Indiana casinos face falling revenue, new competition

Indiana's nearly 20-year-old casino industry is facing declining revenues and growing out-of-state competition, prompting lawmakers to consider what, if any, regulatory changes might be able to stem the tide.

The General Assembly initially authorized riverboat gambling in 1993, which has slowly grown to include large barges, gambling at two horse racing tracks and a nearly land-based facility in French Lick.

Over the years, Indiana's 13 casinos have paid more than $10 billion in taxes — money that has become the state's third-largest revenue source behind sales taxes and income taxes. Casino revenue supports basic government services, such as school funding, child safety and corrections.

But those revenues are in decline. Last year, casino taxes accounted for $660 million in state tax revenue. And the latest budget forecast shows it'll drop to $617 million this fiscal year and to $567 million by June 2013.

Ernest Yelton, executive director for the Indiana Gaming Commission, told The Journal Gazette for a story published Sunday that adjusted gross revenue and the corresponding taxes have been down for three consecutive years.

The adjusted gross revenue — the amount wagered — was $2.7 billion in fiscal year 2011. So far this fiscal year, which ends in June, the state is down about 4 percent on taxes.

Fewer people are going to the state's casinos. In 2011, admissions fell to their lowest level since 1997, well before the addition of the slot machines at the horse racing tracks.

Yelton said one factor is the closing of two major bridges in both southern and northwest Indiana that restricted access to several casinos. Competition from casinos in Michigan and Illinois also is having a bigger effect than expected.

However, Yelton said the largest reason behind the decline is the economy.

"It's a trend. By all accounts, this is a slow recovery," he said. "Whenever you are in an economic recession, the first thing people look at is discretionary spending."

Ed Feigenbaum, editor of Indiana Gaming Insight, a publication that closely tracks gambling in the state, said it might be that Indiana has to accept a lower baseline of funding from legalized gambling in the state.

"We have to understand that the long gravy train has finally seen the caboose," he said. "There isn't going to be as much money. Other states have finally caught up."

Ohio's entry into the industry isn't helping matters. Four Ohio casinos are scheduled to open this year, with the Horseshoe Casino in Cleveland opening last Monday.

Legislators will be updated on the casino issues this summer during a summer study committee, said Sen. Ron Alting, R-Lafayette.

In 2011, Alting sponsored a bill that gave minor relief to casinos, such as making it easier to host card tournaments and saving money on crews for riverboats that never move. This year, lawmakers also gave an exemption for casinos from a new statewide smoking ban.

"We can't just sit idly by," Alting said.

One option is giving casinos substantial tax credits for investing in their properties, such as adding or upgrading adjacent hotels, theaters and restaurants. Alting said that would be a "real struggle" with some of his colleagues.

Rep. Phil GiaQuinta, D-Fort Wayne, said he's well aware of the growing concern about casino revenues as a member of the House Public Policy Committee.

GiaQuinta said he could be persuaded to give more tax credits to the industry for new investment if that investment would cause a long-term increase in revenue.