Monday, October 17, 2011

Gaming Overhaul Needed in Minnesota

An overhaul of gaming is needed in Minnesota.  As the state budget issues worsen and the economy shows little sign of markedly improving, additional revenues are going to be needed to keep the state running.  Spending cuts alone will not make the budget work – the cuts would need to be too deep. Racino has been mentioned in many places are a large part of the answer and that may be correct, but I think a complete look at gaming in Minnesota needs to be looked at and fundamental changes need to be made.

Upfront, I want to say that I’m not going to deal with percentages to the state or any other breakdown.  I’m not even going to advocate for the use of any funds be it for the general fund, Vikings stadium or any other purpose.

There needs to be a look at all three prongs of gaming in Minnesota:  Charitable pull tabs in bars, Native American and racetrack.

First the easy part: get rid of paper pull tabs.  This system is way too easy to cheat and too difficult to monitor.  There is a finite pool and when certain jackpots are hit, they are marked off a sheet that is publically displayed.  At some point the remaining tickets could be “positive”, if you will.  That is, the remaining number of pull tabs can all be purchased and guarantee the buyer a profit.  For that you’d have to know how many cards remain – and there are individuals that do know this number.  The possibility for corruption is great and relatively easy.

Replace the paper pull tabs with electronic forms which would provide a total pool for several million potential outcomes, making the system impossible to cheat.  Each bar or organization would be limited to 3 machines connected by a central system run by the state lottery.  The Lottery will then be in charge of the charitable distribution of the proceeds.  Local referendums should be conducted as part of a primary or general election to determine if municipalities want them in their community.  The replacement of paper pull tabs with electronic versions are overdue, better regulated and serves to limit gaming since an unlimited number of patrons can buy pull tabs while on 3 machines can be occupied at a time.  Any bar or charity on the up and up should have no real issue with this change and, in fact, should welcome it.

Now the tougher part, getting the Native American Bands in Minnesota and the racetracks on the same page in regards to gaming.  Let’s get a few things out of the way first:

-        The gaming monopoly enjoyed by the Bands is not guaranteed.  There are no provisions in the compacts that promises that there will never be any competition for the gambling dollar;

-        The State can want money from the Bands all they want but their compact does not provide for any of it.  The compacts can be reopened only with the mutual consent of the parties.  Can anyone tell me why in the world any of the Band’s would want to reopen a compact?  I wouldn’t.

I try not to take sides on this issue.  I worked in gaming for a long time here in Minnesota (and may again) so the Bands here have been my customers and are my friends.  Conversely I’ve owned racehorses and been involved in the industry one way or another on and off for nearly 25 years and love it dearly.  Is there a way that both sides can benefit from gaming reform?  I think that there is.

I hate to do this to my friends at Running Aces, but you’re out.  Southwest Casinos built this place with the express goal of getting slots while, in fact, the building of the Park probably did more to unify opposition to the idea of racino than anything else.  When slots were only being discussed at Canterbury it was hard for the northern Bands, whose casinos generate considerably less revenue than the southern Bands, to jump on board to the defense of their fellow Natives in Shakopee.  The Mdewakanton Sioux, operators of Mystic Lake and Little Six Casinos, are the wealthiest Band in the state and the per capita payouts are tremendously high due to the success of the casinos and relatively small size of the Band.  However, once Running Aces came into the picture that all changed.  Now there was a threat to the Mille Lacs Band’s two successful casinos, Grand Casino Hinckley and Grand Casino Mille Lacs as well as the potential of the trickle-down effect unemployment would have on the rural counties where they are located.  It was easy then for the Mdewakanton to back off and let the Mille Lacs Band lead the assault on racino because, quite simply, the Mille Lacs story is much more compelling.

Limit the number of slots at Canterbury.  Yup, sorry to you all as well.  No monumental gaming palace, but why not a slot venue?  Especially in Shakopee.  Gamblers will have a choice between Mystic, Little Six and Canterbury.  It almost lends itself to a great joint marketing campaign.  When gamblers don’t win at one place, what do they do?  Move on to the next one.  Where in Minnesota would be the only place that you could actually do that if the track got slots?  Shakopee, that’s where.

