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Pinnacle casino move could alter tax system
New issue in Baton Rouge would introduce competition into state
The Associated Press
NEW ORLEANS - At first glance, a move to bring a third riverboat casino to Baton Rouge appears to be a provincial issue. But the prospect has the potential of tossing Louisiana's system of handling casino gambling on its head.
Pinnacle Entertainment Inc., owner of three dockside casinos in Louisiana, wants to take on two existing casinos - the Belle of Baton Rouge and Casino Rouge - that have been content to slice up the capital city's monthly take. In December, that pile of cash totaled $20 million.
Las Vegas-based Pinnacle has been no shrinking violet when it comes to spending money to make money: The company's L'Auberge du Lac casino resort in Lake Charles seized a huge share of that Texas-targeted market and drove out a deep-pockets competitor. Pinnacle is planning still-another resort in Lake Charles, along with a new riverboat and hotel to replace its current complex near New Orleans.
Considering what happened in Lake Charles, it's small wonder the existing casinos in Baton Rouge are having a conniption over Pinnacle. Harrah's Entertainment Inc., which once had two riverboats in southwestern Louisiana, opted not to rebuild after Hurricane Rita and traded its licenses to Pinnacle for a Pinnacle casino site in Biloxi, Miss.
One of those licenses will be used for Pinnacle's second resort in Lake Charles. The intent for the other is a $250 million casino-hotel in Baton Rouge.
The existing casinos have been quick to say that Baton Rouge would be hard-pressed to support three riverboats. The free-market view would be that if Pinnacle is let into Baton Rouge, the existing casinos will have to invest more money to make less money.
That's competition. Therein lies the rub in Louisiana, which has largely tried to avoid such with casinos.
When riverboat gambling was approved in 1991, the Legislature opted to allow only 15 licenses - something of a government-guaranteed turf - in exchange for a confiscatory tax rate - currently 21.5 percent - that would provide a bounty of state revenue into perpetuity on the gross amount of money won from gamblers. The land casino monopoly in New Orleans held by Harrah's followed the same pattern.
Since then, state gambling regulators have taken into account the overall economic impact on a casino market every time a riverboat has moved. After all, jobs were one of the reasons gambling was legalized and each riverboat provides an average of more than 1,000 paid positions.
Mississippi has a 12 percent local and state tax rate and a system of letting gambling regions have as many casinos as the market can bear. In the Mississippi way of doing business, casino operators are guaranteed nothing.
About 17 months after Hurricane Katrina flattened every casino on the Mississippi coast, 10 are up and running and more than $5 billion in investments are pouring into the area. Industry observers say the result could be Biloxi mentioned in the same sentence with such mega-casino centers as Las Vegas and Atlantic City.
No one is making similar predictions for Louisiana where growth in the gambling pie - except for a few months after the storms - has been largely static for several years.
With the current tax rate, reinvestment to combat competition - especially with the prospect of smaller returns, such as in Baton Rouge - will be difficult to come by, especially for second-tier operators, the industry contends. But Gov. Kathleen Blanco has turned a deaf ear to the complaints, saying she will not support any tax relief.
There is another option many riverboat license holders have opted for: moving to another city. But Louisiana is running out of places with profit potential for casinos. The Belle of Orleans, whose New Orleans facility was wiped out by Katrina, opted to move to the Morgan City-area community of Amelia. Riverboat gambling is not legal in the only major cities in Louisiana without riverboats - Monroe, Alexandria and Lafayette.
Judging by the promises casino backers voiced in 1991, none of this was supposed to happen. At the time, neither was gambling on the Mississippi coast. And Louisiana now has the prospect of dealing with increased competition - both inside and outside the state - with a system perhaps not equipped to deal with either.
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EDITOR'S NOTE: Alan Sayre, the AP's business writer in New Orleans, has covered legalized gambling in Louisiana since its inception. |
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