INDIANAPOLIS —
When a glittering $350 million casino opens next month in a former department store in downtown Cleveland, Ohioans who plan never to play the slots may still feel like they’ve hit the jackpot.
Project developers say Ohio’s first casino, combined with three more casinos soon to open in the Buckeye state, will generate 7,500 permanent jobs, 9,700 temporary construction jobs, and $600 million annually in tax revenues statewide.
Every Ohio county will get a slice of the gaming tax revenues, and some will get a bigger boost: In Columbus, a new casino is going up on the site of an abandoned auto-parts plant; the Cleveland casino is resurrecting a treasured historic site — the long-shuttered Higbee department store where scenes from the movie, “The Christmas Story,” were shot.
But Ohio’s windfall spells trouble for Indiana.
State fiscal analysts predict the arrival of casinos in Ohio will cut deeply into the competition for gambling dollars and the billion-dollar tax revenue stream that helps fund essential public services in Indiana.
The Indiana Casino Association predicts a $200 million to $300 million annual loss in gross gaming revenues at state’s 13 casinos. State budget analysts, meanwhile, predict a $100 million annual loss in gaming tax revenues.
“It’s going to be a huge hit,” said state Sen. Luke Kenley, the influential chairman of the Senate Appropriations Committee and member of the State Budget Committee charged with crafting a state spending plan with those dwindling dollars. “There’s no way to make up those kind of losses.”
Kenley has already seen a glimpse of the future: Indiana’s gaming revenues have fallen for the past two years. In 2011, admissions to the state’s casinos fell to their lowest level since 1997.
You can blame it on other states honing in on Indiana’s action.
Nineteen years ago, Indiana became the sixth state in the nation to legalize riverboat gambling. Legislators cleared the way for the revenue stream that would come: The taxes the state slapped on the casinos generate more than $800 million a year; combined with the state’s lottery, charity gaming, and the pull tabs and punch boards in bars and taverns, gambling generates about $1 billion annually in tax revenues for the state.
There are now 22 states in the gambling game, and about half have entered since 2008, when the recession hit state coffers. Like Indiana, they went in search of a guaranteed revenue stream. According to a new report from the American Gaming Association, there are now 1,020 casinos across the U.S. That doesn’t count the ones coming on line in Ohio.
Mike Smith, executive director of the Indiana Casino Association, has been warning lawmakers for several years that the numbers were going down. The market for gambling dollars, Smith said, is “more and more saturated.”
“Making sure we stay competitive is the big thing,” Smith said of Indiana’s casinos. He’s hoping legislators will consider easing up a little on their dependence on gaming tax revenues.
Currently, Indiana’s 11 riverboat casinos are taxed up to 40 percent on gross gambling revenues; two casinos located at the state’s horse race tracks, the so-called racinos, pay up to 35 percent of gross gaming revenues. There are also admission taxes at the casinos, and local revenue-sharing agreements with casino host counties that push the total taxes higher.
Last year, Indiana was the No. 2 state in the nation for gaming tax revenues. Smith doesn’t want to see the state raise the casino taxes even more.
“That would just kill us,” Smith said. “We’re already one of the highest taxing states in the nation on gaming.”
Ed Feigenbaum, publisher of Indiana Gaming Insight, tracks gaming revenues. He said the Ohio casinos will only exacerbate the trend of declining casino tax revenues for the state. He notes that in 2011, the casinos’ combined “house win” — the revenue collected at slot machines and table games minus what’s paid out to gamblers — dropped to $2.73 billion, down from about $2.8 billion in 2010.
The drop signaled the second year in row that the overall “house win” was down. More ominous is what happens if you exclude the two racinos. If you cut them out of the equation, the total win for the state’s casinos have dropped four years in row.
Given that casino taxes are the third-largest source of revenue for the state, that’s not good news. “It’s just not sustainable as a revenue source,” said Feigenbaum.
The state’s budget forecasters concur. Last year, casino and racino taxes generated $660 million for the state’s general fund. It’s expected to fall to $617 million this fiscal year and to $567 million in 2013.
The forecast is likely to get gloomier since there is no end in sight for the competition for more gambling dollars. Casino developers in Michigan are spending $50 million to convince voters there to expand gambling. They want to build eight new casinos, including one in the Pontiac Silverdome, the former home of the Detroit Lions.
In Illinois — the first state to sell lottery tickets online — there are powerful lawmakers pushing legislation that would add five new casinos, including one in Chicago, as well as place slot machines at airports, horse-racing tracks, and the Illinois State Fairgrounds.
Kentucky legislators killed a casino gambling bill last month that would have allowed slot machines at the state’s racetracks. But bill backers there think expanded gambling is inevitable as the state’s venerable horse-racing industry struggles to keep pace.
State Rep. Ed Clere, a New Albany Republican who sits on the House Education Committee, said the drop in gaming tax revenue doesn’t bode well for the state’s cash-strapped schools. Most of the casino taxes go into the state’s general fund; that’s where K-12 schools get most of their operating money.
Like Kenley and other lawmakers, Clere worries that Indiana has become addicted to gambling revenues.
“It’s sobering,” Clere said. “As a state, we’ve built a revenue structure with components that are changing whether we like it or not.”
Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.
State News
Related Photos
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Patrons play the slots during the grand opening of Hoosier Park Casino in 2008. With casinos opening in neighboring Ohio, the Indiana Casino Association predicts a $200 million to $300 million annual loss in gross gaming revenues at the state’s 13 casinos. File photo / The Herald Bulletin
Discussion
Indiana loses as more states gamble on casino revenues
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