Gaming Slump No Deterrent for Ballot Proposal Calling for Four New Ohio Casinos
- Mar 12, 2009
There is a multi-billion-dollar list of casino projects, mired by a veritably frozen credit market and the embattled economy, that have been halted or scrapped altogether, but the current state of the gaming market is not deterring the Ohio Jobs and Growth Committee. The group just submitted to the Ohio Attorney General a casino gaming ballot proposal that, should it make it to the November ballot and pass, will amend Ohio’s constitution to allow the development of four new casinos–the state’s first–with a total minimum private investment of $1 billion. If voters give the green light this fall, the door will open for the establishment of a single full-service first-class casino property in each of Ohio’s four largest cities: Cleveland, Cincinnati, Columbus and Toledo. In addition to investing a minimum $250 million in an individual project, developers would be required to fork over, upfront, a licensing fee of $50 million. Additionally, casinos would be subjected to a permanent 33 percent tax on gross revenue. Proponents of the Ohio Jobs and Growth Plan tout the proposal as a means of reinvigorating the state’s economy. The aggregate $200 million in licensing fees would be used to fund job training and workforce development endeavors across Ohio, and the revenue tax would yield an annual sum of approximately $600 million, most of which would be infused into primary and secondary education. And the casino developments would produce an estimated 200,000 new temporary and permanent jobs. What had been a throng of developers rushing to build new casinos across the country only a few years ago has dwindled down to a small cluster of companies with an eye on an eventual economic turnaround and ready access to funds for laying the groundwork to capitalize on that renaissance. “Lending for projects has been challenged, so any casino company coming to the table for these projects is gong to have to put a lot of cash down,” Brent Pirosch, director of gaming consulting services for CB Richard Ellis’ global gaming group, told CPN. “There’s a little bit of a risk in that they’re going to have to fund now when the economy is not strong, but they’ll probably be opening when the economy is on an upswing.” For those able and interested, building a casino in Ohio would have some distinct advantages, including the luxury of opening in a virgin gaming market. “If you have a monopoly position in a large city and you only have to spend $250 million on the property, you’re pretty much assured to be successful,” Frank Fantini, CEO of Fantini Research, told CPN. “With a $250 million investment, you’re not going to be killed by debt burden, which has happened with big operators in Las Vegas.” In August, citing unfriendly capital markets and the slumping economy, Boyd Gaming announced it would delay construction of its $4.8 billion Echelon project that was to be erected on 87 acres along the Las Vegas Strip. It’s not just Las Vegas. Plagued gaming developments can be found from coast-to-coast. In January, Revel Entertainment revealed it would suspend work on the interior of its $2 billion 20-acre project along Atlantic City’s Boardwalk. Yet, there are some spots in between where the numbers belie the current overall condition of the gaming industry. “The four casinos in the Kansas City market did $61 million in revenue last month–in the middle of winter, in the middle of a recession,” Fantini said. “In the St. Louis market, which includes two properties across the river, the six casinos did $88 million in February, and February was a short month; there were 10 percent fewer gaming days.” Penn National Gaming Inc., owner of Toledo’s Raceway Park horse track, and Dan Gilbert, who is the chairman and founder of Quicken Loans and majority owner of the NBA’s Cleveland Cavaliers, have already publicly expressed their support of the Ohio Jobs and Growth Plan casino ballot proposal. While the proposal outlines major potential benefits for the state, there is hardly a guarantee that voters will give the thumbs-up in November. “They’ve voted down casinos three or four times in the past,” Fantini noted.