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Lawsuit may be deal killer for slots plan, owner says

Negative ruling for tracks ‘would be a major setback for the industry.’

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By Laura A. Bischoff, Staff Writer Updated 11:05 PM Sunday, August 30, 2009

ERIE, Pa. — Ohio is making a bet that it can keep gambling money and tax revenues — now flowing into surrounding states — in Ohio when it puts 17,500 slot machines at seven horse racetracks.

Gambling supporters have long argued that Ohioans are already gambling in other states but the Buckeye State doesn’t benefit.

During the budget crunch earlier this year, Gov. Ted Strickland switched from opposing expanded gambling to ordering the Ohio Lottery to start operating slot machines by May 2010.

Strickland’s budget bill will allow the Lebanon Raceway to move as long as it stays within 50 miles of the original track and doesn’t relocate to a county that already has live horse racing, such as Hamilton County.

The Warren County Commission has said it won’t permit slot machines at the county-owned fairgrounds in Lebanon, which has hosted harness racing since 1948. Lebanon Raceway owners have narrowed the list of possible sites to five parcels with quick access to either I-75 or I-71, said Lebanon Raceway spokesman John Carlo.

The slot machines as well as upfront licensing fees are expected to generate $933 million over two years for K-12 education.

Some of the money is due Sept. 15 — the application deadline. Tracks that want to operate slots are expected to pony up $65 million each, beginning with a $13 million installment on Sept. 15.

Slot operators will have to submit a 10-year business plan and a security plan, subject themselves to extensive criminal background checks, put up bonds, buy insurance, make $80 million in facility improvements, and give half of the gross revenues to the state.

The applications and first payments are due even before the Ohio Lottery Commission approves permanent rules that will govern slot operations. The commission is expected hold a hearing on the rules Sept. 18.

Meanwhile, anti-gambling groups filed suit in the Ohio Supreme Court to try to force the slot machines to a vote of the people. ‘LetOhioVote.com’ will argue before the court on Sept. 2 that the slot machine portion of Strickland’s budget bill should be subject to a referendum.

Carlo said the lawsuit poses more of a problem than unfinished rules because a negative ruling could be a deal killer. “That would be a major setback for the industry,” he said.

Separately, voters will have their say in November on whether to amend the state constitution to allow four full-fledged casinos — one each in Toledo, Cleveland, Columbus and Cincinnati.

Just a year or so from now, Ohio could be home to as many as seven racinos and four full-fledged casinos.

Pennsylvania jumped into gambling a few years ago, allowing slot parlors in eight locations. The state is now considering adding table games.

The move is paying off in the form of tax breaks for Pennsylvanians.

In the most recent fiscal year, $786 million was rebated to taxpayers across the state. Philadelphia gets an income tax reduction, all the low-income seniors and disabled residents get a property tax or rent rebate, and homeowners statewide get on average of $190 off their school property tax bill, according to the Pennsylvania Gaming Control Board.

In just three years, visitors have dumped $45.4 billion into the Pennsylvania slots and gross revenues — the amount wagered minus the payouts — have totaled $3.6 billion. Pennsylvania has collected $1.23 billion in gaming taxes and another $758.7 million has gone to government programs for horse racing, tourism, and economic development.

MTR Gaming, which also owns Scioto Downs near Columbus, allowed the Dayton Daily News to tour Presque Isle near Erie but prohibited interviews with patrons or employees.

Presque Isle runs horse races 100 nights a year on the one-mile track, but most of the patrons come to spend their money on the slots and the virtual blackjack and roulette machines.

“Racing does not pay its way,” Presque Isle Downs Chief Executive Richard Knight said. “Racing is not profitable. It doesn’t contribute to the bottom line at all. Racing has been a declining sport in the United States for 30 years.”

Indeed, only a small percentage of the customers at the Presque Isle track on a Wednesday night pore over the racing sheets and place bets. Most of the patrons are families who came for the $2 hot dogs and a chance to see something novel. Children are allowed to watch the races but not enter the 47,436-square-foot slots area.

The complex has a steakhouse, restaurant buffet, snack bar and other concessions but no hotel.

Nearby hotel operators are thrilled.

“We get a lot of business from the casino — about 50 percent,” said Jasma Larkin, a guest services representative at the Super 8 hotel across the street. “I wasn’t here before the casino came, but I’m pretty sure business skyrocketed once the casino came.”

Area hotels run shuttle buses to the casino and hand out $5 coupons for food and slot play.

Larkin said she likes to gamble there once a month.

“I’m not too fond of the blackjack or virtual poker. I like the 2-cent slots. I go there, lose 20 bucks and that’s it,” Larkin said.

Contact this reporter at (614)224-1624 or lbischoff@DaytonDailyNews.com.

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