State gambling revenue expected to stay flat

Scott Olson, The IBJ

solson@ibj.com

Indiana's share of tax money generated by the state's 13 casinos is expected to remain relatively flat for at least the next few years, a state fiscal analyst told Gaming Study Committee members this morning.

The committee, consisting of eight state legislators and the executive director of the Indiana Gaming Commission, is meeting today to consider state gaming issues, including changes at Indiana's two horse tracks with casinos.

Jim Landers, fiscal analyst for the committee, told members that tax money will decline or remain flat in fiscal 2010, and might increase only slightly the following fiscal year.

The average growth rate of gambling tax revenue historically had been about 5.5 percent, before it began declining by single digits the past few years, he said.

"This is sort of striking compared to what we've become used to, in terms of riverboat and wagering taxes," Landers said.

The state received $818.9 million in tax money from the state's casinos in fiscal 2008.

Today's discussion was set to include proposed tax breaks for the so-called "racinos" and whether to allow table games. The racinos - which feature slot machines and electronic games, but not the table games found at traditional casino - say they are struggling to bring in enough revenue to make interest payments on debt they took out to pay state licensing fees.

Owners of Hoosier Park in Anderson and Indiana Live in Shelbyville were saddled with a hefty $250 million one-time state license fees for the slot machines. They also spent millions of dollars more to upgrade their facilities last year after slots were approved.

Hoosier Park could be in danger of going bankrupt, Indiana Gaming Commission Director Ernie Yelton said recently.

Indiana measures casino performance by adjusted gross receipts, or total gambling revenue minus payouts to players. In 2008, Indiana's 13 casinos eked out a modest 1.65-percent increase in AGR. But that's only because Hoosier Park and Indiana Live opened their expanded casinos midyear. The state's 11 existing casinos saw AGR drop 6.15 percent.

In other words, the racinos drew business away from the riverboats - a trend that seems to be continuing this year.

In July, AGR at Indiana Live climbed 27 percent, to $19.1 million, compared with the same month in 2008, when it had only a temporary gambling facility. At Hoosier Park, AGR improved by 4.6 percent.  

But some rivals are wilting under the economy and additional competition. AGR was down by double digits at several casinos, including Ameristar in East Chicago (21 percent), Majestic Star in Gary (18 percent) and French Lick Hotel & Casino (11 percent).

"We've had some flattening out and declines in revenue." Landers said. "A lot of it has to do with racinos. They've displaced some business at the casinos. That's obvious, to some extent."

Overall, the state's 13 casinos recorded AGR in July of $251.4 million, a 4-percent increase from the year-ago period.