What’s the right number, though?  That’s a good question and I would peg the high end at 2,000 with 1,500 probably being a fair number. That’s a good size casino and would produce enough revenue to revitalize the horse industry, build the equestrian park that is sorely needed here and generate generous amounts of cash for the state while still providing a bit of subsidy for Running Aces – you can’t leave them totally high and dry. 

But what about the Bands?  What do they get out of this deal?  Well, first of all get rid of the ridiculous “video only” gaming requirement in the state and let the Bands have mechanical reels as well as the table games that they are currently barred from offering: craps and roulette.  Why not?  Additionally, shed the maximum payback requirement.

According to the terms of the compact between the state and the tribes…the minimum and maximum payouts are regulated as follows: video poker and video blackjack - 83% to 98%, slot machines - 80% to 95%, keno - 75% to 95%. Each tribe is free to set its machines to pay back anywhere within those limits and the tribes do not release any information regarding their slot machine percentage paybacks. (taken from the American Casino Guide).

This limitation is ludicrous and only harms the players.  If I operated a casino in Wisconsin or Iowa I would advertise in Minnesota that my place offers “slots so loose they are illegal in Minnesota!”  Open it up and let competition reign.

Finally, restructure the technical standards that the Bands have to follow in the state.  The standards are so archaic and hard to change that as the gaming industry is moving toward more server based applications for gaming and leading edge computer technology, Minnesota lags behind.  The state should simply adopt the latest Gaming Laboratories Inc.’s (GLI) technical standards.  Once a new set of standards is GLI approved, they are approved in Minnesota.  This isn’t a radical step and, in fact, mirrors most gaming jurisdictions that do not have their own testing lab (which I would adamantly oppose as a waste of taxpayer money, by the way).

The Bands would then get more games and more leeway in the way they can build their business. And, by the way, keep revenue sharing out of any discussion.  The state is getting its money from the racino.

I admit that this isn’t perfect for everyone – it’s not meant to be.  What it’s meant to do is be as perfect as possible for the taxpayers of Minnesota while still providing something for three groups most affected by gaming legislation. 

Ultimately if everyone could get together and talk about this, much could be accomplished for the state and its residents. A comprehensive look at gaming in this state is necessary before we move forward on anything.  A little bit to everyone could very well mean a lot for the state of Minnesota.


Anonymous said...

I love live racing at Canterbury. I have for years. This past Summer when the start of the racing season was postponed due to the state government shutdown made me realize just how much I would miss racing if Canterbury were to shutdown permanently.

If a "racino" would help support Canterbury, bring in more bettors, increase the purses, and bring in some higher quality races as a result, then I support the idea 100%.

What I do not support, however, is the idea that the state should be picking winners and losers. Why should Canterbury be permitted to open a casino, but Running Aces (and every other business in the state) be barred from it?

Why not just eliminate the puritanical and outdated laws banning gambling across the state? Whatever revenue would be generated for the state by a single "racino" surely would be multiplied if collected from many additional sources as well. I can't think of one good reason why a local bar owner should be banned from installing a slot machine for their patrons to enjoy.

Canterbury is in a unique position to benefit greatly from the legalization of gambling, and I believe it would fare well against the competition. There is no need for the state to grant Canterbury the same kind of artificially created monopoly the Native American Bands have been exploiting in order for Canterbury to benefit from a "racino".

Theodore L. Grevelis said...

Anon - thanks for reading and taking the time to comment.

I wrote that bars and taverns should have electronic pull tabs ("slots" as a generalized term) only that they be subject to local referendum. If the people want them, let 'em have them in limited quantities. I don't think we want MN to become like NV with slots in every grocery store but replacing pull tabs where they exist with a limited number of "slots" I think will work.

My conclusion with Running Aces was a difficult one to come to but I think that main obstacle to racino over the last few years is its very existence. A case can be made that Pine County would be greatly impacted by slots at RA unless it was stringently limited. In addition to a plan that could work, it also needs to be passable and as long as slots at RA is part of the program I don't think it can pass.