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Ohio's Issue 3 Could Bring New Competition

25 October 2006

Ten years ago this November, Michigan voters approved Proposal 3 which allowed for casino style wagering in Detroit. As the 2006 election day draws near, residents in the state of Ohio are preparing to weigh in on whether the state should allow up to 31,500 slot machines at nine locations throughout Ohio.

The Ohio Constitution currently prohibits the operation of casino-style gambling by the state or private businesses. The state's gaming options consist of a state sponsored lottery, legal pari-mutual horse race wagering, and charitable gaming. During the last decade and a half, there have been two organized initiatives to amend the state constitution to allow casino-style wagering. However, in 1990 and 1996, both of these efforts failed to gather the necessary support for passage.

The Learn and Earn Committee, the group sponsoring the slots initiative, believes that Ohioans are now ready to support a pro-gambling bill. According to the committee, Ohio residents currently spend more than $900 million annually at casinos in Indiana, Michigan and West Virginia.

The current proposal calls for slot machines at nine sites throughout Ohio. The sites include the state's seven racetracks, as well as Tower City, owned by Forest City Entertprises Inc., and the Nautica Entertainment Complex, operated by investor Jeff Jacobs. Toledo Raceway is located just 55 miles from Detroit.

Beginning in 2009, the Learn and Earn plan would allocate 30 percent of slots revenue for college grants and scholarships. According to Learn and Earn's Web site, that amount is estimated at $853 million annually and would pay tuition for high school graduates in the top 5 percent of their class who attend an Ohio college or university. The plan would also set aside another 8 percent of slots revenue annually for economic development, and is expected to produce approximately 56,000 full-time jobs statewide.

In early August, Ohio Attorney General Jim Petro informed the committee it could face criminal probes related to allegations its petition workers were not truthful when collecting signatures needed to get the measure on the ballot. The group was then informed on Aug. 30 that little more than half of their 621,224 collected signatures were valid. Learn and Earn hit the streets again to gather new signatures, and surpassed expectations by submitting 35,130 more than required within their 10-day deadline.

While Learn and Earn has received the support of Cleveland Mayor Frank Jackson, it has also received criticism from other state politicians including U.S. Senator George Voinovich and Governor Bob Taft.

If it passes, the Ohio initiative will have a significant impact on the Michigan casino industry, as Northern Ohio is a strong feeder market for the state. It is clear that the competition will intensify for the Detroit casinos if this measure passes. Also, the Michigan racetracks will face the difficult task of trying to compete with yet another bordering town with slots at racetracks. All of this could adversely impact Michigan's gaming and racing revenues.

If it passes, Michigan will need to proactively work with the gaming and racetrack industries to find ways to ensure our state remains competitive in this highly lucrative and important tourism industry. Michigan tourism has been one bright spot in the state's struggling economy.

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