When a casino in Cincinnati and racinos near Cincinnati and Dayton opened last year in Ohio, Indiana state officials suspected their gaming industry would take a hit. Their suspicions were confirmed when gaming revenues dropped 2.5 million in the past 11 months, as gamblers who used to play at southeast Indiana’s three riverboat casinos switched their allegiance to the new Ohio operations.
And there’s more bad news. In Illinois, 15,000 video gaming machines at local bars and restaurants are taking business from the four riverboats in East Chicago, Gary and Hammond. Kentucky racetracks are installing gaming machines, which will affect the Horseshoe Southern Indiana and the Tropicana along the state line. In Michigan, the Four Winds Casino opened in 2007 near the border with Indiana and since has opened two satellite locations that compete with Indiana’s Blue Chip Casino in Michigan City.
More competition could be on the way within the state. The Anderson and Shelbyville racinos want to add live gaming; they’re the only Indiana gambling operations to post increased revenue in the last 11 months. In addition, the Pokagon Band of the Potawatomi Indians began the process to open a casino near South Bend two years ago.
Ed Feigenbaum, publisher of Indiana Gaming Insight, said, “We’re looking at a new normal that is certainly nothing like we’ve seen before. It has upset the casino apple cart, and it has reordered the hierarchy of casinos within Indiana. And it has proven to be a tremendous negative hit to the state of Indiana’s bottom line.” Mike Smith, president of the Casino Association of Indiana, added, “Our world has changed.”
To try to stay competitive, Indiana casinos have increased advertising in Ohio and southeast Indiana, and invested in their aging properties. Hollywood Casino in Lawrenceburg spent $4.2 million and Rising Star Casino in Rising Sun invested $400,000 to remodel their hotels. Belterra in Florence spent $4.5 million on its food and beverage services.
But those investments have not paid off as anticipated. Over the past 11 months, revenues at Hollywood Casino dropped $114 million, or 36 percent. At Rising Star and Belterra, the casinos closest to Cincinnati, revenues declined 30 and 23 percent respectively.
Additionally, gamblers spent $33.9 million in May in Cincinnati–54 percent of the total $62.8 million spent on regional gambling. In Indiana, the three nearby riverboat casinos took in 46 percent of gambling dollars, a drop of 18 percent compared to a year ago.
As a result, gambling tax revenue—the state’s third largest source of funds behind income and sales tax–also has dropped. In the past 11 months, gambling tax revenue fell from $687 million in 2013 to $592 million. In 2013, the state’s 11 casinos paid $98 million in development fees to surrounding communities, and Indiana’s 92 counties shared $72 million from the 13 total gambling properties.
At Rising Sun, Clerk-Treasurer Rae Baker Gipson said wagering tax revenues for 2014 are expected to be down 38 percent from $3.2 million, and admission tax revenues have dropped 23 percent from $2.7 million. “It’s tight and it’s going to get tighter,” she said. Ohio County Councilman Dillon Dorrell said the county’s income from gaming is expected to drop by half. “We are taking this very seriously. The Ohio competition has definitely had an impact,” he said.
Still, advertising and remodeling only can do so much. Above all, casino owners and their lobbyists are counting on legislators to help the industry by approving tax breaks and additional gaming options. Lawmakers are reviewing the situation this summer in anticipation of the 2015 session. Even if they reach some sort of agreement, most likely it will have to take a back seat to completion of the two-year state budget.
Last year, in anticipation of the Ohio gambling operations, gaming industry officials asked lawmakers to consider land-based casinos and live gaming at Central Indiana racinos. Those measures were defeated but the 13 gaming operations received a combined tax giveback of $65 million.
Those issues are likely to be revisited in 2015. House Speaker Brian Bosma said he’s unsure allowing land-based casinos is the solution, and he believes live gaming at racinos only would draw customers from Central Indiana casinos. He said he would consider tax incentives. “We have to find the right balance, what’s right for Hoosiers and what’s right for the industry. Any change that impacts one or a handful of gaming locations in Indiana generally has a negative impact on the remaining venues,” Bosma said.
Senate Appropriations Chairman Luke Kenley said he’s concerned about continued declining revenue projections in gaming, sales taxes and income taxes. He said land-based casinos may be the way to go. “They want to maintain their present site but be able to build out upon the land and have it be more one-unit facility instead of this farcical concoction called a riverboat. I think we should look at that,” Kenley said.
Added Senate Public Policy Committee Chairman Ron Alting, “There comes a point down the line, you set the tools in place, you say this is it, and now you are on your own. I don’t think we’re near that.”