Will Slots At Tracks Kill French Lick?

The Star's Mary Beth Schneider and Theodore Kim put out of a puff piece today for Indiana's horse race tracks and their bid to be transformed into land-based casinos overnight equipped with more slot machines than any of Indiana's existing riverboats. Their story speaks to a bill passed by a 54-39 vote yesterday in the House:

In the House, the bill drew bipartisan support from lawmakers who view slots as a financial panacea for Indiana's horse-racing and breeding industries and a help in balancing state costs elsewhere.

In addition, supporters said slots would inject money and life into the two struggling horse tracks being targeted: Hoosier Park in Madison County and Indiana Downs in Shelby County. Rep. Sean Eberhart, R-Shelbyville, urged lawmakers to support the bill to give the tracks "a fighting chance for survival."

Van Haaften's legislation has drawn resistance from gambling opponents like Rep. Chet Dobis, D-Merrillville.

One of the votes Dobis said he most regrets in his 37 years in the General Assembly was one early in his career to allow the horse tracks.

Now, he said, the facilities are struggling and coming to the state for a bailout.

"Northwest Indiana has been devastated because of the demise of the steel industry," Dobis said. "I didn't see anyone stand up in this state and say the steel mills are in trouble, let's go bail them out and subsidize."

Van Haaften told legislators not to kid themselves. The bill, he said, represents an expansion of gambling. But, he said, the money raised would help communities statewide, and he urged lawmakers to view it that way.

The state Legislative Services Agency estimates the machines eventually might gross the state at least $85 million in tax revenue each year, based on adjusted gross revenues of at least $225 million annually when both slots operations are running. A recent study done at the behest of the track owners estimated much higher adjusted gross revenues: $534 million a year. The agency's tax revenue estimates came before lawmakers this week agreed to a higher wagering tax.

The bill would require the slot operators at each track to pay the state a $100 million up-front franchise fee.

The legislation also would prohibit the operators from selling or transferring those slots licenses for at least 10 years. If they are sold or transferred after that, the state would get half of any profits beyond the first $100 million in the transfer.

Completely missing from the Star story is any mention of the legislation's impact on existing riverboat casinos and, in particular, the newly-opened French Lick casino. Fortunately, the IBJ does the critical analysis left out of the Star article. The IBJ writes:

The owners of French Lick Resorts & Casino always expected a narrow profit margin. So there’s no sign of panic yet over indications the place already is struggling, less than four months after its launch. But the threat of unexpected competition from Indiana’s two horse tracks is something else entirely. The casino’s owners are downright terrified legislators soon will allow both tracks to become “racinos” and add up to 5,000 slot machines.

One-armed bandits at Hoosier Park in Anderson and Indiana Downs in Shelbyville could attract a significant share of French Lick’s clientele—possibly enough to break its bottom line.

“We are such a lowmargin business, trying to support the resorts with a very small casino in a remote location,” said Mark Bommarito, vice president of sales and marketing for French Lick Resorts & Casino. “It doesn’t matter if it’s 100 machines or 2,500 machines [at each track]. Anything’s going to have some impact.”

In its 1920s heyday, French Lick was a magnet for tourists across the Midwest. But when cars replaced trains, highways to the rural region never followed suit. For decades, the palatial French Lick Springs and nearby West Baden Springs hotels qui- etly deteriorated. Both are historic landmarks.

Economic developers hope a $382 million restoration project and the state’s 11th casino license will return the hotels—and the area’s economy—to their former glory. But their luck may have soured. On Feb. 15, legislation that would allow slots at the tracks cleared a House committee 9-3. The measure now advances to the full House.

Legislators this year are looking for money to fund a slate of expensive new programs—including full-day kindergarten. Many see racetrack slots as a palatable way to raise millions of dollars in new tax revenue. On the day of the vote, Orange County residents clad in orange shirts gathered at the Statehouse to argue against the bill. The casino earlier had organized a town meeting to rally concern. They may have good reason to fret.

Since French Lick Resorts & Casino opened in late October, it has become the region’s largest employer, with 1,560 workers. And when renovations on the West Baden Hotel are complete in a few months, it will hire even more. The next-largest local business is woodworking firm Paoli Inc., whose 750 employees face increasingly stiff overseas competition. Thanks to the casino, Orange County’s unemployment rate has fallen to 6.4 percent. That’s a full percentage point below its rate a year ago—but still well above Indiana’s 4.7-percent average.

In the Star story, Rep. Chet Dobis is quoted as saying the bill was carefully crafted by gambling lobbyists intent on maximizing private profits. Rep. Van Haaften is quoted as responding that he, not lobbyists, crafted the bill and that he had "no horse in this hunt." Neither track is in his district. I'm sure Rep. Van Haaften is sincere in what he says about his legislation, but this idea is nothing new. When I lobbied the legislature back in the 1990s, lobbyists for the horse racing industry were fast at work then trying to craft a plan to convert horse race tracks into casinos. Both from personal observation and published news media reports, the horse racing industry earned a pretty sleazy reputation for its lobbying efforts at the State House.

If this legislation becomes law, the legislature will be increasing the value of these licensed horse race tracks by many times. With so much money at stake for a hand full of individuals, the potential for corrupt influence on the legislature is very real. Hopefully, the feds are keeping a close watch on what's happening under our State House dome. The legislature would also do well to take a close examination of the impact these land-based casinos situated so close to Indianapolis would have on the riverboat casinos.

For the legal buffs who are always amused by the conflict checks, according to Indiana Lobby Registration Commission records, Ice Miller lobbies for both riverboat casinos and Hoosier Park race track.