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Gambling interests tout job creation benefits

From the inbox:

REPORT OUTLINES 77.5K JOBS BY REGION, SECTOR CREATED BY SLOTS BILL

Confirms Texans Continue To Spend Billions Gaming in Neighboring States

AUSTIN, Texas – Win For Texas released a new report today outlining the specific regions and sectors of the 77,500 new, permanent jobs that will be created when slots are allowed at Texas horse and greyhound tracks and recognized Indian reservations. TXP, a Texas economic policy consulting group, prepared the study.

The study also details the $2.7 billion dollars Texans spend on gaming in a seven state region every year. TXP estimates that $2.2 billion of this “leakage” could be kept here simply by allowing slot machines at existing racetracks and Indian reservations.

“TXP estimates that approximately $2.4 billion in gaming revenue (and $3.8 billion total) would appear in-state by the end of 2013,” said TXP President, Jon Hockenyos. “This in turn would create $8.5 billion in total economic activity, $2.6 billion in earnings, and about 77,500 permanent jobs.”

The new report breaks down the specific economic and job creation into five regions: Austin Area, DFW, Houston and the Rest of Texas.

“The economic benefits of implementing slots are well-distributed across the state, as Dallas-Fort Worth and Houston each stand to gain close to 20,000 permanent jobs, Austin and San Antonio will realize approximately 10,000, and the balance is distributed across the rest of Texas,” said Hockenyos.

The legislation that would bring this proposal to Texas voters to decide is HJR 111/ SJR 33. The enabling legislation that details the implementation and oversight are HB 2111/ SB 1118.

The study was commissioned by Win For Texas and is attached in its entirety. For more information about this proposal or Win For Texas, please visit www.winfortexas.com.

Please see the report for your region’s specific benefits. The TXP report is attached and may also be downloaded here: http://www.winfortexas.com/TXP_Regional_Impact_Slots_Tracks_Spring_2011.pdf

I will simply note that TXP issued a similar report in 2009, which I blogged about here. I’ll leave it to you do compare the two and see what differences there are. Hey, we’ll need something for all those soon to be unemployed people to do.

As for the ubiquitous question of gambling’s prospects in the Lege, it doesn’t look any clearer now than it did before the session. The good news for gambling interests is that a consensus bill may emerge from the House.

A Texas House committee will listen to several gambling proposals at a hearing today , and in the coming days, the chairman of the committee will take all the proposals and roll them into one measure.

The forthcoming piece of all-encompassing legislation by Rep. Mike “Tuffy” Hamilton, R-Mauriceville, could lead to seven new Las Vegas-style casinos, slot machines at 13 horse and dog tracks across the state, slots at a few Indian reservations and slots at bingo halls across Texas, he said.

“Something for everybody,” Hamilton said. “We’ll put them all together.”

But there are competing gambling interests in Texas, and getting them to work with one another could prove difficult; casino proponents and the group wanting slots at tracks have not been able to work together this session or in sessions past.

There are also pro-gambling groups representing bingo halls and Indian reservations.

Hamilton, though, said he can get them all together.

Asked how he’d reach a consensus among the competing groups, Hamilton said, “Because I’m the chairman, and there will be just one bill passed out of committee.”

Whether that’s a bill that makes the casino interests, the racetrack interests, and the Indian tribes happy or one that makes some or all of them feel disgruntled remains to be seen. It’s also not clear that this consensus bill, or any other gambling bill, will get a hearing in the Senate.

While a new statewide poll shows that 86 percent of Texans believe the public should vote on whether to legalize casinos, an influential state Senate chairman with jurisdiction over gambling said Monday he has no intention of advancing the necessary legislation.

“There is no support in my committee,” said state Sen. Robert Duncan, R-Lubbock. “I just don’t think there are the votes in the Senate. I don’t see any chance of passage.”

Duncan’s opposition signals almost insurmountable odds for the expansion of gambling in Texas, despite the industry’s hopes that lawmakers would look favorably upon casinos this year as a solution to the state’s fiscal crisis.

So far, Lt. Gov. David Dewhurst has referred all gambling resolutions and bills filed in the Texas Senate to the State Affairs Committee, which Duncan chairs.

His spokesman, Mike Walz, said Dewhurst also likely would refer all “stand-alone” gambling bills passed by the House to Duncan’s committee. He noted that the issue could be attached to other significant legislation that traditionally is heard by other committees.

So the door isn’t completely closed, but it’s far from wide open. I thought gambling’s odds may have improved somewhat after the terribly austere Pitts and Ogden budgets first surfaced, but this doesn’t lend support to that thesis.

As for the poll mentioned in the story, there’s no details or references to the poll data, and I’m not interested in seeking them out. We’ve seen plenty of polling data that suggests Texans support the idea, so this is no revelation. I still think the fundamental issue is a lack of legislators that support it. If Hamilton’s “consensus” bill never makes it to the House floor, that will tell you all you need to know. The Trib, Texas Politics, and Postcards have more.

