8/6/2019 "Gambling in Texas" by James Bernsen, Part 2

1/4

Gambling In Texas

This is Part II of a four-part series in the Texas Republic News on various issuesrelated to gambling legislation.

Part II - Horse Racing and Slot Machines

By James Aalan BernsenTexas Republic News

Twenty-two years ago, the Texas Legislature signaled the return of gambling to Texas ina limited form by legalizing pari-mutuel horse racing in Texas. It was an innocuous entry

into the world of gambling: horse racing is ultimately a game partly of skill, not just

chance like slot machines or roulette tables. But now Texas thoroughbreds are carryingmore than just jockeys on their backs they carry the hopes and dreams of the gambling

lobby to bring the holy grail of gambling to Texas.

An unlikely partnership of supporters, including horse breeders and the generallyconservative Texas Farm Bureau, has stepped up to the plate to support an initiative that

would bring video lottery terminals, or VLTs, to Texas tracks. VLTs are virtually

indistinguishable from casino slot machines, and more importantly, are treated as such infederal law with rather large implications for Texas.

Indeed, the introduction of VLTs to Texas horse tracks would create a domino scenariothat most of the legislations supporters appear to not have considered. Instead of

reviving the declining stakes of the Texas horse raising industry, VLTs and their

consequences would likely start an explosion of gambling beyond the ability of the race

tracks or the State of Texas to control.

The Argument

First there are the general arguments for gambling. Proponents say it will bring in largetax revenue to the state, as well as economic development (These issues will be discussed

in Part IV of our series). But there are also arguments specific to racetrack gambling.

Texas Horse Breeders say theyre hurting, and argue that the only way to rejuvenate their

industry is through the passage of legislation establishing horse incentives to grow the

industry. This can only be done, they claim, by increasing the purses at thoroughbredracing venues like Sam Houston Park in Houston and Retama Park in San Antonio.

And the only way to get those payouts, they assert, is through the introduction of slot

machines at racetracks.

To get their message across, the Texas Thoroughbred Association has even hired noted

Texas songwriter Lyle Lovett as their spokesman. In a video on theirwebsite, Lovett

http://www.texasthoroughbred.com/http://www.texasthoroughbred.com/http://www.texasthoroughbred.com/http://www.texasthoroughbred.com/

8/6/2019 "Gambling in Texas" by James Bernsen, Part 2

2/4

makes the Associations case, and pushes for passage of the Texas Horse Prevention

Preservation Act.

Its a bill that would benefit virtually every aspect of the horse industry in Texas and

would allow video lottery terminals or VLTs to be installed at existing licensed

racetracks, Lovett said. It would provide a way to supplement purses and breedingprograms for racehorses, equine research, breed retirement and adoption programs.

Regardless of the merits of what is essentially a bailoutfor the Texas horse-raisingindustry, the Texas Horse Prevention Preservation Act is somewhat misleadingly

named. The subsidy amounts which are unknown, but would likely be in the tens of

millions would likely be dwarfed by the actual slot machine revenue, which supporters

say will likely be in the tens ofbillions of dollars. It is the equivalent of a mouse hitchinga ride on an elephant and painting his own name on the side.

Farm Bureau Support

One of the big wins for the racetrack casino lobby prior to the opening of the 81

st

Legislature was the winning of an endorsement of the project by the Texas Farm Bureau.

Steve Pringle, the bureaus legislative director, said the issue came up from members inthe horse raising industry, who argued that slot machines at racetracks would revive their

business.

The horse industry in Texas has been suffering in the last five years, Pringle said. Wesupport these incentives and support VLTs as a funding mechanism to support that

industry.

Pringle said that the bureau doesnt take a position on gambling, and said that if there was

an alternative funding mechanism for the incentives, the group would support that. As of

today, however, VLTs are it.

Battling Polls

Texans for Economic Development (TED) a group which promotes racetrack casinos,orracinos as they are sometimes called commissioned a poll by Baselice and

Associates, which shows strong support in Texas for the proposed race track casinos.The

poll (linked via Newspaper Tree, an online El Paso newspaper) found 63 percent of

Texans support the idea and 36 percent oppose.

However, the poll was paid for by TED. A similar poll from only two years ago,

conducted by an a separate gambling group favoring resort casinos, found only 45percent of Texans supported racinos. That poll wasalso conducted by Baselice and

Associates.

The dueling polls is a legacy of past discord. Historically, disunity has been the gambling

lobbys worst nightmare, and the biggest boon for opponents of the idea. This session,

such groups have put up a front of unity, although it remains unclear how strong that

remains. Right now, gambling proponents are supporting HB 1724, which technically

http://newspapertree.com/system/news_article/document1/3492/baselive_gaming_poll.dochttp://newspapertree.com/system/news_article/document1/3492/baselive_gaming_poll.dochttp://newspapertree.com/system/news_article/document1/3492/baselive_gaming_poll.dochttp://newspapertree.com/system/news_article/document1/3492/baselive_gaming_poll.dochttp://newspapertree.com/system/news_article/document1/3492/baselive_gaming_poll.doc

8/6/2019 "Gambling in Texas" by James Bernsen, Part 2

3/4

includes both resort casinos and racinos, although it did not escape notice among the

capitol crowd that a recent press conference touting the bill did not have any

representatives from the horse racing industry present. Word in the halls also suggeststhat many members of the Farm Bureau may be getting cold feet, although Pringle says

the group continues to support the idea.

