Push on for legalization of casino gaming

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The Texas horse racing industry is in trouble, and some are arguing legalized gambling can save it.

The downturn is a direct result of competition from other states offering higher purses, said Andrea Young, CEO of Sam Houston Race Park. According to Young, breeders are leaving Texas in favor of states attracting larger crowds with casino gambling.

The statistics are telling: Studies show breeders registered 300 foals eligible for horse racing in 2013 down from more than 4,000 at its peak. At the same time, a new study shows that Oklahoma’s horse industry has grown, bringing $3.6 billion to the state in 2012.

A 2011 report by the Texas Racing Commission showed that attendance dropped 12 percent, money wagered declined 23 percent and available purse revenue across the state decreased in the five years preceding the study.

“How can we compete with surrounding states, where the horses can compete for two to three times the amount of money in Louisiana or Oklahoma?” said Young. “Absent any new revenue, the way we were going to do that was cutting our supply, allowing us to have more revenue to spread over shorter times.”

While the industry is no longer hemorrhaging, regulations keep us from being competitive, said Young.

In the last 20 years, legal gambling has expanded from two states to 48 states that allow some form of legal gambling. Of those, 40 states allow casino style gaming.

As new race parks with casinos have gone up across state lines, Texas has seen a drop in revenue. Currently, Texans spend about $4.37 billion a year on gambling in neighboring states such as Oklahoma, New Mexico, and Louisiana; $3.2 billion of which was spent on gambling while the rest was spend on restaurants, hotels and gas.

“Our core revenue is gaming. The model is designed and built for having that primary gaming revenue as core business,” she said. “We’ve had to modify our business a lot because the core economics behind the sport are so broken.”

Young said Sam Houston grew every year until 2002, when Delta Downs, a new racetrack with casino gambling in Vinton, La., opened.

Young is joined by a growing coalition lobbying for gambling in Texas. Let Texans Decide has been promoting a referendum that would allow voters to decide gambling’s fate in Texas. The last big push was in 2012, when the group lobbied for a referendum during the Nov. 2013 election.

However, the referendum never made it to the ballot nor did lawmakers vote on the issue. For a referendum to appear on the ballot, two thirds of the state legislature must approve of it or 100 votes in the House and 21 votes in the Senate. So far, with a lieutenant governor and governor against expanding gambling, that has not happened.

Now, with new leadership poised to take office for the first time in more than a decade, Let Texans Decide is gearing up for round two.

Local Support

State Rep. Allen Fletcher of Tomball said the straw polls show the majority of Texans would support a referendum.

“We’ve never had the opportunity, as legislatures in the state of Texas, to cast a vote allowing the people of Texas to vote,” he said. “I’ve heard many times that people have said they want this in our area, and I’ve always said it’s your decision. If I get the opportunity to put it on the ballot, I will.”

The Houston Northwest Chamber of Commerce also supports a referendum giving citizens the ability to vote on certain gambling machines.

“Last session this chamber signed a resolution in favor of considering video slots at this venue,” said Barbara Thomason, chamber president. “Our statement said we were not interested in seeing the footprint of gambling extend beyond the current situation, but we felt we needed the chance to vote on video terminals.”

In 2005, Cy-Fair Houston Chamber of Commerce also created a resolution in support of video lottery terminals based on annual expenditures, employment and state revenue. Similar to a slot machine, a video lottery terminal allows gamblers to bet on the outcome of an electronic machine that generates random numbers.

Let Texans Decide estimates casinos at racetracks could add up to 75,000 jobs and $8.5 billion in economic growth statewide. Young estimates a quarter of that would come to Houston, resulting in hotels, restaurants and other entertainment venues.

Opposition

Despite the support, critics including the conservative group Empower Texans, religious organizations and Texans Against Gambling argue gambling contributes to crime, fuels social problems and only benefits the gambling industry.

The economic benefits of gambling are also dubious, according to a report by Earl L. Grinols, professor of economics at Baylor University and one of the nation’s leading researchers on the economic impacts of gambling.

Grinols found gambling reduced lottery revenues about 10 percent and increased regulatory costs 10 percent and criminal justice costs 8 to 13 percent. The report showed costs would be magnified by lost jobs resulting from decreased spending on goods and services and reductions in state revenue from the diversion of spending on goods and services to gambling.

According to the Texas Public Policy Institute, 27 out of 57 counties with casino gambling in the U.S. experienced job losses; sales declined 10 to 20 percent among local businesses in Natchez, Miss., after gambling was introduced; 50 percent of the city’s retail businesses and restaurants closed in Atlantic City within 10 years of the legalization of gambling and violent crime increases up to 13 percent in counties with casinos that are least four years old.

Still, the gaming industry is insistent. Texans should be able to choose the level of gaming they want, whether it’s slot machines and video lottery terminals or other casino games, as well as the venues they want authorized.

“Every single poll we do shows Texans support a referendum,” she said, adding 80 percent of Texans support a referendum and 64 percent support expanded gaming.