Response from the racetracks

When I wrote my earlier post about how much revenue expanded gambling would generate for Texas, I said I’d be more than happy to do a similar exercise for someone on the pro-gambling side of things. Sure enough, I got an email from Mike Lavigne on behalf of Texans for Economic Development, who sent me a copy of a study done by TXP that examined the question for the horse racing interests. I’ve uploaded it here (PDF) for your perusal. The main thrust of the argument is as follows:

Texans are already gaming at a high level. Based on data from a variety of sources, including state gaming commissions, convention and visitors bureaus (CVBs), and other academic studies, TXP has estimated the current gaming revenue in a seven-state region that is attributable to Texans at approximately $2.3 billion during 2007, the equivalent of about 3.8 percent of the national total. This is the assumed universe of current Texan gaming; while there undoubtedly are individual instances of Texans gaming elsewhere in the country, it does not appear to be significant.

The Innovation Group was engaged by Texans for Economic Development to estimate the size of Texas’ gaming market. A summary of their results follows. As the table indicates, the total Texas market approaches $4.2 billion in gaming revenue at full implementation. However, there is still leakage out of state, as some Texans will continue to game elsewhere.

A significant share of the revenue that would occur in Texas with the implementation of racinos would be recaptured from other states where Texans currently game. Measurement of the volume of this spending is done through subtracting the leakage out-of-state ($840.2 million) from the $2.4 billion figure, yielding recaptured spending of approximately $1.8 billion.

They estimate a total of about $3.4 billion in gambling revenue, which when taxed at 30% (the rate for racetracks is higher than what has been proposed for casinos) yields about $1 billion a year for the state. They make other claims as well about related economic activity and employment, which I’ll leave to you to examine.

I remain basically skeptical of the claims made here – I think some of these projections are optimistic, especially the ones made separately about the economic benefits for other businesses that flow from expanded gambling. I also think it’s foolish to rely on gambling revenue for anything other than “found money” – the Texas Lottery should be an object lesson there. Finally, there is a moral case to be made against expanded gambling, and I think we greatly underestimate the social costs associated with it, which the state does precious little to mitigate. I’ve got a future post planned for that, since it’s outside the scope of this one. Having said all that, I can at least see where the racetracks’ numbers are coming from, and while I think they’re sunny, they’re comprehensible and reasonable. We can argue over these numbers because they’re here to be argued over, which remains more than I can say for the casino interests, whose claim that they would generate $3 billion for the state looks even more ludicrous to me based on this.

I also asked Lavigne in an email exchange after he sent this to me about the bleak picture the racetracks have painted for their industry today, and why they would be a better vehicle for capturing the “leakage” than regular casinos. Here’s what he said, reproduced with permission:

The Racing Commission did indeed paint a glum picture. There is no denying the shape the industry is in right now. The primary reason is that purses in Texas are so low, there is no incentive for breeders to breed in Texas. If they take the same horse and breed it in Louisiana, NM or OK they will be eligible for much larger prizes. A large chunk of the money made in this bill will go toward growing purses here that will be competitive with not only with our neighbors, but with the eastern seaboard, where racing has had a lot more success. This model is the reason our industry in Texas has fared so poorly. When parimutuel wagering was legalized in Texas, there were very few (if any) racinos in our bordering states.

We don’t oppose the proposal for regular casinos on its face, but we do object to the disparate tax rates. That would surely kill any chance racinos would have to be successful.

As to why we think racinos would better capture the money than casinos? I think that is the wrong question. Both would be able to get at that money. We do have to look at political reality though. What is more palatable to the legislature? Full on casino gambling overnight? Or a smaller expansion at existing sites with legal wagering already taking place.

The Governor and many Republicans have repeatedly said that they do not want to expand the footprint of gambling. We believe our proposal is a more modest one.

The most important thing to remember about these figures is that the Comptroller will ultimately make the decision as to how much money these proposals would raise. She will do her own math.

So there you have it, the case for racinos. My thanks to Mike Lavigne for engaging me on this. If someone with the casino interests wants to show me their numbers, I’ll be more than happy to do this for them as well.

Finally, on a related note, whatever reservations I have about casino and/or racetrack gambling, I do support an expansion of legalized poker in Texas. HB222, introduced by Rep. Jose Menendez as the Poker Gaming Act of 2009, would establish poker as a “game of skill and not a lottery or gift enterprise prohibited by the Texas Constitution” and would thus allow for the creation and regulation of legalized games. In particular, it would allow establishments that hold a license to serve alcoholic beverages issued by TABC or a license issued by the Racing Commission to have the ability to host the game of poker. There was a hearing for this bill yesterday in the House before the Licensing and Administrative Procedures committee. I have no issues with this bill and support its passage.