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Gov. Kasich on Ohio's money games

Published: Sun, June 19, 2011 @ 12:01 a.m.

RELATED: Mahoning Valley suitors ready for the gate




After years of little movement to increase gambling in Ohio, the state is taking a new gamble on gambling.

That’s not happening by chance. Voters approved a constitutional amendment in 2009 for four Las Vegas-style casinos.

Also, Gov. John Kasich wants the seven horse racetracks in Ohio to pay fees to the state to use video slot machines at those locations — something that will generate money for the state and save the ailing horse- racing industry in Ohio.

“It’s good we’ll have more money, but I don’t look at this as solving the financial problems in the state,” Kasich told The Vindicator.

Slot machines, called video lottery terminals or VLTs for short, are likely to come to horse tracks over the next three years, Kasich said.

Of importance to the Mahoning Valley, Penn National Gaming Inc. wants to relocate its horse-racing gaming license from Raceway Park, a harness racetrack in Toledo, to a $200 million facility to be built in Austintown at the vacant 186-acre enterpointe business park. Penn also wants to move its gaming license from Beulah Park in Grove City, near Columbus, to the Dayton area.

“This administration is committed to getting VLTs to Youngstown,” Kasich said. “I can’t guarantee it. I’m hopeful it will work out.”

Kasich said, “There is tremendous interest” in the Youngstown area for a racetrack with VLTs.

“But we can’t force [Penn National] to come to Youngstown,” he said.

On Friday, Kasich announced an agreement with Penn National, building casinos in Columbus and Toledo, for the company to pay an additional $110 million in fees to the state over a period of 10 years.

That deal makes the relocation of Penn’s gaming license to Austintown easier, state Rep. Ronald V. Gerberry said.

Also, Bob Tenenbaum, Penn National’s spokesman, said the casino deal will help the company meet its goal of relocating the track to Austintown. “A lot of steps need to be gone through, but it’s our intention to work it out.”

The Penn National deal came two days after Kasich announced a similar agreement with Rock Ohio Caesars, building the Cleveland and Cincinnati casinos, for that company to pay an additional $110 million in fees to the state over a period of 10 years.

Every state surrounding Ohio has legalized gaming, including several with Las Vegas-style casinos and others with video slots.

Gerberry, of Austintown, D-59th, said Ohio is “behind the game” when it comes to gambling. The casinos and slots at the tracks will help, he said, but Ohio would be in better financial condition now if they had been implemented years ago.

But Kasich said there is still money to be made for Ohio with gambling.

“I don’t think [ROC and Penn National] would be making these investments in casinos unless they think it will work,” Kasich said. “Dan Gilbert [ROC’s chief executive officer] is confident he’ll be successful.”

It came as somewhat of a surprise that VLTs at the state’s seven horse racetracks were included in the casino announcements.

Kasich said he decided to handle all gambling issues at one time, and that he didn’t want to “lose control” over VLTs as the state did with gambling casinos.

“Not having a comprehensive process isn’t a good plan,” he said.

An executive order in 2009 by then-Gov. Ted Strickland to legalize VLTs at racetracks died after a lawsuit questioning his power to do so. The lawsuit was dropped later.

While some legislation approved by the General Assembly is needed for portions of the gambling deal, Kasich said he and his advisers “don’t think” it’s needed to legalize VLTs.

The process of relocating a racetrack gaming license is a lengthy and difficult one, requiring approval from the Ohio State Racing Commission as well as the signatures of at least 51 percent of the total number of voters in the last general election from the township in which the racetrack would be located. Owners of two other racetracks already have expressed objections to Penn National’s plans.

Robert Schmitz, appointed by Kasich as chairman of the Ohio State Racing Commission, said: The “movement of tracks will be a challenge. There are a lot of hoops that need to be jumped through. There’s a lot of checks to go through. The lottery commission and the racing commission will be involved.”

When asked about the commission’s relocation process, Kasich hinted the state would make it easier to move the gaming licenses of the two tracks.

“It’s our intention to have a streamlined process,” he said.

If any legislation is needed to help that process become streamlined, the General Assembly could consider it as early as this week, Gerberry said.

Strickland’s VLTs proposal called for each track to pay $65 million up front to the state and 50 percent of the slot profits, estimated at the time to be $933 million annually.

Kasich’s proposal is for $50 million from each track with $10 million upon application, $15 million at the onset of VLT sales, and $25 million a year later. Also, 33.5 percent of slot profits would go to the state, projected to be $400 million annually.

“With VLTs, you don’t know what you’ll have in terms of competition,” Kasich said of reducing the up-front money and the percentage of slot profits. “This is the right economic [structure] so you can have money come to the state. You don’t slap numbers on a piece of paper. I’m very comfortable with the amounts we’ll receive.”

Schmitz said, “VLTs will rebuild the horse-racing industry in Ohio. It’s definitely good news for horse racing in Ohio.”

Gerberry, a strong supporter of a racetrack with slots in his hometown, said, “VLTs have the ability to maintain and assist the growth of horse racing in Ohio.”

The horse-racing industry has declined significantly in the past decade with purses at the state’s commercial tracks dropping from $58.63 million in 2001 to $28.25 million last year, and owners desperate for VLTs in order to keep operating.

Horse racing isn’t the only struggling gaming industry in the state.

When it comes to gambling in Ohio, Gerberry said, “We haven’t been real progressive.”

Gerberry pointed to the state lottery, saying, “It’s been stagnant over the years. The state hasn’t been aggressive with the lottery. We could have had VLTs under the lottery or some form of sports betting years ago.”

There also is talk of privatizing the lottery with the Republican-controlled Senate including a provision in its version of the state budget requiring the budget director to compare and analyze possibilities to make the lottery “a commercially run enterprise.”

In response, Kasich said, “We’re not looking to privatize the lottery. We’re asking, ‘How do you make more money?’”

The state needs to look at the lottery’s operations to make them “more effective and more efficient,” Kasich said.

It’s too early to make those decisions now, he said.

The state sold the lottery to voters in 1973 as a way to provide money for schools. But only about 4 percent of total education funding comes from the state lottery commission.

Gerberry called lottery money for education “a shell game” because the state finds “out how much we’ll get from the lottery and eliminates it from education funding” from the operating budget.

And the Ohio Lottery Commission forecasts a 5 percent reduction in annual sales two years from now, said Marie Gilbane, its spokeswoman.

The addition of Keno in 2008 was supposed to generate $292 million in sales during its first year but took in only $99.8 million. The annual amount has grown to about $150 million, a little more than half of the original projection.

The lottery has grown from its first 50 cents weekly drawing, the Buckeye 300, in August 1974 to include dozens of games, including about 50 instant scratch-off tickets, Pick 3 and Pick 4, the Ohio Lotto, and the introduction of multistate games: Mega Millions in 2002 and Powerball last year, Gilbane said.

“You have to keep games fresh,” she said. “Like any product in the marketplace, you have to keep people’s interest.”

For the past 15 years, the lottery’s contribution to education funding has ranged from around $600 million to the low $700 million amount, Gilbane said.

The lottery’s contribution increased from $672.2 million in 2008 to $702.3 million in 2009 to $728.6 million in 2010. Last year was the second-best year for the lottery, with $748.5 million in 1997 being No. 1.

The commission is projected to give $743 million for education this year. But the commission expects a 5 percent decrease in annual sales by 2013 because of competition from the new casinos.

“It’s a projection; it’s hard to say the exact amount,” Gilbane said. “Some other states have seen a decrease in sales in the immediate area or the county with a casino. Some states felt the impact for a couple of years, and then it came back.”

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