Losing the Paddle Wheel and the CaptainBy Ken Adams, CDC Gaming ReportsOctober 27, 2017 at 9:42 pm Riverboat gaming is undergoing change, evolving away from its beginning. Riverboat gambling states are revisiting the legislation and regulations hoping to make the casinos safer and more competitive. Riverboats are the product of difficult financial conditions in the late 1980s and early 1990s. States on the Mississippi River or one of its tributaries considered riverboat gambling reminiscent of the 19th century to stimulate struggling economies. The first state to pass a riverboat gambling law was Iowa in 1989, although the first casino did not open until April 1, 1991. In the 1980s, Iowa was reeling from a farm crisis and loss of manufacturing jobs; in one three-year period unemployment doubled. Many lawmakers were willing to try anything, even gambling to solve the problem. “The riverboat gambling concept came from Davenport. Davenport was struggling economically, and we thought it would help their economy,” Don Avesnos, a former Speaker of the Iowa House said. However good the idea may have seemed to its advocates, it had an equally convinced opposition: “Everybody just thought everything would go to hell. We’re going to have crime and prostitution and stealing and people going bankrupt,” said Sen. Wally Horn, D-Cedar Rapids. The debate was heated, but the pros carried the day and riverboat gambling became law. Other states were quick to follow suit.The growth of riverboat gaming was part of the second wave of gaming expansion in the United States. It started in 1988 and included historical communities and riverboats. By 1994, Colorado and South Dakota had authorized limited gaming in small historic mining towns while Iowa, Mississippi, Indiana, Louisiana, Missouri and Illinois passed riverboat gambling legislation. Riverboats and mining towns had one thing in common; casinos and gambling were kept as far away from population centers as was possible. In the eyes of the lawmakers in those states, putting gambling up in the mountains or floating on a river or lake would confine the sin. That expansion was successful; the casinos made money, created jobs and paid substantial taxes. Other states looked at the successes and coveted those results, leading to a third wave of expansion. That wave was not confined to rivers or mountain locations and it put extreme pressure on the riverboat and mountain casinos. At the same time, Indian gaming began what has become the most significant growth trend in gaming. The American Gaming Association recently reported that Indian gaming has grown 300-fold from $121 million a year in gross gaming revenue in its early 1990s to $30 billion in 2016. The combination of Indian gaming and expansion into Ohio, Pennsylvania, Michigan, Maryland, Massachusetts, Kansas and New York put an immense amount of competitive pressure on those states with limited access to casinos.As the competitive pressures increased so did the lobbying efforts to relax the restrictions on the floating and remote mountain casinos. Operators in those states asked politicians and regulators for permission to expand their offerings, reduce the taxes and move into better locations. The lobbying efforts worked, at least partially. The historic town casinos were allowed to raise the wagering limits, extend the hours and add additional gaming options. The riverboats wanted easier access, no entry fees, a reduction in the tax rate and most importantly, to be able to come ashore. Each state approached the issues differently. For example Indiana under pressure from Pennsylvania, Ohio and Illinois made a series of changes; boats were no longer required to have a crew and be capable of actually sailing, taxes and entry fee were adjusted and in 2015 a bill allowing the casino to build on land became law. But competition was not the only issue that stimulated debate to bring casinos onto land.Hurricane Katrina, not competition, caused the change in Mississippi. Katrina hit Mississippi in September 2005 nearly destroying the casino industry in Biloxi. The casinos were closed for two months as a result of the storm. Casinos in Biloxi were built on barges and as a result were very vulnerable to the fury of the storm. The devastation overwhelmed the opposition and Mississippi easily decided to allow casinos to be built on land. The wisdom of the change was evident during Hurricane Nate that hit Biloxi 12 years after Katrina. It was not as powerful as Katrina and the damage was minor. Nate did less damage largely because new construction regulations made casinos less vulnerable to storms after Katrina. Mississippi revised the idea of isolating the sin to protect the innocent and found the innocent were better protected in a casino on land than one sitting in the bay.Those two ideas, adjusting to an increasingly competitive environment and protecting casino customers from the fury of Mother Nature are continuing to push the process forward. Tropicana Evansville, the first casino in Indiana to move onto land, opened on October 20, 2017. The casinos in Ohio and Pennsylvania have taken 40 percent of the revenue from Indiana casinos; to survive they will need help from the state, entry fees, taxation. Land-based operations are a good beginning.Louisiana is next in line to address paddle wheels and captains. The state is as vulnerable to tropical storms as the Mississippi Gulf Coast and that puts its casinos frequently in harm’s way. Its casinos are also feeling the impact of casino expansion in other states. Riverboat gambling was a good idea in its time, but that time is passed. During one of the discussions in Indiana, a Republican lawmaker, Ed Clere, summarized the issue very well; “We see all the signs of increasing competition. It’s our responsibility as legislators to make gaming policy for the long term and for two decades we’ve been making gaming policy in a reactive and ad hoc fashion.” It is time to get rid of the paddle wheels and captains; those riverboats are not safe in extreme weather and they cannot compete with the land-based casinos being built all around them.