The Casino Association of Indiana is pushing state officials to engage in a "robust conversation" about the gaming industry in Indiana in light of the Pokagon Band of Potawatomi Indians' recent start on construction of a casino in South Bend.
A study commissioned by the association and Blue Chip Casino — not an association member, but the closest casino to South Bend — has concluded that a new Four Winds Casino would lead to a gaming and income tax revenue decline of $354.75 million over five years, and the loss of 732 jobs in the commercial casino industry.
The study also projects a reduction of $3.8 million in Local Development Agreement payments to Hammond, East Chicago, Gary and Michigan City over five years.
"The introduction of a tribal casino in South Bend will have a substantially negative impact on state revenue, employment in the commercial casino industry, payments made to communities through local development agreements and the resulting community benefits those payments support," association President and CEO Matt Bell said in a statement announcing the release of the study prepared by gaming consultancy Spectrum Gaming Group.
Spectrum argues that the tribal casino would have significant competitive advantages, resulting from the favorable revenue-sharing status tribal casinos generally have, that would allow it to draw business away from existing casinos.
Through a spokesperson, the Pokagon Band declined to comment on the Spectrum Gaming report.
The report bases its projections on figures in a federally mandated environmental impact statement for the South Bend project. The EIS describes a casino with 216,000 square feet of gaming space, an 18-story hotel with 500 rooms, projected annual revenues of $620.4 million and 2,000 employees.
But the Pokagon Band announced last week a smaller project — calling it "phase one" — that will include a 175,000-square-foot casino with 1,800 electronic gaming devices. The casino is scheduled to be completed in early 2018 and will employ approximately 1,200 people, according to Four Winds officials.
The tribe does not need government approval to open a casino with the games, designated class II, planned for phase one.
The Spectrum Gaming report acknowledges that a Four Winds South Bend would itself lessen the negative impacts the report projects, especially concerning employment.
And, the tribe has reached a revenue sharing agreement with South Bend that will provide it 2 percent of its gaming profits.
But the report notes that the Pokagon Band will be required to pay no gaming taxes with its proposed class II gaming facility, "giving it an enormous marketing and pricing advantage, particularly in slot payout rates."
In response to the pending class II gaming, the state should "enact policies that encourage capital investment in the commercial casino properties to make them more attractive, and to increase their geographic and demographic reach."
If the Pokagon Band pursues an expansion to become a class III casino — allowing regular slot machines and table games — it would need to enter a compact with the state. The Spectrum Gaming report argues such a compact should "ensure that the (Four Winds South Bend) casino’s revenue share with the State would be in line with the gaming tax rates paid by the commercial gaming operators."
But while compacts are negotiated between the tribe and state, the state is required to negotiate "in good faith," and the U.S. Department of the Interior must approve the result, and protect the tribe's interests.
In Michigan, the Pokagon Band pays 8 percent of its slot machine revenue to the state, while commercial casinos pay 24 percent of both slot and table game revenue, as well as nearly 5 percent income tax, according to the Spectrum Gaming report.
The Spectrum Gaming report also discusses challenges posed by competition from casinos in Ohio and the Four Winds New Buffalo in Michigan, legalization of video gambling devices in liquor-licensed businesses in Illinois, other gaming industry expansion in the Midwest, and an aging customer base as challenges facing the industry.
According to the Spectrum Gaming report, gross gambling revenue at Indiana casinos for the 12-month period ending in September has dropped more than $2.2 billion, or 21 percent, from its peak a decade ago. A South Bend casino would reduce commercial casinos' gaming revenue by another $800 million over the next five years, according to the study, and would lead to a decline of $282 million in gaming tax revenue.
The Spectrum Gaming report suggests various tax reforms to assist the commercial casinos and make capital investment more reasonable. The casino association's Bell called the report "a clarion call" to engage policymakers in discussion about policies to aid the industry.