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Gaming Guru

 

Gaming Expansion Requires Striking a Delicate Balance

26 November 2003

It is a difficult task that the Governor and Michigan Legislature face. With a full blown state budget crisis, the thought of enhancing state revenues by expanding the number of gaming outlets in the state has become very attractive.

Already there has been a major expansion of gaming into bars and restaurants throughout the state with the introduction of the state Lottery's "Club Games," including pull-tab games and a video keno game with 225 drawings in 900 restaurants and bars state wide each day.. Surprisingly, this expansion occurred without legislative action and without any large public outcry opposed to it. This reflects the growing recognition of gaming as a socially acceptable form of entertainment.

From 1933 until 1972, the Michigan horse racing industry provided the only legal form of wagering in the state. As a result of statewide voter initiative in 1972, the Michigan Constitution was amended to authorize a statewide Lottery. Governor Milliken signed a comprehensive state Lottery law into effect on August 1, 1972. Shortly thereafter, in 1973, the state began offering a sponsored lottery and various forms of bingo, charitable games, and millionaire parties were authorized by statute.

Not surprisingly, 1971 was the best year in history for racing attendance. Things have been on a downhill slide since that with the decreases in attendance appearing to be directly attributable to increasing competition from the Lottery and later from Michigan's tribal casinos and Casino Windsor and Windsor Raceway.

In 1996, a statewide voter referendum passed authorizing three casinos in the City of Detroit. In the subsequent negotiations over what was to become the Gaming Control and Revenue Act, a large part of the justification for the high rate of gaming taxes (18 percent) was that the three casinos were going to enjoy an "oligopoly," with a limit of three casinos in the area and the nearest competition in the state being in Mt. Pleasant, some two hours away. Investors who were willing to take a chance on Detroit were made promises that should not be quickly forgotten.

The three casino limit, which was part of the voter initiative, directly resulted from a study conducted by a "Blue Ribbon Commission" Governor Engler appointed in 1994, which released its report in 1995. The Commission, which was made up of a large group of people with far different perspectives, concluded that a "limited" number of casinos could economically benefit the state coupled with authorizing horse racing simulcasting.

Both carefully studied and thought out conclusions of this Commission proved successful. Limiting the number of private casinos in Michigan to three in Detroit and allowing simulcasting of races have proved to be very beneficial both to the operators of the facilities and to the state in terms of revenue.

As gaming continues to expand ongoing study and evaluation is needed from a public policy standpoint to assure (1) maximum revenues to the State of Michigan and the local communities that host such facilities; (2) a fair and equitable return on investment to those willing to invest in such endeavors; and (3) that the Goose will not be killed in an effort to get the Golden Egg. Hopefully, our legislators and new Governor will take a business sensitive, academic, and studious approach to planning for the state's long term success in this industry as it looks at additional gaming in Michigan.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com