Greater Baton Rouge Business Report: Gambling no sure bet in Louisiana

Louisiana is getting to be a gambler's paradise.

You can spend hours at the bingo hall and feel good that you've contributed to the fund-raising efforts of a school or a charitable organization. You can play the ponies without even going to the track. And you can pick up a lottery ticket with your milk at virtually any convenience store.

Soon, you'll be able to play video poker for money--legally--at your neighborhood bar as well as at the racetrack. In the not-too-distant future, you'll be able to drop in a casino or hop a riverboat.

Whether all this is necessarily good for the state is another question. State government makes money off various forms of gambling, and it's a new source of revenue at a time when voters are in a decidedly anti-tax mood. But one form of legalized gambling may hurt another.

Plugging holes in the state budget or funding something important like education by assuming that there's a lot of money coming from gambling, seems, well, a big gamble.

Video Poker

The Legislature approved video poker last year on the theory that people were doing it illegally anyway and the state might as well keep it honest and make some money off of it. Interestingly, the first place you'll be able to try it is at the race track.

Evangeline Downs was the only race track to oppose video poker and testified against it in the Legislature, according to general manager Charles Ashy Sr. That stand aside, Evangeline will install 40 to 50 machines in all areas of the track and expects to start them up June 1. "We're not stupid," Mr. Ashy says. "If everyone else is going to have it, then we're going to have to have it too."

The Louisiana State Police Gaming Division regulates video poker and wanted to test it at race tracks first because tracks offer an already secure and heavily regulated environment with the necessary telephone lines and computer facilities. State Police are expected to spend at least a month testing systems and working the bugs out, Mr. Ashy says.

One of the vendors working the state is Raymond Mahfouz, master associate and minority stockholder in Louisiana Gaming Management Inc., an eight-month-old company in Lafayette specializing in video poker machines. Mr. Mahfouz handles marketing and public relations for the western side of the state including Shreveport, Monroe and Lake Charles. Fifty-three percent of the company is Louisiana-owned; the other 47 percent is held by out-of-state investors with experience in gaming.

Mr. Mahfouz says the security precautions surrounding state-regulated video poker are extensive. His company hasn't yet brought machines into the state because the State Police only began mailing letters of approval for licenses last week and the licenses themselves had not been sent out. Distributors of the machines must have them tested by an New Jersey company to ensure fair play, and the State Police will handle their accounting via computer. "You can't even open the machines without notifying them, even if the machine is broken," Mr. Mahfouz says.

Lounges, restaurants and other places with liquor licenses will be the types of places offering video poker, he says. The maximum single play will be $2 and the maximum payoff will be $500. Players who wager less, say a quarter or 50 cents, will be playing for lower payoffs. Between 80 and 94 percent of the total amount wagered can be returned in payoffs depending on the individual machine and location. Of the remaining amount, 22.5 percent goes to the state as a "franchise fee."

Video poker won't be widely available until at least July and probably August or September, says Mr. Mahfouz. Projections of how much the state will net range from about $40 million annually (the state budget projection) to $150 million. Another $12 to $15 million could go to local governments. "Most people think it will do as much as the lottery or better," Mr. Mahfouz says.

The Casinos

While politics engulfs the issue of a casino in New Orleans, the Coushatta Indians are quietly going about the business of putting up a casino and eventually a resort on land they purchased contiguous to their reservation. The casino will be located on U.S. 165 between Kinder and Oberlin in Allen Parish.

Indian tribes around the country are constructing or taking a hard look at casinos on their reservations, where unemployment is often astronomical and economic development is limited.

The Coushatta have been working with the Edwards administration, and the Tunica-Biloxi Indians also have a casino planned for the Marksville area. Coushatta reservation administrator Paul Ruppert says the casino would not only employ all the members of the tribe who are now unemployed but provide a large number of jobs to others. "It would virtually eliminate unemployment in both parishes, Allen and Jeff Davis," Mr. Ruppert says, "It has been one of the most successful economic development opportunities for tribes to get into."

