February 21, 2005

Printer Friendly Version

Vegas-Style Casinos Gain Steam
as Legislators Duel on Gambling

By Mike Hailey
Capitol Inside

Some state lawmakers are saying privately that they might be more inclined to support legislation legalizing full-scale casinos than a measure that restricts new gambling in Texas to video lottery terminals. The pool of potential casino supporters includes some House Republicans who'd been wavering on whether to back or to oppose a plan to legalize VLTs if and when it makes it to the floor for a vote this spring.

Legislators who prefer Las Vegas-style gambling to video slot arcades could have the vehicle they need as early as this week. There's speculation that State Senator Rodney Ellis is on the verge of resurrecting a major casino proposal that died in a Senate committee without a hearing after he filed it against long odds two years ago. The package that Ellis introduced in 2003 included a proposed constitutional amendment and accompanying legislation that would have authorized voters at the state and local levels to allow almost three dozen Vegas-style casinos to operate around the state.

The Houston Democrat's plan would have established a state gaming commission with seven members appointed by the governor to license and regulate land-based casinos around the state. The legislation would have allowed Las Vegas-style gambling at the state's greyhound and major horse racing tracks. The commission would have been given the power to license up to 24 additional casinos in the state's urban areas, coastal resort towns and counties that are located on the Mexican border. Each operating license would have been subject to voter approval in local option elections.

It's not clear at this point whether Ellis will offer the same proposal or a revised version of the Nevada-style casino package he dropped in the hopper two years ago when lawmakers were searching desperately for ways to help erase a massive budget deficit. Lawmakers at that time were just beginning to weigh the possibility of removing the prohibition against slot machines - or VLTs as they became known - but abandoned that idea during the regular session after Governor Rick Perry threatened to veto video lottery gambling. Perry reversed field a year later and proposed to legalize VLTs to help pay for local property tax relief as part of a school finance plan he advocated during a special session last spring. The Republican governor, who caught criticism from activists within his own party after backing a video lottery plan, has indicated recently that he would support VLTs as a means of restricting the spread of "rampant gambling" across the state.

After staying relatively quiet on the issue of video lottery gambling last year, the state Republican Party has taken a high-profile stand against VLTs this time around, even though a substantial number of GOP legislators favor expanding gambling to allow slot machines or even Vegas casinos if given the choice during the session this year. An estimated 30 House Republicans or more are expected to be solid no votes on any gambling measure that comes to the floor this spring. But some House Republicans who'd been wavering or leaning toward opposing video slot machines are now hinting that they might consider voting for full-scale casinos because of the windfall they'd be expected to produce for state coffers.

While VLTs would generate an estimated $1.2 billion a year in state revenues, casinos would produce twice that amount or more each year if some projections hold true. The Legislative Council did not prepare an impact statement in 2003 for Ellis' proposal, which was sent to the State Affairs Committee and buried there by its chairman, former State Senator Bill Ratliff, an East Texas Republican and former acting lieutenant governor who did not believe the state should rely on gambling to fund public schools or other essential state needs.

But an economic analysis that Waco economist Ray Perryman performed using the Ellis plan as a model estimated that casinos would pump about $2.3 billion a year into state coffers while generating an additional $730 million for local governments and more than 270,000 new jobs across the state. The overall economic impact could be worth as much as $30 billion a year statewide, according to Perryman's study. Perryman said that kind of money would make possible significant reductions in local property taxes and the elimination of the Robin Hood wealth-sharing system while boosting school funding and performance and preventing the need to increase state taxes. Gambling opponents argue that higher costs for law enforcement and mental health programs that would be necessary to combat an increase in crime, addiction and other social problems would more than mitigate the positive economic effects that casinos might offer.

Despite opposition within their own party, Republican legislators who vote to expand gambling to allow VLTs or even casinos probably don't have to worry about being excoriated on the issue the way Democratic State Rep. Sylvester Turner of Houston was when he announced support for a video lottery measure earlier this month. State GOP Chairwoman Tina Benkiser called Turner's proposal a cruel attack on Texas families. But when Republican State Rep. Charlie Geren indicated to the hometown Fort Worth Star-Telegram last week that he might get behind a Vegas-style casino proposal, Benkiser mentioned the lawmaker's statements in an email news update to supporters on Saturday without offering an opinion on them or expressing the party's position on casinos or gambling in general.

