Tribes Versus Racinos in New Mexico

A consortium of racinos in New Mexico led by Sunland Park racetrack (l.) have proposed a “Recovery Act” that would put state racinos on a level playing field with tribal casinos

Tribes Versus Racinos in New Mexico

A proposal in New Mexico called the “Gaming Industry Recovery Act” has been introduced by a consortium of the state’s five racinos with the idea of unleashing them with unlimited gaming while in return allowing the gaming tribes to keep the $70 million they have been paying the state in revenue sharing.

Proponents claim the freed racinos would make enough money to more than make up for the $70 million the state would lose in taxes.

The draft legislation would allow the state’s five racetracks and racinos to expand beyond their existing limitations to unlimited video slot machines, gaming tables and sports betting parlors. They would also be allowed to serve alcohol on casino floors, to have ATMs on the casino floor and to be able to offer lines of credit to players. It would, according to the proposed draft “eliminate any question of legality of types of gaming on New Mexico Tribal Lands.”

Tribes would be able to negotiate online gaming, and offer Las Vegas style comps, (i.e. full comps for hotel rooms and food, golf and other amenities, etc.) The act would allow New Mexico to “Join the ‘big leagues’ in the gaming world.”

Scott Scanland, a lobbyist with New Mexico Government Affairs, says Sunland Park Racetrack & Casinos has taken the lead in the effort to pass “Gaming Industry Recovery Act,” a proposal that would put the state’s five racinos on a roughly equal footing with the its tribal casinos.

It would, says the proposal, benefit tracks by creating “large and stable racing purses across all tracks while making up for tribal gaming revenue.” Limits on numbers of gaming machines and hours of operation would be lifted, while allowing racinos to have table games, sport wagering and online gaming.

The consortium that includes Sunland Park Racetrack and Casino, Ruidoso Downs and Billy the Kid Casino, Sun Ray Park and Casino, Zia Park Racetrack and Casino, and New Mexico Horsemen’s Association engaged Union Gaming Analytics “to perform a Gaming Market and Economic Impact Study for New Mexico that projects the effects of allowing full-scale casino gambling at the state’s five racetrack casinos and, potentially, the addition of a sixth racetrack casino license,” according to the report.

Scanland explained, “We hired Union Gaming out of Las Vegas. They are in a leader in market research and banking. What their study concluded is that, if we do it right, we could generate enough revenue in the state to continue to pay what the tribes have been paying. We could make up the $70 million the tribes would stop paying, plus bring in additional revenues.”

Scanland told GGB News, “It’s a proposal rather than a bill at this point. The bill that is being written about is not going to be the one that would hopefully pass.”

They have a bill sketched out, but with details left to be written. They don’t have a sponsor yet. “We’ve had multiple conversations with legislators,” said Scanland. “It’s still a draft but we have got it to the point where we can begin vetting it and shopping it. It’s still not complete. There are several placeholder sections on, for example, tax rates. All of that will be determined with the tribes most especially and the other stakeholders.” He added, “People want to see things written down so they can look out it. That was the emphasis for getting this version out when we did.”

They started with the Governor Michelle Lujan Grisham’s office to give her a head’s up on what they were planning. “During the hourlong Zoom meeting we had with her she directed us to talk to the tribal leaders, the gaming tribes, the key legislators and committee chairs,” said Scanland.

They visited with the Navajo and Ohkay Owingeh tribal leaders and also talked to the Tesuque.

Their reaction? “Every tribe we’ve talked to whether casino operators or the leadership—all have listened to us,” said Scanland. “No one has said this is the worst thing in the world. The tribal governments operate very much like our legislature and there is a process to follow.”

Note: GGB News reached out to several New Mexico tribes on this story but has not yet gotten a reply.

Scanland added, “They listened. They were engaged. They said ‘We need to talk to the tribal council.’ We’ve begun the process for them of vetting the bill also.”

One of the major selling points for the proposal—and why Scanland thinks it might even start a national conversation—is that gaming tribes would no longer need to pay the state any revenue sharing in order to maintain their monopoly on some forms of gaming, especially slot machines.

New Mexico, he says, was one of the first states to legalize Indian gaming. “We passed our original gaming act twenty years ago and as a state we were pretty early. We passed our first set of compacts in 1998.”

There has been one major revision of the New Mexico Gaming Control Act that resulted in the tribal state gaming compacts, “and the tribes are on their second and third set of compacts,” said Scanland. “They pay $70 million – $80 million in revenue sharing for exclusivity and the racetracks have a set number of slot machines but we don’t have tables or sports betting and we have limited hours.”

