Racinos: another plan, this one with a twist and lots of questions to ask and answer

Sen. Dave Senjem. left, and Rep. Bob Gunther talk about their racino bill.
MinnPost photo by Jay Weiner
Sen. Dave Senjem. left, and Rep. Bob Gunther talk about their racino bill.

The long-expected “racino” bill hit the Legislature today. By the count of one of its sponsors, it’s the sixth time that thoroughbred horse racing backers have tried to get slot machines at 25-year-old Canterbury Park, and now at Running Aces, too, the newer harness track in the northern suburbs.

In the eyes of many observers, including Indian gaming lobbyists, this sixth time appears closer to the charm than any other … what with the giant state deficit, a radical change in legislative leadership, an $800 million to $1 billion Vikings stadium in search of funding, and a nimble governor who has left the door open — no matter how slimly — to some form of state-sanctioned gambling.

The twist to this new proposal – backed by two Republicans — Sen. Dave Senjem of Rochester and  Rep. Bob Gunther of  Fairmont) and DFL Sen. Dan Sparks of Austin — is that the revenues generated by putting a combined 4,000 slot machines at the two tracks would flow not into the state general fund, but into a “Minnesota Future Fund,” which would be put in the hands of the state’s Department of Economic Development (DEED) to “spur job creation,” said Senjem and Gunther.

“This is all about … a new prosperity,” said Senjem, who said the racino revenues would fund job growth and retention programs — in urban areas and in Greater Minnesota — research and development programs at the University of Minnesota and Mayo Clinic, among other centers, and entrepreneurial support.

(The bill had not been formally introduced by mid-afternoon.)

As always, these bills emerge with a great burst of publicity and hyperbole: Room 181 of the State Office Building was bulging with racino supporters, opponents, lobbyists, public affairs consultants, legislators and TV cameras this morning for the announcement.

As always, the devil is in the details, and we’ll swiftly try to go through some questions, even if we can’t answer them today.

How will the Minnesota Future Fund work?
Not clear. But it seems as if the Legislature will determine how to divvy up any racino funds, providing certain percentages for different job creation and research programs.

Assuming all the racino money flows through the DEED, it would be a boon to the agency’s budget. DEED’s proposed two-year operating budget for the 2012-13 biennium (the one that begins on July 1) is about $78 million, according to an agency spokesperson. DEED’s budget for the 2010-11 biennium that ends on June 30 is about $87 million. This bill as crafted could mean as much as $250 million every two years DEED job creation programs.

Are the racino revenue numbers solid?
Racino backers have used a study conducted by the Minnesota Lottery that projects $250 million every two years could be generated by the addition of 4,000 slot machines at the race tracks.

But Indian gaming supporters question those numbers, especially because the market will be cluttered, and is “mature,” as Minnesota Indian Gaming Association (MIGA) Executive Director John McCarthy puts it. “They’re not making any new gamblers,” he said, meaning the market has peaked. He said Indian casinos haven’t added slot machines over the past four years, an indication that gambling growth may have flattened out.

Plus, there is other legislation on tap that would allow electronic pull tabs in the state’s bars and restaurants that would compete for gamblers’ dollars.

Can the “Minnesota Future Fund” be used to build a Vikings stadium?
A Vikings bill is apparently soon to be introduced. Apparently, there is some state funding attached to it, source unknown.

Of funding a Vikings stadium with racino money, Senjem said: “It’s not on my agenda  … That would remain to be seen.”

Gov. Mark Dayton has said, in his view, any state-backed gambling money won’t flow to a Vikings facility.

But Gunther said using this Minnesota Future Fund cash for the “economic development” of a stadium wouldn’t be prohibited.  “That’s not the purpose of this,” Gunther said, adding this racino legislation is intended to aid the horse racing industry and provide other job growth.

Meanwhile, McCarthy said the football team and the tribes haven’t had any discussions either.

