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March 8, 2013

Ohio gaming cutting into Indiana’s piece of the pie

CINCINNATI, Ohio — Standing inside the glittering, 400,000-square-foot Horseshoe Casino in the heart of this city’s downtown, Steve Rosenthal sounded like a happy man as he greeted an Indiana reporter who’d come for a sneak peek of Ohio’s newest gambling hall.

As a partner in Rock Gaming, the company developing the $400 million venue, he’s counting on Ohio’s neighbors to cross the state border with fistfuls of cash and credit cards in hand.

“I would love to have Hoosiers come visit us,” Rosenthal said. “The casino is just one more reason to come to Cincinnati.”

Sounds so cordial, doesn’t it? But Ohio’s decision to get into the lucrative world of gaming is posing a serious threat to Indiana’s share of casino dollars and prompting a Statehouse debate about how to respond.

The Horseshoe Casino is the fourth big-city casino launched in the Buckeye state in 10 months, and the closest one to the Indiana border. In location and amenities, it’s designed to be enticing: Just a short hop off the interstates that run through the city, the upscale casino is fronted by a crystal-chandeliered, glass-walled entryway that offers a sweeping view of the city’s downtown.

Open 24/7, it features 2,000 slot machines, 87 table games, a VIP players’ lounge with limits as high as $50,000 a hand, a World Series of Poker room, a private bar for big spenders (and one for low-rollers, too), and three outward-facing restaurants, including singer Jimmy Buffet’s Margaritaville.

Also inside are 1,700 employees, eager to make customers feel welcome enough to willingly part with their money.

Ohioans long resisted Las Vegas-style gambling, sure of the ills it would bring. Three times, the state’s voters turned down gambling measures on the ballot before finally approving legalized casinos in 2009.

What changed? Hurting from the recession and the related deep cuts in state services when tax revenues plunged, voters decided the estimated $1 billion being wagered annually by Ohio residents in neighboring states like Indiana needed to stay home.

“They were ready to recapture those dollars,” said Matt Shuler, executive director of the state’s Casino Control Commission. The theme of the pro-casino campaign, Shuler said, was “Ohio needs the money.”

Ohio only had to look to Indiana to see how fruitful gambling could be. Since the mid-1990s, when it became the sixth state in the nation to legalize casino gaming, Indiana has raked in more than $10 billion in casino taxes and drawn millions of gamblers across state lines. Last year, Indiana’s 13 riverboat, land-based, and racetrack casinos saw $2.7 billion in gross gaming revenues and paid more than $450 million in wages and benefits to more than 14,000 employees.

The American Gaming Association ranks Indiana as the third largest commercial gambling market in the nation.

“Indiana is a gaming state,” said Senate Minority Leader Tim Lanane, whose district includes the Hoosier Park racetrack casino in Anderson. “That’s just the case.”

But fortunes are changing. There are now 23 states with a cut of the action, and more than 1,200 commercial casinos competing for gaming dollars. More than half the states with legalized casinos have gotten into the game since 2008.

Indiana saw the problems coming. Three years ago, state fiscal analysts predicted the arrival of casinos in Ohio, coupled with casino expansion in Illinois and Michigan, would cut deeply into the competition for gambling dollars and the hefty tax revenue stream that helps fund essential public services in Indiana. Now they’re witnessing their fears.

In the short months they’ve been open, the casinos in Toledo, Columbus, and Cleveland have earned more than $404 million and generated $133 million in taxes. With Cincinnati, the total casino revenues in Ohio are predicted to hit almost $1 billion a year.

Meanwhile, Indiana is on a losing streak. Admissions and revenue are down over the last three years. Patronage at the state’s riverboat and land-based casinos have fallen under two million for the past five consecutive months. That’s the longest such streak in a decade, said Ed Feigenbaum, who tracks the numbers for his Indiana Gaming Insight newsletter.

“Things are only going to get worse,” Feigenbaum said. The additional casinos aren’t expanding the gaming market, he said, they’re “cannibalizing the market.”

January was a particularly gruesome month. Combined, Indiana’s five floating casinos on Lake Michigan saw the lowest revenues since December 2001. The six southern Indiana casinos had their worst month since January 2003.

Indiana legislators are trying to come to grips with the grim news. A bill that recently passed the state Senate would grant tax breaks to the state’s 10 riverboat casinos and allow them to relocate nearby to dry land. And it would give Indiana’s racetrack-casinos the ability to operate table games like craps, roulette, and blackjack.

But the complicated legislation, described by Feigenbaum as a “Rube Goldberg device,” faces an uncertain future in the House.

Opponents fear the tax breaks will cut too deeply into the tax revenue streams that the state and local communities where the casinos are located have come to rely on. And Republican House Speaker Brian

Bosma of Indianapolis said the bill may be seen as an expansion of gambling — something his conservative caucus members will oppose.

Tim Lanane fears the legislation will simply die.

“This issue is ‘Can we wait another year?’” Lanane said. “In my opinion, if we put it off, the problem will only become more severe.”

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