Under this proposal, he says, they would expand gaming in New Mexico. “While some of the tribes might initially have the reaction of digging in their heels, I think the additional revenue they could spend on their reservations is going to be a factor in their calculus. Can they spend whatever the number it is they spend better keeping it on tribal lands?

Scanland argues that Covid-19 has exposed terrible problems on tribal lands, “especially on the Navajo lands. Problems of water infrastructure and delivery issues. What all the tribes will ask themselves is: ‘Can we spend that money better on our own people and not send it off to the state of New Mexico?’”

The chore the racetracks have, he says, is to convince the state and tribes that neither will lose money. “We won’t go the legislature with a proposal that blows a hole in the budget,” he said.

The Union Gaming study concluded, “Under a scenario that allows full-scale commercial gaming at six racetrack casinos, in addition to other regulatory changes, gaming revenue is expected to reach $464 million (within a range of $425 million to $502 million). However, in order to reach this amount, significant capital investment would be required at all six racetrack casinos in order to stimulate the levels of demand needed. Other regulatory changes, like the approval of casino complimentaries and all-day (24/7) casino operations are also important factors that help reach the forecasted amount.”

Scanland commented, “They really didn’t go into details. What’s not included in the numbers is indirect revenue when it comes to additional employment from new construction.”

The proposal was first presented October 1 to the state’s legislative finance committee, which is the staff driven, year round operation, that includes the legislative analysist. They work with all state government departments. They create the budget—and when the budget is passed they oversee it.

The committee meets monthly and is starting to ramp up for the budget creation process, which will begin in earnest in January.

Scanland explained, “It’s a process. What you will read is not going to be the final product. Even though we began thinking about these things before Covid, what we have seen is our tourism industry, which is so important, almost come to a standstill. We believe this proposal would be the shot in the arm our tourism industry needs. It would be a half a billion of revenue statewide. This could be the proposal that stimulates our economy as we come out of Covid and retool our economy going forward.”

Recently Sunland Park Racetrack Casino General Manager Rick Baugh told KRQE “There’s so many different things that can, you know, benefit from this in tourism.” He added, “We have the capability of turning the tide and creating the tourist destination, not only here but across all five race tracks and the tribal casinos.”

Senator John Smith, one of the co-chairmen of the Legislative Finance Committee,  brings a unique perspective to this proposal since he combines 32 years as a New Mexico legislator with the fact that he won’t be in office after December because he was defeated for reelection.

Smith has been a senator since 2001 and is also a small business owner because New Mexico’s part-time legislature sends lawmakers back home after the legislative session.

Senator Smith was around 24 years ago when there was a joint legislative committee and two governors who said tribes could have horseracing. He told Global Gaming Business News, “Our attitude was you either give it to everybody or take it away. But that philosophy did not pass. We were trying to get gaming going to attract out-of-state dollars.”

In 1996 the legislature approved Class III gaming. Smith recalls his reservations: “I never thought revenue sharing was legal. You can’t assess the tribes but they can voluntarily give it up. To do that they wanted exclusivity on table games. The tracks would get the machines. In those days there was a difference between Class II and Class III games.”

In Smith’s opinion, gaming in New Mexico is near oversaturation. “I think it’s less profitable for the tribes, and the tracks with the advent of Covid. We aren’t getting the $70 million from the tribes,” he said.

“I’ve not been in agreement with the revenue sharing concept at all,” said Smith. “When I look at the expansion of tribal gaming, I say let’s put it back to the tribal enterprise. We don’t have a good accounting of how tribes spend their money. We don’t know if they are using it all for health care or education. I want to get away from this sovereign nation issue. They don’t want to negotiate with the legislature. We can kick it back and forth but the ultimate decision makers are the tribes. I don’t think it creates a level playing field. And we can’t get a real number on Class II revenues. I’d like to get away from that and let free enterprise take over.”

There is also a problem with the racino side of the equation, says Senator Smith.

“Some incentive money is going to purses to try and rejuvenate the horse industry. And now even if you have live racing you don’t have the purses. We got the machines to revitalize the horsemen and related industry and now we no longer have that. The next move when the tribes comes back they will want to reduce the $70 million to the state, the 25 percent they pay, which the tracks negotiated for.

Articles by Author: David Ross

David D. Ross edits the Escondido Times-Advocate and Valley Roadrunner newspapers. A freelance journalist for over 40 years, Ross is knowledgeable about San Diego's backcountry and has written on tourism in Julian, Palomar Mountain, San Diego Safari Park—and the area’s casinos. He has a master’s degree in military history from Norwich University.