The Coushatta casino is being developed by Grand Casino Inc. out of Minnesota. The company will finance construction and takes 40 percent of the profits for the first seven years of operation. "It's really a great deal for the tribe," says Mr. Ruppert.

The first phase of the project, at $18 million, includes the casino, a restaurant and parking lot; the $22 million second phase, the resort, includes a water park, golf course, indoor theater, amphitheater and recreational vehicle park. Projected total employment is 1,500, with first preference to Coushatta and second preference to their spouses. The Coushatta tribe consists of 637 members.

Meanwhile, the proposed New Orleans casino looks like one of the more controversial issues in this legislative session.

The New Orleans casino is expected to gross between $1.6 billion and $2 billion annually. State Rep. Raymond "Lala" Lalonde of Carencro, chairman of the House Criminal Justice Committee, says he doesn't think an Indian casino would have an impact on a New Orleans casino because the New Orleans casino would be attractive to tourists headed for the city anyway. Studies show that 80 to 85 percent of visitors to casinos are from out of state, he says.

Louisiana Lotto

Whatever the impact is from newer forms of gambling, the Louisiana Lottery is about to take a hit. On May 29, the Texas Lottery starts up with both instant winner and jackpot games. All the Texans who made Hebert's in Vinton just over the state line the biggest ticket-seller, can stay home.

That's why Lottery Commission chairwoman Mary Jeansonne of Lafayette makes sure you know the chances of winning Louisiana Lotto are twice as good as the odds in Texas: 1 in 7 million in Louisiana vs. 1 in 14 million in Texas. However, Texas jackpots are expected to be bigger because of the larger population.

Up to now the Louisiana Lottery has done much better than projected. Sales have totaled $307 million to this point, substantially more than the projection of $200 to $250 million. The Lottery expected to be able to turn over $50 million to the state; it has handed over $90 million.

Louisiana ranks 10th nationally in total sales and second in instant-winner (scratch-off) games, which have proven more popular than expected. The games with Louisiana themes, like Crawfish Cash, Louisiana Treasures, Bayou Gold and others, have been particularly well-received, Mrs. Jeansonne says.

However, every state lottery goes through a "sophomore slump," and Louisiana's may be coming. Lottery officials estimate that border players from Texas, Mississippi and Arkansas account for about 10 percent of Louisiana and Lottery sales. Video poker is expected to hurt, and casino gambling looms. "There's just so much money out there to be spent on gaming," says Mrs. Jeansonne. "We're definitely concerned about all this."

Louisiana Lottery President Michael Carr says competition from neighboring states was inevitable. Mississippi residents will vote on a lottery in November.

"Video poker is our single biggest challenge right now," says Mr. Carr. When video poker became available in South Dakota, for example, that state's instant-winner lottery game sales dropped by 40 percent, he says. He doesn't think the Louisiana Lottery will suffer as badly as South Dakota's, but he thinks that if video poker's projected $1 billion in revenue is accurate, the video game has to hurt lottery sales.

Mr. Carr last week decided to call it quits; he will return to his native Michigan to run for public office in the fall. His resignation is effective July 1.

Good Ol' Bingo

Traditionally one of the most consistent sources of charitable fund-raising in Louisiana, bingo faces more varied competition for the gambling dollar. "The lottery hasn't really hurt. It surprised me," says Joey Atiyeh, administrator of Catfish Town Bingo in Baton Rouge. "Poker machines will probably hurt bingo parlors."

Bingo operators are pushing legislation introduced in this session to allow video poker machines in bingo parlors, with the profits going to the charitable organizations using the facilities, Mr. Atiyeh says. That would create a more level playing field for bingo halls. "Not to permit bingo parlors to have the video poker machines could be a serious problem down the road," he says.

Some form of instant-winner scratch-off game not connected with the state lottery is usually available in bingo halls, and Catfish Town Bingo does not sell state lottery tickets. Mr. Atiyeh says he has noticed a drop-off in bingo participation as a result of off-track betting although the OTB parlor in Baton Rouge only opens this week. Ninety percent of bingo players play because they like it and not because it's a form of gambling, Mr. Atiyeh says. "Bingo players are bingo players, and they aren't the same ones who are going to off-track betting."

