Plotting a Monopoly?
The game of musical racetracks spotlights how increased competition in a VLT'd Ohio could be problematic for the state's infant industry. Yes, most agree there's enough gaming business out there for multiple Ohio projects. But that success also depends heavily on what part of the state you're talking about.
Should VLTs get approved, the pieces resettle as proposed, and Mahoning Valley Downs happen, the northern part of the state would have six gaming options — five of them clustered around the northeast corner. Those chips might be in the wrong place, according to UNLV's Schwartz. A number of gaming options make sense in southern Ohio, he explains, because they would be positioned to pull from Kentucky, an underserved market. "But northern Ohio, you've got Michigan, Pennsylvania, and Indiana, and they all have pretty robust industries."
And while the original setup outlined in the legislation obviously isn't an example of the free market at work, it gives developers a leg up for a crucial reason. According to Schwartz, the casino business isn't exactly growing nationally, and bankers are skittish about lending money for gaming projects. That is, unless they see market dominance.
"If you can guarantee that by statute we're the only casino in how many miles, then [banks] may be more interested," he says. "But are you going to be able to borrow the same amount of money if the bankers know you have competitors down the street? That could be a limiting factor."
Rock is working out financing for the first phase of its Cleveland project, which calls for a $350 million Horseshoe Casino in the Higbee Building that is expected to open by 2012. Phase II, a $600 million chunk of Vegas glitz airlifted onto the banks of the Cuyahoga, is planned for down the line.
Kulczycki admits that if Northeast Ohioans went from having one gaming option to three or more, there's a chance the downtown project's revenue projections could slip. But studies of the Cleveland-area gaming market justify the project regardless of competition, she says.
Kulczycki also says that the uptick in competition is all speculative at this point, and that the company will not "speculatively worry" about future events, including the possibility that Rock's former partner, Penn National, sets up shop on Rock's doorstep.
"We'll certainly keep an eye on it," she says. "But it's not a decision we have control on."
In the end, it will come down to how Kasich chooses to roll on the issue. Deputy Press Secretary Connie Wehrkamp tells Scene the governor's office is in the midst of hiring an expert to review VLTs and other forms of gaming in order to "best harmonize" the state's new industry. There's no cemented timeline for when that hire will happen or when the review will be completed.
"Until we see the full report, no policy decisions on gaming will be made," says Wehrkamp.
But with a cocked-and-loaded budget deficit firmly placed against Ohio's head, there seems to be little option about what the administration can do. Regardless of how the tax on gaming revenue for racinos breaks down, they'll give the state an opportunity to squeeze more money out of gamers. The ongoing land scramble shows that developers know they could earn more as well. That is, if they're holding down the right real estate.