A Monopoly or the Big Tent?

Currently, horse racing tracks have a near monopoly on gambling in Texas, and a big-tent

approach would end that. It would also make legislation a harder sell. In the past,legislators have been somewhat moved by the idea of gambling that has a small

footprint. For this reason, racetracks have generally advocated for the exclusive right to

gamble, limiting casinos to existing tracks. This is actually an impossibility, given the

impacts of the federal Indian Gaming Regulatory Act (which will be discussed in Part IIIof our series).

Will The Revenue Projections Turn Out?

Historically, gambling revenues have underperformed expectations. The Texas Lotterywas sold as a cure-all for the states school finance system, but failed dramatically

(though this was partly a result of skyrocketing school costs which the lottery could nothave met anyway).

But is the current economic environment the right time to launch a major gambling

operation? In a March 5, 2009 Houston Chronicle storya Nevada economist andgambling expert said no. William Eadington, an economics professor at the University of

Nevada and director of the universitys Institute for the Study of Gambling and

Commercial Gaming, pointed out that two states are currently facing the prospect ofhaving to pass tax breaks to bail out the very casinos that were pitched to legislators as a

way to bail the states out.

Even Texas tracks have been touched. On the same day the Chronicle story appeared,

Magna Entertainment Corp, the parent company of Grand Prairies Lone Star Park, filed

for Chapter 11 bankruptcy. Lone Star Parkspress release is quick to point out that itsoperation is not part of the filing. Magna Entertainment is the largest horsetrack operator

in America; after its colossal collapse after 7 years of failing to make a profit, the

company was officially de-listed from the Nasdaq Exchange on Monday.

The loss of revenue is not restricted to racetrack operations, but is a trend generally true

of all casino operations. Casinos in New Jersey posted a 20 percent drop in income last

month the largest decline in the 30-year history of gambling in that state. Famed casinodeveloper Donald Trump who made a name for himself turning everything he touched

into gold couldnt even make it work.

About the only positive casino developers can take from recent developments, in fact, is

the argument that gambling may not be as addictive as some say. Given the choice

between paying the bills or playing the slots, it seems, people just arent gambling as

http://www.chron.com/disp/story.mpl/sports/6296706.htmlhttp://www.chron.com/disp/story.mpl/sports/6296706.htmlhttp://www.lonestarpark.com/NewsEvents/FeatureStories/Details/MEC+Chapter+11.htmhttp://www.chron.com/disp/story.mpl/sports/6296706.htmlhttp://www.lonestarpark.com/NewsEvents/FeatureStories/Details/MEC+Chapter+11.htm

8/6/2019 "Gambling in Texas" by James Bernsen, Part 2

4/4

much. Yet the premise behind the argument that the two items compete at all is hardly

something gambling proponents want to admit to.

Opening the Door for an Explosion of Gambling?

Last week was National Pathologicial Gambling Week. Indeed, the social costs of

gambling are widely known, and are tacitly admitted to by the fact that virtually everygambling bill proposed includes funds for treating compulsive gamblers (These issues

will be discussed in Part IV of our series).

Given this fact, gambling is recognized by all as a cost/benefit ratio. Benefits are

maximized and costs reduced by limiting the footprint of gambling. Destination

casinos are likely just as addictive as any others, but they are generally less accessible

and require sufficient expense, premeditation and planning to visit, unlike hometown

casinos.

For the horse racing industry, furthermore, there is additional reason to keep the footprint

low. As alluded to above, the business model of a racino includes slot machines whichmake sufficient revenue to offset the loss or insufficient gain of the actual horse

racing operation. The more casinos there are racinos or others the more diffused thepotential revenue base. More casinos chasing a limited number of gamblers means fewer

returns. A model of business based on a handful of casinos will simply not work if the

casinos proliferate wildly. This does not even consider the draconian and uneven tax

rates levied on gambling operations.

This then, is the ultimate mirage of racetrack casinos: proponents believe they can

prevent the expansion of gambling. But a closer look at the law and experiences fromaround the country prove this is a very dubious proposition. Casino gambling cant be

tamed, because it isnt a thoroughbred, its a mustang.

Thats because another group of people who once lived and died by the horse hold all the

cards now.Indian Tribesbring a whole new dimension to the dynamics of gambling.

They have the power to expand indeed they virtually guarantee it by their presence the footprint of gambling wherever they exist or could potentially exist.

Indeed, when the dimensions of Indian gambling are considered, all bets are off, and all

the dreams of horse racing enthusiasts and state budget writers could likely be dashed.For that reason, we turn next to the most controversial and vital piece of the gambling

puzzle: Indian Gaming.