As they've done for the past couple of years, horse racing interests are again seeking a reduction in the state parimutuel takeout to soften the impact of other forms of gambling. The perennial state budget crunch may, again, make that goal difficult to achieve, even though Mr. Ashy says the lost money would be made up through lottery revenue.

"At this point, the lottery has not hurt us. We're holding our own. The lottery has not impacted us. But when we get our crowd on race nights, it may hurt us then," Mr. Ashy says.

Only one track in the state has run a complete racing season since the lottery sales began in September--the Fair Grounds in New Orleans, which ran from Thanksgiving Day through late March. The start-up caught the end of the Louisiana Downs season in Shreveport, but the betting handle there was also heavily impacted by the opening of a track in Fort Worth, Texas.

The Fair Grounds handle was down about 12 percent, says Paul Burgess, newly hired executive director of the Louisiana Racing Commission. However, he's not sure the downturn can be attributed solely to the lottery, because economic conditions in New Orleans may have hurt more. "We have a lot, a lot of people out of jobs," says Mr. Burgess. "I don't believe you're going to see those people at the race track."

If the state takeout reduction goes through, the money would go to purses, the tracks themselves and capital improvements.

Last week, Evangeline Downs opened its long-awaited betting parlor in Esplanade Mall in Baton Rouge. Occupying 24,400 square feet, the plush parlor opened its grandstand and general admission areas. A clubhouse and private dining area open this summer. Mr. Ashy says that because the growth of off-track betting means Evangeline Downs makes money from betting all over the state, any new form of gambling will hurt.

"What happens to them impacts us. What happens to us impacts them," says Mr. Ashy.

Yet even though he filed the two casino bills and was a force behind the creation of the lottery, Mr. Lalonde thinks it's time to slow down the spread of gambling in the state. "We need to slow it down a little bit so we can progress more in an orderly fashion," he says.

Riverboat Players Make BR Pitch

Several notable riverboat gambling and hotel operators have expressed interest in setting up gaming operations in Baton Rouge. They include:

* Resorts International Inc. in Atlantic City, N.J., which is owned by Merv Griffin. Jeffrey Lowenhaur, a senior management consultant to Resorts International, plans to visit Baton Rouge this week to talk with city officials about a possible venture.

* Steamboat Casino Cruises in Bettendorf, Iowa. The firm is affiliated with companies operated by Bernard Goldstein, who manages two gambling boats in Iowa and one in Illinois.

* Louisiana Cruises Inc. of Baton Rouge, which is involved in a joint venture with Casinos Austria Maritime.

* And Paddlewheels Inc. of New Orleans.

The companies have already made contact with the Downtown Development District about their interest in riverboat gambling. They will be invited to make formal presentations to local officials, said Davis Rhorer, executive director of the DDD.

Several other inquiries about riverboat gambling were made, but no formal proposals were submitted, Mr. Rhorer said. Jack Pratt, owner of the Sands Hotel in Las Vegas, paid a visit recently to the mayor's office and the Governor's Mansion. And the owners of the Ramada Inn on Nicholson Drive also contacted the mayor's office.

Mr. Rhorer said riverboat gambling would provide incentive for building a convention hotel in downtown Baton Rouge. Two of the gambling boat operators who submitted proposals to the DDD also operate hotels.

The DDD has been pushing construction of a downtown hotel next to the Centroplex. Mr. Rhorer said the city is negotiating with Ramada Inc. and Stormount, an Atlanta-based developer of Marriott hotels.

A hotel feasibility study has been completed and is being reviewed by city officials. Mr. Rhorer said the study indicates a downtown hotel is economically feasible if the city provide incentives through property abatements or leases.

The study does not indicate what impact riverboat gambling could have on a downtown hotel.

"If we get riverboat gambling, it will give them (hotel developer) a much better deal," Mr. Rhorer said. "Then will they need as much from the city?"