Gambling
8:04 am
Wed March 16, 2011

Non-tribal casinos renew push for video slot machines

Lawmakers expect to get more bad news tomorrow when the new state revenue forecast comes out. If the budget shortfall grows, pressure will intensify to find new sources of tax dollars to offset some of the cuts. Maybe gambling.

That's what owners of the state's non-tribal casinos are betting on. They're ready with a proposal to allow video slot machines in off-reservation mini-casinos – something they say will benefit the state’s coffers.

At the Iron Horse mini-casino in Auburn the motto is: "Let us help you take a break from your worries." The place has 15 card tables, Vegas-style dealers and real poker chips. Customers can play Blackjack, Spanish 21, even Texas Hold ‘Em.

But owner Chris Kealy says the list of what you can’t play here is even longer:

"We do not do Craps, we do not do Roulette, we do not do Keno, we do not have any Electronic Gaming Devices at all."

It's that last category - electronic slot machines - that Kealy wants to be able to offer. Kealy claims, "51% of the population that gambles wants to use a slot machine or an electronic gaming device of some form." He says not having slots is killing Washington's non-tribal gaming industry

Card Rooms Closing

According to the State Gambling Commission, card room revenues in Washington have been on the decline since 2006. And 23 card rooms have closed – including one of Kealy's.

So now he and his fellow card room owners are rolling the dice on a plan they say will save their industry - and provide cash-strapped state and local governments with a new stream of tax dollars:

"This revenue source is real, it's about $190 million a year that's available to the state coffers and that $190 million can fund things the state would rather not cut," Kealy says.

That projection comes from a new study commissioned by the Recreational Gaming Association of Washington. Kealy is president. The RGA wants the legislature to allow an average of 125 electronic gaming devices in each of the roughly 60 remaining non-tribal casinos in Washington. And tax them at a 35-percent rate.

Under the proposal, only card rooms that have been in business for five years could get machines. Frank Hackmann likes the idea. He's a regular card player at the Iron Horse:

"What can it hurt. Increases more tax dollars for the state."

Hackman has played the machines at the tribal casinos. Asked if he would play those games at the Iron Horse, he replied, "I'd play them."

Lawmakers, Tribes Have Concerns

That's what concerns State Representative John McCoy. He's a Democrat and a member of the Tulalip tribe, which operates one of the biggest casinos in Washington.

McCoy says allowing non-tribal card rooms to have video slots would steal business from tribal casinos:

"It's simple logic that if I've got to drive by a card room to play the device I like why would I drive further to get to the tribal casino?" asks McCoy.

Tribal gaming in Washington is big business: 28 casinos, nearly 24,000 video slots and revenues last year of $1.7 billion and growing.

Washington tribes have signed treaties with the governor that limit their expansion. In turn they don't have to share their revenues with the state.

But McCoy notes one tribal casino in Washington closed in 2009 and several have experienced a significant drop in revenues due to the recession. 

"Not all tribes are doing well in Washington state, so you start opening up these card rooms around the state and that will cause some of the tribal casinos to go under because they got to stay where they're at. They don't get to get to move to the population centers," McCoy says.

Are Tribal Casinos Hurting?

The Recreational Gaming Association disputes this. Its study projects tribes would experience a nine percent decline in business, but recoup that over time.

Of course, there's another question at play here. Should an expansion of gambling be part of Washington's budget solution?

Professor William Thompson - aka Billy Gamble - is a gaming industry expert at the University of Nevada at Las Vegas. He says video slots would certainly provide a shot in the arm for the card rooms:

"It would save their businesses, the particular businesses will do well."

But Thompson thinks the projection that video slots in Washington mini-casinos would bring in $190 million a year in taxes is optimistic. And, he argues, it would cut into sales tax revenues in other segments of the state economy:

"The casino money is going to come out of dining budgets, people aren't going to go to the Wal-Marts and the Sears Roebucks to buy stuff that would be subject to the sales tax."

Thompson says policy makers always have to weigh the benefit of gambling taxes against the social impact. "This is a policy decision that produces a very regressive tax, but it is tax money and the money would go into the treasury," he adds.

Olympia's Odds

The odds of getting a gambling expansion through the Washington legislature – especially at this late date – appear slim. Voters have said "no" in the past. The tribes are major campaign contributors to majority Democrats. Plus, it would likely require a 60% vote in the State Senate – due to Senate rules.

But Senate Majority Leader Lisa Brown of Spokane says if the state gets a bad revenue forecast and budget negotiations stall out over what to cut – then ideas like this could end up on the table.