July 29, 2007

Cannibalistic Gambling in Indiana

As more and more states turn to legalized gambling as a less-unpopular alternative to conventional taxes to help pay for public investments, some observers are starting to wonder: is there a limit to how much gambling Americans will indulge in?

The folks who operate Indiana's Belterra Casino sure think so. In the immediate wake of legislation passed by the Indiana legislature this spring, which allows two Indiana racetracks to install up to 4,000 slot machines, the company that owns Belterra, Pinnacle Entertainment, announced that they are "postponing indefinitely" a planned expansion of the casino. Here's the complete explanation from Pinnacle's first-quarter 2007 financial statement:
The Indiana legislature recently authorized the installation of 2,000 slot machines at each of two racetracks in the Indianapolis metropolitan area. The Company has postponed indefinitely its planned construction of a 250-guestroom addition at Belterra due to the significant expansion of gaming in this market. The Company's Belterra casino is approximately two hours from Indianapolis, which is the third-largest market for Belterra, after Cincinnati, Ohio and Louisville, Kentucky. The $45 million of capital investment that had been planned for such expansion will be redeployed to other markets.
The implication is that there is a point at which Indiana's appetite for gambling will become saturated-- and that Indiana has maybe reached that point.

This isn't the end of the world for Pinnacle: as they sniffily note, their investment will be "redeployed to other markets"-- but should give pause to lawmakers in Indiana who are banking on the new slot machines to help pay for property tax rebates later this fall.

And for lawmakers in neighboring Illinois and Kentucky who are espousing gambling as a painless source to their tax system's woes, this news should make them seriously rethink their strategy.


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