Ohio voters could create competition for Pa. slots
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Ohio's voters will get a chance tomorrow to decide something Pennsylvanians never had a direct say in: Should slot machines be legalized?
Two years after Pennsylvania lawmakers approved slots at 14 locations, the first of them to open next week at Pocono Downs near Wilkes-Barre, Ohio residents will consider a constitutional amendment to join the game.
If the Ohio measure known as Issue 3 passes, slot machines could operate at seven existing racetracks statewide and two stand-alone parlors to be developed in downtown Cleveland. The two stand-alone locations and two racetracks in Cuyahoga County could also begin table games in four years, if that county's voters approve of it in a later referendum.
The slots measure has drawn the kind of attention and funding typical of major political campaigns, with the supporters spending more than $20 million, which is more than either candidate for Ohio governor is spending. The opponents have raised less than one-tenth of that, but they too have taken to the airwaves recently. And they have the knowledge that Ohioans twice rejected constitutional amendments to expand gambling in the 1990s.
"If gambling in casinos was something 75 percent of the population was doing, it'd be one thing, but most people don't go to casinos on a regular basis. They don't have a reason to defend it, to want it or to advocate for it. They're very hesitant about it," said David Zanotti, president of the Ohio Roundtable, a conservative group leading the opposition.
Issue 3's private backers, who label it the Learn and Earn campaign, created a plan that bypasses the Ohio Legislature. It sets out the nine specific gambling sites instead of creating competition for them, and earmarks revenue from a 45 percent tax primarily to fund college scholarships, with a portion also going for economic development.
Supporters gathered 340,000 signatures to put the slots question on the ballot, and they believe Ohioans have reason to feel differently this time about expanding gambling. Pennsylvania's own entry is a key factor, and the nearby states of Indiana, Michigan and New York also have casinos.
"This time around, the state of Ohio is an island surrounded by states who have gaming," said Learn and Earn campaign spokesman Michael Caputo. "This time around, the higher education system is teetering on the brink of extinction."
Both sides say publicly that they believe they are ahead in public opinion, but that the vote will be close. It is an election with special interest for Pennsylvania officials, who projected slot machines in the Keystone State would generate about $3 billion in revenue shared between the operators and the state. One-third of that is to be used for property tax reduction.
The two Pennsylvania locations most affected by Ohio legalization would be Presque Isle Downs, a new racetrack to open next year in Erie County, and a track that may be developed in either Beaver or Lawrence counties. If that track is built -- two proposals rejected by the Pennsylvania Harness Racing Commission are undergoing court appeals -- it is supposed to draw heavily from the Youngstown area.
An analysis done in 2004 for Pennsylvania Senate Democrats estimated those two tracks, both located close to the Ohio border, could lose $100 million in combined revenue if Ohio legalized slots. Impact on the Downtown Pittsburgh slots parlor and the Meadows track in Washington County would be far less severe because of the greater distance, said a Pennsylvania Senate staff member who helped craft Pennsylvania's legislation.
"We have planned for this contingency [of Ohio's possible legalization], but it will have an impact," said Christopher Craig, an aide to state Sen. Vincent Fumo, D-Philadelphia. "We strategically placed our venues. ... We built everything to keep our locations X miles away from other tracks. It's like a chessboard to maximize markets and minimize competition."
Ohio's racetracks include Thistledown in Cleveland, Northfield Park in Northfield, Raceway Park in Toledo, Beulah Park in Grove City, Scioto Downs in Columbus, River Downs in Cincinnati and Lebanon Raceway in Lebanon.
Some of the same interests in Pennsylvania tracks and slots are pushing for legalization in Ohio as well.
Forest City Enterprises, one of three bidders for the Pittsburgh license, would be guaranteed a Downtown Cleveland location if the constitutional amendment passes. The location of its Tower City Center property in Cleveland is written into the amendment's language, so it would have no licensing competition of the kind it is undergoing with its Station Square site.
Forest City officials declined comment on the Ohio plan, which they have jointly crafted and financed with the seven racetracks and a second Cleveland developer guaranteed a slots parlor.
MTR Gaming, owner of both Presque Isle Downs and the Mountaineer Racetrack and Gaming Resort in Chester, W.Va., owns Scioto Downs and has joined the other Ohio racetracks in pushing Issue 3. As in Pennsylvania, the Ohio slots revenue would be used to increase purses at tracks with the intent of reviving the moribund racing industry.
MTR Gaming officials also declined to discuss Issue 3, which clearly would boost its Ohio track at the same time it takes some customers away from its West Virginia and Pennsylvania locations. Even so, it makes sense for MTR to support the Ohio plan, one gambling industry analyst said.
"Clearly, Columbus is a much better market than the West Virginia panhandle. Columbus is a booming city, very demographically attractive," said Joe Weinert of Spectrum Gaming Group. "It would undoubtedly be a net positive for the company."
About two-third of Mountaineer's customers come from Ohio. At Wheeling Island Racetrack & Gaming Center, also in the panhandle, about one-third come from Ohio and nearly two-thirds from Pennsylvania, said spokeswoman Kim Florence.
"We've been preparing for competition for some time now," she said. "Would Ohio impact us? Absolutely, but as to what impact, it's similar to Pennsylvania, in that we're not sure to what extent."
The nine Ohio locations could each have 3,500 machines, or 31,500 total. That's less than Pennsylvania's maximum of 61,000, but industry analysts believe economics will result in Pennsylvania casinos installing only 30,000 to 40,000 machines. The Ohio plan's supporters publicize that their machines should produce $2.8 billion in revenue, a figure that opponents believe is inflated.
Mr. Weinert said the West Virginia tracks, with the small population base in their own state, have more to lose from the Ohio vote than do Pennsylvania's facilities. If the amendment passes, it would just give the West Virginia tracks more ammunition to seek approval of table games from their Legislature next year, he noted. And Maryland officials also appear on the verge of legalizing slots in 2007, he said.
"Basically, this is all a microcosm for what's happening throughout the northeastern quadrant of the United States, with casino-style gaming rapidly expanding," Mr. Weinert said. "What happens in one state causes a reaction in another state. ... The chasing effect does not stop."
First Published November 6, 2006 12:00 am