Gaming proposal yields rosy, dire forecasts

10/22/2006

COLUMBUS - Slot machines would pump "almost $1 billion" year into college scholarships for Ohio students. Or less than a third of that, depending on whom you talk to.

Issue 3 would harness Ohio gambling dollars now traveling over state borders to level the playing field for Ohio's struggling horse-racing industry.

Or it would write multibillion-dollar casino monopolies into the Ohio Constitution for a lucky few while unleashing 109,000 new problem gamblers and the social ills that come with them.

Seven racetrack owners and two private Cleveland developers have been spending millions for months to sell their message of a construction boom, new jobs, and reduced tuition pressures on parents. The benefits would just happen to be tied to 31,500 slot machines statewide.

Their slogan: "A whole lot of good will come of this."

At the same time, the opposition, including a broad swath of clergy and statewide officials, are punching holes in supporters' numbers, arguing that the machines will generate less revenue and create a lot more headaches than projected.

Their counter slogan: "A whole lot of grief will come of this."

By a margin of 62 percent to 38 percent, voters twice rejected casino-style gambling in Ohio in the 1990s. But backers of Issue 3 are banking that increased exposure to gambling in neighboring states and the skyrocketing cost of higher education in recent years have softened the opposition.

Issue 3 asks voters to amend the Ohio Constitution to allow the introduction of up to 3,500 slot machines at Toledo's Raceway Park, six other racetracks, and two stand-alone sites in The Flats and Tower City areas of downtown Cleveland.

After four years, Cuyahoga County voters could approve expanded casino-style table games such as roulette and blackjack at its four locations: the two downtown sites and two suburban racetracks.

Thirty percent of every slot machine's take, and potentially other gambling in Cuyahoga, would be earmarked for Ohio Learn and Earn. The scholarship program would start slowly in 2009, but, when fully funded by 2021, it promises scholarships for every qualifying high school graduate to attend an in-state public or private college.

"The positives far exceed any negatives on this issue," said Bill Burga, president of the Ohio AFL-CIO. "Gambling already exists in Ohio. Ohio is in need of good-paying jobs to stimulate our sluggish economy, and neighboring states are receiving millions of dollars that will remain in Ohio when Issue 3 is approved."

Fifteen percent would be earmarked for local economic development and capital improvement projects, enhanced racing prizes, gambling-addiction services, and operation of a new state gaming commission.

That would leave 55 percent for the nine slots parlor owners. That 55 percent would be exempt from any additional direct taxation, including the state's new commercial activities tax that applies to the gross receipts of nearly all other businesses in the state.

U.S. Sen. George Voinovich, a Cleveland Republican and staunch gambling opponent, said the proposal would write nine casino monopolies into the constitution. "This group is going to rip off 61 percent of the money [counting 6 percent for increased racing prizes] that's generated as a result of these slot machines," he said. "Nine individuals are going to get very, very rich as a result of this."

Columbus Mayor Mike Coleman, a Toledo native who also opposes Issue 3, painted this picture: "I can imagine them now having a big map of the state of Ohio and saying, 'OK, how are we going to get richer.' They took a knife, cut it up, but they didn't stop in this office to talk about what was on their minds until after this hit the ballot."

A study by the state Office of Budget and Management suggests backers of Ohio Learn and Earn have overestimated the slot-machine market in Ohio and underestimated costs associated with regulating gambling and treating addicts.

By looking at how many people would live within 50 miles of an Ohio slots parlor, including people in neighboring counties in Kentucky and Michigan, the state budget office estimated the market could support 10,035 machines, roughly a third of what would be authorized in the amendment.

The average number of slot machines at the 43 facilities studied in Illinois, Indiana, Iowa, and Missouri was 1,357 compared to Learn and Earn's 3,500.

The reduced projections create a trickle-down effect on all of Learn and Earn's numbers. The budget office estimates gross revenue would amount to just under $1.1 billion compared to the $2.8 billion estimated in a study funded by the Greater Cleveland Partnership, a business group that has since endorsed the slots proposal.

Instead of an estimated $852 million a year heading into the scholarship fund, a number later rounded up to "almost $1 billion" in TV ads, state budget officials said the figure would be more like $324 million.

Issue 3 backers have disputed the budget office figures while characterizing their own numbers as "conversative."

"The business community in Cleveland hired a company to provide us with revenue-stream projections," Issue 3 spokesman Ian James said. "We'd much rather rely on those who are actually in the business of creating and retaining jobs than [Gov.] Bob Taft's Office of Budget and Management that has proven it can't count."

He was referring to budget cycles earlier in the decade when revenue projections fell far short of reality, triggering repeated budget fixes that included spending cuts and tax hikes.

The Office of Budget and Management said its own lower projections may be too optimistic since the constitutional amendment locks in existing locations rather than seeking competitive bids for more advantageous sites.

"With the exception of the two Cleveland facilities, the seven racinos are in less than ideal locations," the study reads. "The quality of the facilities, the timeline in which they are built, and the associated restaurants, hotels, and entertainment may not be subject to state oversight."

Toledo's Raceway Park, owned and operated by major casino player Penn National Gaming Inc., is on Telegraph Road off I-75, just south of the Michigan border.

The area is a mix of commercial, industrial, and residential properties with a smattering of strip clubs.

Owner Penn National Gaming Inc., which operates casinos in Indiana and other states, is considering building a slots facility next to the track or razing the existing track and starting anew.

"Issue 3 recaptures gambling dollars," Mr. James said. "It creates thousands of jobs at a time when Bob Taft's administration has lost a quarter-million jobs.

"The revenue will not only go into economic development, but it will stop the brain drain," he said. "This is a legacy issue. We realize that we have one chance to do this, or let it slip by us."

However, Mr. Voinovich said Ohio can't afford to bank on slot machines to solve its problems.

"If this passes, no way will the state legislature tackle the crisis in funding higher education," he said. "The public will say, 'We gave you Issue 3. Don't talk to us about any additional levy or another ideas about how we're going to fund higher education.'•"

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.