parlor on a Monday at 8 A.M. (oh man, picture that).

- Furthermore, it seems to me that if these states ever add sports betting and legal brothels, then why the hell would anyone go to Vegas anymore? (Though it is, for now, the only place you can see Prince. And you could hang out with Walter.)

2 Comments:

suebroux said...

There was a brief note in today's issue of the Star-Telegram that that legislation had been [once again] been filed to legalize video slot machines in Texas. Rather unusual since I have not read anything on the Texas racing sites. A few years ago, MEC spent bushels of money lobbying for slots and now I hear nothing but a little blurb in the paper??? I couldn't even find it on the Star-Telegram site!

Hope the link works ... Texas HB 1405, filed 2/13/07.

Neal said...

This is a tough one for me, as much as I love horse racing.

I grew up in the Ohio Valley about 45 minutes from Mountaineer, which was, at that time, Waterford Park. My first racing experiences were at that track, and I still enjoy watching simulcasts from there.

That part of West Virginia is poor and a very depressed area. The excellent facilities at Mountaineer, a new resort, the casino, and even the track, have brought people and jobs to this area. It's a nice place, and fun to go to the races in the summer.

I'd like to see them be successful for that reason. With casinos coming to Pittsburgh, this is going to bring stiff competition. So table games might give them the edge.

Although I do want to see them keep the horse racing. The slot money has dramatically raised the purses, meaning at the low level claimers, they get the best of that bunch from the region.

To sum it up, I'd like to see Mountaineer be successful and continue to offer decent low end racing. Heck, they're about the only game in town on Tuesday nights-their Saturday.