Thursday, June 3, 2010

Playing the odds.

There's a lot of white noise surrounding the expansion of gambling debate in Texas these days, much of it created by advocacy groups or reporters and bloggers who don't understand the issue anyway, about "how much" or "how little" expanded casino gambling is expected to generate for Texas coffers. Estimates in this Robert Garnett, Dallas Morning News article on the budget quotes House Budget Chief Jim Pitts (R - Waxahachie) estimating the figure at "$4 Billion" per year. This Ross Ramsey, Texas Tribune article contains estimates from $2 Billion down to somewhere around $110 Million per year.

So that's the projections, what about the actuals?

1. Unfortunately, the actual current revenue numbers for Texas gaming are not easily determined. since the pari-mutual tax is obviously bundled with something else in the State's database. However, according to the 2009 Annual Report by the Texas Racing Commission, pari-mutuel betting resulted in $3.5 Million in taxes paid to the State in 2009, a number that was down from the prior year and which has been in decline for years prior to that.

We also know, from the State's revenue database that the Texas Lottery is generating approximately $1.5 Billion dollars in gross sales, although despite the fact the title is "net lottery proceeds" it's unclear that administration & awards costs have been removed from that account.

However, given the information available to the public at a superficial level. (Digging deeper would require a FOIA act, something that the HCA budget of just about nothing cannot afford.) It can probably be assumed that monies from all sources of gambling would come in at around $2 Billion dollars/year but with only $3.5 Million of that coming from non-government ran (read: Lottery) sources.

Based on that information it'd be difficult to assume that Texas casinos, or the inclusion of slot-machines in racing venues, would come anywhere NEAR the $4 Billion potential windfall for the State that's being forecast by industry supporters.

Then, there's this data point as reported by Michael McNutt of OK news via the Tulsa World:
Tribal gaming fees have contributed $107.5 million to the state coffers so far this fiscal year, Meacham said. It's expected that tribal gaming fees will bring in about $120 million by the end of this fiscal year, June 30, he said.

Read more from this Tulsa World article at http://www.tulsaworld.com/news/article.aspx?subjectid=11&articleid=20100603_11_A1_Gamble847987


Coincidentally, I just got back from a vacation in Oklahoma where the wife and I stopped off at one of the casinos right next to the Texas/Oklahoma border. It's a casino where I go frequently to play poker. They just opened a new tower hotel and casino, with a totally revamped poker room that's on par with many that you find in Vegas.

The parking lot was also packed with cars & trucks.....from Texas.

If you assume that probably 3/4 of Oklahoma's casino revenue is sourced from Texas, and that you can probably make the same assumptions about Louisiana gambling revenue, it appears that the $110 Million projection is going to be much closer to reality than is the pie-in-the-sky projections of Billions.

My back-of-the-napkin estimate pegs the increased revenue at around $200-$250 Million if full casinos are approved, around $10-15 Million if expansion is limited to slot machines in race tracks. (See Delta Downs in Louisiana for a good way that would work)

Still, any way you look at it, that's money that's currently heading outside the State that wouldn't, and that could be the most compelling argument of all.

5 comments:

  1. Something of an aside, but did you notice all those humorous billboards just south of the border showcasing Bossier-area gambling? (As in, "Hey Texans, why settle for OK?"). Texans are definitely viewed as a marketing target!

    Whatever amount it may be, that surely is money just leaving our state...

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  2. Yup. My favorite was:

    "Your luck has improved just by leaving OK casinos."

    Clever marketing. Whatever they're doing it's working. Anytime I go to a casino in OK or LA to play poker I meet more people from TX than I do locals.

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  3. I happen to like the one for LdL that says "Vegas Action, with a Louisiana address" (or something like that), as well as the "Burma Shave"-like series for Coushatta.

    I have always preferred LA casinos personally, the buffets have better food (esp. during crawfish season.)

    ~EdT.

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  4. I am pretty sure tribal gaming location tax rates are dictated by federal law. The non tribal locations in the states all around Texas pay much higher rates - maybe as much as 2 or 3x as much.

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  5. "I am pretty sure tribal gaming location tax rates are dictated by federal law. The non tribal locations in the states all around Texas pay much higher rates - maybe as much as 2 or 3x as much."

    Which pretty much proves my point. Assuming that OK derives 80MM from Texas sources, and if you treble that, then you get $240MM in casino revenue.

    Louisiana has reported 700MM from ALL gambling sources, but it appears that the casinos that would draw from Texas only account for around 1/4 of that. That's $175MM from Texas.

    240MM + 170MM = 410MM

    That's a helluva lot closer to $110MM than it is $4B.

    Not knowing LA's number I took a guess that was on the conservative side. Still it will probably be closer to reality than what you're seeming to suggest.

    ReplyDelete

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