Will the race tracks be asked to put in money up front to the state
Not yet, but Gunther said he expected that to become an issue as the bill travels through the legislative process.

Last legislative session Canterbury CEO Randy Sampson offered to pay a $100 million licensing fee to gain a racino. The bill died. Just as Vikings owners are expected to kick in hundreds of millions of dollars into any stadium project, it would seem that the owners of publicly traded Canterbury Holding Corp. would be expected to pay some rights fees.

Indeed, just this morning, Canterbury’s stock price went up more than 7 percent.

Running Aces is owned by Black Diamond Commercial Finance, a Connecticut-based private equity fund.

Last week, Gov. Dayton seemed to be saying that the track owners need to put some skin in this racino game when he commented, ““I’m not interested in expanding gambling for private interests.”

Are Running Aces and Canterbury Park partners in this?
Sort of.  They’ve been negotiating for months to settle their technical differences, but, so far, haven’t been able to.

Running Aces board member John Derus, the former Hennepin County commissioner, issued a chilly statement even as Senjem and Gunther were conducting their news conference, expressing concern about the “right governance to regulate gaming at the race tracks.”

Later, Derus downplayed any split between the two tracks, saying they are “on the same page” and that he’s confident there will be total agreement on how racinos would operate, if enacted.

The Canterbury backers want the Minnesota Lottery to regulate the proposed racinos, and the Running Aces folks want the Minnesota Racing Commission to be the regulatory organization.

Tribal lobbyists wonder if, in fact, the Lottery can regulate slot machines. If the bill goes that way, a lawsuit might be on the horizon.

Regulatory issues could be a sticky stumbling block.

How will tribal gaming interests oppose this?
The same way they always have, with aggressive and massive lobbying — there are about 40 lobbyists linked to various tribal interests — and with a story to tell: that Indian casinos are good for Greater Minnesota, that the tribes have never received state subsidies, that Indian casino workers — who aren’t tribal members or live and work  on the reservation — pay taxes like any Minnesota worker, that the federal Indian Gaming Act was designed to aid tribes, and it has, more or less, worked.

Every casino worker pays federal income taxes. State income taxes from Indian casino workers to $18 million annually, according to MIGA.

Is the horse industry in trouble?
The horse racing industry has been whacked by a variety of forces, nationally and regionally.

In general, horse racing popularity is down nationally because of the proliferation of all sorts of gaming options. Regionally, other states have introduced racinos, drawing away horses from Canterbury. The Minnesota Racing Commission’s 2010 annual report (PDF) shows a sharp drop in race horse registrations, a sign that the industry is struggling.

But the conservative Freedom Foundation, led by former Repubican Lt. Gov. candidate Annette Meeks, published a report (PDF) last year asserting that the overall equine industry in the state is strong and shouldn’t be subsidized.

In a case of strange political bedfellows, MIGA’s McCarthy cites Meeks’s group’s statistics. Her husband, Jack Meeks, leads a group called Citizens Against Gambling Expansion.

Is this an attack on the tribes?
McCarthy was calm in responding to that provocative question.

“I don’t know if it’s an attack necessarily, [but] it’s a typical move on the part of the dominant society,” said McCarthy, who is not a member of any tribe, but a full-blooded Irishman.

But this he contends: Running Aces, with its location on I-35, could severely cut into business at the state’s northern Indian-run casinos, and he thinks a Canterbury racino could cut into Mystic Lake’s business, barely four miles away, by as much as 25 percent.

He contended today that any “new” jobs at the state-sanctioned racinos would merely be transferred from Indian casinos, where workers would be laid off as competition increases.

To be clear, there was no anti-Indian rhetoric at all attached to this racino news conference today, which differed from earlier iterations of gambling expansion talk in the 1990s. The compact between the state and the tribes doesn’t prohibit state-backed gaming, and the state needs some dough. Thus, looking in between the sofa cushions for cash, gambling is one way to go.

