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Published: 7/3/2011

Hollywood Casino Toledo

Place your bets, but who's looking out for the taxpayers?

BY DAVID KUSHMA
BLADE EDITOR

When Toledo's casino opens next year, I doubt I'll spend much time there. I prefer to dispose of my disposable income, such as it is, in other ways.

Relax -- this isn't another futile anti-gambling diatribe. If you like to play the slots or table games or poker, knock yourself out (but please don't bet the rent).

At least if you do it in Toledo, you'll lose your money locally, instead of dropping it in Detroit or Las Vegas or Atlantic City. Of course, it won't all stay here, given the casino's out-of-town ownership.

Whatever the economic, moral, and political arguments against legalized gambling, Ohio voters considered them two years ago -- and rejected them emphatically. The four casinos that are going up in our state, including the gaming palace on the Maumee, are facts on the ground, and we all might as well get used to them.

But I'd hope that gambling enthusiasts and skeptics could agree that state government has a duty to the taxpayers who approved the casinos to make the best deal it can on their behalf with the casino operators. That still hasn't happened.

During last year's campaign, candidate John Kasich harrumphed that the state constitutional amendment authorizing the casinos in Toledo, Cleveland, Columbus, and Cincinnati was a "raw deal" for Ohioans. He was right.

The 33-percent tax rate on casino profits is too low for a monopoly franchise, and the one-time licensing fee of $50 million per casino is too small. That's hardly surprising, since the casino operators, Penn National Gaming and entrepreneur Dan Gilbert, wrote the amendment.

Mr. Kasich pledged that if he were elected governor, he would conduct a thorough study of all forms of legal gambling in Ohio, aimed at improving the state's take. After he took office, he hired an expensive investment banking firm to advise him.

So what happened? The governor abandoned his reasonable argument that all wagers at the casinos should be taxed, not just bets minus payouts, as the casino operators demanded.

After Mr. Gilbert staged a theatrical but not very persuasive construction shutdown at his casino sites, Mr. Kasich settled for $220 million more in payments from the operators, along with their commitment to some further investments in the casino properties.

That's not chump change, but it's not a whole lot considering these payments will stretch over a decade. And it's much less than the state would have collected under Mr. Kasich's original tax proposal.

The governor then broadened the deal, with the General Assembly's assent, to revive a plan that would allow Ohio's seven horse racetracks to add video slot machines -- with a lower state tax rate and smaller licensing fee than his predecessor, Ted Strickland, proposed. Whether Ohio citizens must approve this expansion of legal gambling isn't clear, although we surely should be given the opportunity to vote on the "racinos."

Because the casino owners have bought several racetracks, the governor would permit them, assuming the state racing commission goes along, to move their track operations. That includes Penn National's venerable harness track in Toledo, Raceway Park, which is bound for the Youngstown area. No percentage in competing with yourself.

Mr. Kasich congratulated himself on his hard-nosed bargaining; some supporters even suggested the governor's tax threat had been a shrewd bluff. But Mr. Gilbert's description of the governor, in a moment of indiscreet candor, as a "speed bump" seemed to suggest how seriously the casino sharpies took him as a negotiating adversary.

Any prospect of getting another casino plan on the ballot, one that aims to benefit taxpayers rather than casino owners, seems dead. In the meantime, all Ohioans can do is hold the operators to the promises they've already made.

Elsewhere on this page, former Casino Control Commission member Jerry Chabler asserts that Penn National is fulfilling its commitments to Toledo in such areas as job creation, local hiring, minority contracting, charitable contributions, and working with downtown hotels to boost their occupancy rates. Given Mr. Chabler's previous opposition to casinos in Ohio, his argument is credible.

I still worry that Toledo's casino will suck up dollars that now get spent in other local entertainment venues, restaurants, and bars, instead of attracting a lot of new spending. Penn National's decision to close and move Raceway Park suggests this process of substitution has begun.

But I've also thought that the market for gambling, locally and nationally, would be saturated sooner or later, and that hasn't happened. If Toledo's casino can attract gamblers and tourists and conventions from out of state, as advocates predict, the regional economy stands to reap some benefits.

Casino companies are in business to make as much money as they can, and they're good at it. Nothing wrong with that -- it only would be wrong, and foolish, for us to expect them to be altruists.

At the same time, Ohio taxpayers are under no civic obligation to help the casino companies maximize their profits. Neither are our elected officials.

For better or worse, and probably some of both, casinos are now a permanent presence in Ohio. But Columbus need not work quite so hard to affirm the ancient gambling-industry wisdom that the way to make money in a casino is to own it.

David Kushma is editor of The Blade.

Contact him at: dkushma@theblade.com



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