While moves to expand gambling will draw guaranteed opposition from several dozen conservative Republicans and a few Democrats as well, the big fight is taking place behind the scenes where casino lobbyists for the past year have been trying to block legislation that would allow horse and dog racing interests to enjoy all of the benefits from legalized VLTs. Track owners, horse and greyhound breeders and other racing interests would see the incomes they experience from an expansion of gambling cut substantially if forced to compete with two dozen other casinos around the state. Perry's plan last year would have limited video lottery to existing horse and dog racing tracks and casinos on Indian lands. The Turner measure would legalize VLTs at the races tracks and Indian reservations - and in an attempt to shore up support it would allow additional video lottery arcades in nine regions of the state with one in each of the state's major cities, one in East Texas, one in the Rio Grande Valley, one in the Lubbock-Amarillo area and one in Central Texas.

But casino supporters in the lobby and in the Legislature argue that it doesn't make fiscal sense to stop there when full casinos could be worth so much more for the state by offering games such as blackjack, poker and roulette. Established racing interests had the inside track when the Legislature two years ago began toying with the possibility of extending gambling to help fund schools.

But major casino companies have turned to a cadre of influential Austin lobbyists to make their case to state legislators. Harrah's Entertainment has powerful lobbyist Stan Schlueter, a former House Ways and Means Committee chairman, and his partner Eric Glenn on board at the Texas Capitol to advocate the economic benefits of full-scale casinos. Boyd Gaming Corporation has enlisted the services of former Railroad Commissioner Kent Hance and his partners Robert Floyd and Jay Stewart to lobby at the state Capitol this year. James W. Jonas III, who was a partner in former Texas Congressman Tom Loeffler's law firm until late last year, is representing Isle of Capris Casinos Inc. before the Texas Legislature during the regular session. Nevada Gold & Casinos Inc., which is based in Houston, has law partners Marion Sanford and John Kuhl lobbying at the Texas Capitol while Penn National Gaming has hired Thomas Forbes to watch out for its interests in Austin this year.

The lawmakers they lobby won't have to go far to see their work in action if full-service casinos are legalized and one eager Austin group gets permission from local voters and the city council to follow through with a plan rolled out two years ago. The plan called for a $440 million casino in downtown Austin near Waller Creek about a block west of Interstate 35. Former Mayor Bruce Todd and lawyer Pete Winstead were tapped as consultants for the Austin casino project, which would employ 2,700 workers while generating an estimated $200 million annual profit from which city, school and state taxes would be paid.

The Austin casino's lead developer, Barry Keenan, also envisioned a Vegas-style casino that would cater to winter Texans traveling through the tiny town of Tulia in the Texas Panhandle on Interstate 27. According to news reports, Keenan spent time in prison for his role in a botched plan to kidnap Frank Sinatra Jr. in the early 1960s. Jodi Jackson, who's registered to lobby for Integrated Gaming Concepts and former Hollywood Casino chairman Jack Pratt of Dallas, was the project manager for the casino envisioned for Tulia. Jackson led a group called Let the Voters Decide, which was organized two years ago to advocate casino gambling in Texas.

While casinos in Travis County and Switzer County might rank somewhere between longshots and pipedreams at this point in time, the Kickapoo Traditional Tribe of Texas may have the best odds for full-scale casino gambling because its regulated primarily by the federal government and not the state. The tribe entered a deal last month with Lakes Entertainment Inc. to manage the Lucky Eagle Casino in Eagle Pass. The casino, which currently offers limited gaming, has been at the center of a scandal, its previous managers accused recently by a federal grand jury of conspiring to embezzle hundreds of thousands of dollars from the tribe's gaming establishment. Former State Rep. Timoteo Garza and several family members have been indicted on charges ranging from tax evasion to the use of casino funds to run political campaigns in connection with the Lucky Eagle case. The tribe's current leadership has high hopes for the casino under the agreement with Lakes, which already operates Indian casinos in California and Michigan and owns a controlling share of a media company that produces television programs about gaming including the World Poker Tour series.

Despite growing support among Texas lawmakers, casino advocates know they can expect intense opposition from anti-gambling forces such as the Texas Baptist Christian Life Commission and conservative Republicans who helped kill video lottery gambling during the special session last year. Citing social ills, State Rep. Charlie Howard, a Sugar Land Republican, announced last week that he's gathering signatures of fellow state lawmakers for a letter opposing new gambling in Texas.

Gambling advocates will need 100 votes in the House and 21 in the Senate for the two-thirds support necessary to give voters the opportunity to make the final call on casinos or VLTs.