Of course, some of the tribal communities have become wealthy, mostly notably the Shakopee Mdewakanton Sioux Community, via its Mystic Lake casino.

Still, whenever a racino bill is proposed, it’s hard not to remember the chilling quote from former tribal lobbyist Larry Kitto, who died in 1999 when the racino wars began.

“There’s never been anybody standing in line to share our poverty,” Kitto said once. “Now everybody’s in line to take away our money.”

But McCarthy agrees with other Capitol observers: Racino has its best chance ever this session.

“Yeah, I think it’s probably got a few more legs,” McCarthy said. “I think any racino proposal this year would have had some more opportunity.

Before that occurs, however, questions and answers are bound to get in the way.

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Comments (5)

  1. Submitted by bernie hesse on 03/21/2011 - 05:29 pm.

    Having spent my highschool years up around Mille Lacs and doing some work on “the rez” I am disappointed by the attempts to steal the gaming industry away from the tribes, but not surprised. While not acquainted with the Prior Lakes operation- I have checked in over the years with the natives from the Mille Lacs operation and applaus their move towards sustainability. I will always remember an older tribal member telling me that he expected the state to take away their ability (gaming) to raise resources and that is why they diversified over the years with obtaining a bank, bakery, grocery, health clinic, etc.
    We can find some other way to raise revenue- let us leave the native american community alone.

  2. Submitted by craig furguson on 03/21/2011 - 08:50 pm.

    Any sign of Dick Day?

  3. Submitted by Drew McDaniel on 03/22/2011 - 11:30 am.

    @Bernie Hesse –

    Describing this Racino proposal as an attempt to “steal” the gaming industry away from tribes is disingenuous at best and a bold faced lie at worst. This proposal would add a total of 4,000 slot machines split amongst two facilities, tribal gaming entities would still have 23,000 slots and the ability to add as many more as they wanted too. Furthermore, they would continue to operate their 18 facilities tax free and without the state’s smoking ban. Both huge competitive advantages.

    Thousands of people are employed in racing, an industry that was one of the first forms of gambling to be enacted in the state when it passed as a constitutional amendment in 1982. SInce then, the state has continued to authorize other forms of gambling, all at the peril of the racing industry.

    At the very heart, this bill is about making Minnesota’s racing industry competitive with those in other states and ensuring that it is around for the long run. It isn’t about “stealing” an industry away from the Native Americans.

  4. Submitted by Bill Coleman on 03/22/2011 - 04:19 pm.

    A couple points – MN “horse racing industry” is a joke, something comparable to the Vikings training camp in economic impact. What percentage of Canterbury’s horses were bred and live in MN?

    There is absolutely no reason to link casinos and horse racing other than to enrich the Sampson family and now the out of state owners of Running Aces. If the state wants casinos, let’s getting some bidding going from the likes of Bally’s and Harrah’s.

    This is just one more example of the GOP going after groups that have connection to the DFL – union members, tribes, women’s organizations, government workers, people on social services, senior citizens. I wonder if they realize that this list now includes most of us.

  5. Submitted by Jerry Joubert on 03/22/2011 - 10:42 pm.

    The joke is that the Minnesota horseracing industry is on the rocks and they pay taxes!!!. If you believe that not giveing the industry the same benefits as states such as Iowa, which now advertises to our business’s to move to Iowa, then go for it. The no cost of this boom to Minnesota’s econonmy is a no brainer. The spin offs to the economy are endless. And for people who need jobs that is more important than protecting millionairs at Mystic Lake. Many of the new people that will go to Canterbury to play the slots, do not play at the non tax paying casinos out of fair play. Canterbury will get a lot of players that only go to Las Vegas (which is another group that opposes the expasion of gambling in Minnsota, right!). If you are worried about out of state casino owners or out of state horeses then state that, but don’t be hypycritical. The horse racing industry in Minnesota fits the clean and green economy that is a welcome and financially sound solution to our problems.

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