Sometimes after you do things right, and get good results, circumstances change.
Take the case of gambling in Indiana. In 1993, state leaders approved riverboat casinos in a rational, well-planned manner (although it require a special session in which budget challenges were being ironed out). The venues were spread across the state, and businesses thrived, well above expectations, for about two decades.
But changing times, neighboring state competition, and Indian gaming have all whittled away at casino revenues in the state, which has meant less and less money for the state government.
The most recent hit came in the form of the Pokagon Band of Potawatomi Indians, which earlier this month opened the Four Winds Casino South Bend. (That’s in northwest Indiana; South Bend = University of Notre Dame.) The casino, on Indian land, is expected to lure many gamblers from outside the local area; it has a business advantage because it isn’t required to pay state taxes. Nor will the state be able to get money via a compact, because the tribe simply offers the same things the commercial casinos already do.
Indiana’s commercial casinos took in $2.2 billion in 2016, down almost 21 percent from their peak seven years earlier. The 13 existing casinos, all run by private companies and regulated by state officials, paid about 27 percent in state and local taxes on their gambling profits last year. The new Pokagon casino is projected to cut gambling profits at those 13 casinos by 4 percent in the first year and by 9 percent over the next five years, according to a study for the Casino Association of Indiana.
The Blue Chip Casino in Michigan City, Ind., was the hardest hit after the first Pokagon casino opened in 2007 near New Buffalo, Mich., less than 20 miles away. David Strow, vice president of corporate communications for Blue Chip owner Boyd Gaming, told the Associated Press the company has continued to invest in casino amenities in order to stave off the competition. “We have seen several new casino properties open in this region over the last 10 years, and Blue Chip has continued to compete successfully each time over that timeframe,” Strow said.
In the last 10 years, casino operations have grown all around Indiana. Ohio’s 11 casinos and racinos were all opened since 2012. Illinois’ model of retail gaming – allowing up to five slot machines in truck stops and bars – has decreased interest for Illinois residents who used to frequent casinos on the western border of Indiana. Michigan is now committed to expanding the number of its commercial casinos.
Meanwhile, the biggest win in Indiana has been industry supporters persuading legislators to back off on imposing taxes on free play. Matt Bell, president and CEO of the Casino Association of Indiana, says the state didn’t take a position until 2011, then allowed casinos to hand out $5 million in free play annually tax-free. The amount was later increased to $7 million, partly in response to competitive threats from Ohio.
“When we looked at free play as a percentage of overall revenue, Indiana ranked last at only about 8 percent,” he said. It was 15.9 percent in Ohio. “That creates a distinct marketing advantage for those properties,” he said. “And free play is the most effective marketing tool a casino can offer.”
In sum, Indiana was ahead of the game when it began its casino industry in the 1990s. But with everyone else now catching up, operators in the state have to be considering what changes could stop things from continuing to get worse.
