Thursday, February 20, 2003

$400M offer from tracks draws notice

Too soon to tell if lawmakers will take cash in exchange for slots

By Patrick Crowley and Robert Anglen
The Cincinnati Enquirer

Kentucky Sen. Dick Roeding isn't exactly sure how to view the thoroughbred industry's offer of $400 million upfront in exchange for the legislature allowing slot machines at racetracks.

"I don't know if it's a bribe from them or extortion on our part." said Roeding, the second-ranking Republican in the GOP-controlled Senate.

"We only have two weeks to go in this session, and at this point we don't have a bill. I'm sure it will come up again if we don't get to it this year."

The surprise offer, proposed Tuesday night on the House floor by Democratic Leader Greg Stumbo, D-Prestonsburg, has created a buzz in Frankfort and beyond.

To a cash-strapped legislature, the offer of the millions it needs might be seen as a bribe, extortion, a friendly loan from the state's $2 billion thoroughbred industry, or manna from heaven.

After all, they're just about $400 million short on their budget.

"This would provide $400 million for a budget that needs new revenue, and it would bring in the money without a tax increase," Turfway Park president Bob Elliston said.

It's too early to tell whether interest in the proposal will equate to support for legislation that would allow Kentucky's eight racetracks, including Turfway in Florence, to get into the casino business.

"But at least people are down here talking about it. There's a definite buzz," Elliston said Wednesday from Frankfort. "And that's a start. There's always a concern about timing in a short (legislative) session like this. But we're trying to send a message that will resonate with people, and maybe we can get something done this year."

A bill containing the measure will be introduced and there is, technically, time for a vote this session.

Jack Hanessian, general manager of River Downs in Anderson Township, said he has "never seen anything like" the offer made by Kentucky's thoroughbred industry.

"We couldn't afford to do that, or even pay our share of that kind of proposal," Hanessian said Wednesday.

Tracks in Ohio, including River Downs, have pushed for slots as well. But they have met resistance from Gov. Bob Taft; and legislation to expand gaming, filed by Sen. Louis Blessing, R-Colerain Township, has not garnered enough support to pass.

Hanessian said River Downs "would be devastated" by lost business if Kentucky tracks were allowed to offer casino gambling.

Elliston and others in the Kentucky horse industry have been working for gambling at racetracks as a way to compete against riverboat casinos in Indiana and Illinois and racetracks with slot machines in states such as West Virginia.

Even with the state facing budget cuts, there has been little appetite in Frankfort for expanding gambling to include what are basically mini-casinos at racetracks. Turfway has said it would build a $125 million gambling facility adjacent to the track, which is 10 miles south of downtown Cincinnati.

Stumbo said the gambling at racetracks could generate $1.2 billion over five years for the state budget. He implored lawmakers to focus on the revenue and not on objections from religious groups such as the Kentucky Council of Churches, which has lobbied against casino gambling.

"It is not a moral issue," Stumbo said. "It is strictly a business issue."

The Rev. Nancy Jo Kemper, executive director of the church council, as well as conservative legislators such as Rep. Stan Lee, R-Lexington, portrayed the offer as a "bribe" and "ransom" money.

Elliston said the offer of upfront money is not a bribe, "but a willingness on the part of our industry to take some upfront risks, and provide some upfront money, to help the fill the budget needs in Kentucky."

Within the next day or two Stumbo is expected to amend a bill filed by Rep. Tom Burch, D-Louisville, that would allow electronic gambling devices at racetracks. Elliston said the amendment would include specifics on how the $400 million would be generated.

But basically, Elliston said, the tracks would make accelerated tax payments and then recoup the money over the next several years from revenue generated by gambling.

The budget passed Tuesday by the House and now before the Senate included no new taxes. That's despite a call by Gov. Paul Patton to increase taxes by nearly $600 million and a bill that would increase the state's cigarette tax. Under the house budget, the state's cigarette tax will remain at 3 cents a pack - the second lowest in the nation.

This is not the first time in the nation, or in Kentucky, that gambling proponents have offered money to state governments.

Daniel Lee, chairman and chief executive officer of Pinnacle Entertainment Inc., which owns Belterra casino in southeastern Indiana, said the $400 million carrot that is being dangled in front of Kentucky legislators has been offered before in other states with mixed results.

About a year ago, MGM offered $600 million to Illinois for a single operating license in the state. Lee said legislators did not agree to the idea.

"In Connecticut, an Indian tribe pays more than $100 million to the state for an exclusive operating arrangement," he says.

And the Massachusetts governor said last week that he was negotiating with that same Indian tribe to pay the state for not opening any casinos.

"Basically, it is a giant game of Monopoly that is going on all over the country," Lee said.

In 1994, former Kentucky Gov. Julian Carroll, who at the time was out of office and lobbying for Turfway Park, floated a plan in Frankfort for providing the state with $341 million in upfront money in exchange for approving casinos.

The plan was received coldly by lawmakers and quickly died.

But now, the racetracks, once opposed to slots or casinos, are unified and lobbying for the bill that would license only the state's signature industry - horseracing - to operate slot machines.

A 2001 study by the accounting firm of PriceWaterhouse Coopers found that Kentucky residents spend nearly $1 billion a year on gambling and related services in Indiana, including $400 million directly on gambling and $600 million on food, drinks, hotels and entertainment.

Kentucky Rep. Walton, R-Florence, said there is disagreement among gaming proponents who are split between the racetrack industry and Northern Kentucky developers that include Jerry Carroll, Bill Butler and Bill Yung, who have touted building full-fledged land-based casinos. Mr. Carroll and Mr. Butler have discussed placing a casino on the last 10 acres of undeveloped Covington riverfront.

That division will make it harder for gaming to find supporters in Frankfort, he said.

Pinnacle's Lee says he doesn't believe Kentucky wants legalized gambling.

Pinnacle conducted a survey of 600 homes last year and residents overwhelmingly opposed the idea of putting slot machines at racetracks, he said.

"It's the most I've ever seen in opposition to it," Lee says. "So it's pretty unlikely that it is going to get approval."

The Associated Press contributed.

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