Gambling on the future
• In a sour economy, a Portland casino sounds good to many • Moral arguments aside, the legal hurdles are significant
Gambling usually creeps back into Oregon's tax debate when the economy goes bad.
Here it comes again.
Starting it off was the offer by the Confederated Tribes of Grand Ronde to build a $350 million major league ballpark in exchange for permission to build a casino in Portland.
The proposal died when Gov. Ted Kulongoski vetoed an off-reservation casino tied to building the ballpark, his right under federal law. One casino per tribe on reservation land is Oregon's policy.
But the Grand Ronde hasn't given up on the idea of a Portland casino, and all the gambling talk renewed interest in Salem and other government circles. Riverboat gambling. Tribal casinos. Commercial casinos. More Oregon Lottery games. You name it, and someone's looked at it as a way to help the state's most pressing needs, including schools, transportation, social services and criminal justice.
And why not? The Grand Ronde's Spirit Mountain Casino made an estimated $72 million in proÞts last year. Why can't the state get in on the action?
'It's obviously out there as a possibility in this budget mess,' said Mary Ellen Glynn, spokeswoman for Kulongoski. The governor so far has neither come out in favor of expanding gambling nor ruled it out.
The most ambitious effort in Salem so far this year has come in the form of two proposals from Rep. Cliff Zauner, R-Woodburn. First was a ballot measure to remove the prohibition on casinos from the Oregon Constitution and second, a bill authorizing a state-owned casino. Neither proposal got a hearing, though.
Politicians always have been cautious about gambling. True, 66 percent of Oregon voters liked the lottery in the 1984 authorization vote, the Þrst and so far only time they faced a signiÞcant gambling issue. But the issue carries political baggage rooted in religious objections and fears that gambling hurts families and the disadvantaged.
Gambling, though, has become big business, and the buzz about the possibility of a Portland casino in the wake of the Grand Ronde proposal is growing.
'I think Oregon's ready for it,' Zauner said. 'We've got to generate new revenues.'
Kulongoski dismissed the Grand Ronde's stadium proposal so fast that many area business leaders didn't give it much thought, said John Czarobski, spokesman for the Portland Business Alliance.
'It left the table so quickly I don't think the business community has taken the time to discuss the issue,' he said. 'There's a host of questions that haven't been thoughtfully debated.'
But the community, he said, is trying to address school funding issues with the new local business tax and the proposed temporary Multnomah County income tax, on the May 20 ballot. If voters defeat the income tax, a serious discussion about gambling may begin, he said.
Laying some groundwork for the future, Cheryle Kennedy, chairwoman of the Grand Ronde Tribal Council, came to Portland recently and talked casinos with Mayor Vera Katz; Diane Linn, chairwoman of the Multnomah County Board of Commissioners; and Metro President David Bragdon.
Metro hopes to attract a headquarters hotel near the newly renovated Oregon Convention Center and wants to know more about adding a casino to the mix, said Metro spokesman Marc Zolton.
'There might be some synergy between a casino and a headquarters hotel,' Zolton said. 'It could happen without a casino or with a casino. We're not sitting around thinking about how we can get a casino here. But that's one of the ideas ßoating around out there.'
Less revenue, more gambling
Many states have been looking at gambling in this time of dropping revenues. New York wants video lottery games; Iowa wants slot machines; Maryland, Pennsylvania and West Virginia are looking at casinos.
Today, you'll Þnd tribal casinos in 23 states, lotteries in 40 states and some form of legal gaming be it a lottery, dog racing or whatever in 48 states, all but Hawaii and Utah.
It's not hard to see why. Commercial casinos in 11 states paid state and local governments $3.6 billion in taxes in 2001, according to the American Gaming Association.
But any effort to establish a Portland casino tribal or commercial would face complex hurdles, including state laws, federal laws and tribal sovereignty.
Allowing one tribe the authority to build a casino off its reservation land, for example, would have a ripple effect among all federally recognized tribes. Once one tribe was granted that authority, the others then could open negotiations for their own casinos, said MardiLynn Saathoff, the governor's general counsel.
A commercial casino carries a different set of legal complications, as Zauner learned, including a constitutional amendment, a statewide vote and a lot of massaging of the electorate.
But history shows that Oregon legalizes gambling when the political and economic stars align just right.
Horses started it
Gambling Þrst became legal in Oregon in 1931, during the Depression, with betting on horses. In the years after, social gaming received legal sanction, including friendly card games and charity casino nights.
Voters approved the lottery during the last recession in the 1980s, a proposal marketed as a spur to economic development. It didn't get on the ballot through some groundswell of public demand. A company called ScientiÞc Games, a maker of lottery scratch-off tickets, Þnanced the campaign.
Today, lottery dollars also go to public education, state parks and salmon restoration. When the books are closed on the 2001-03 biennium, those programs will have received more than $700 million in lottery dollars, with about 63 percent of that going for education statewide, said Lou Torres, Oregon Lottery spokesman.
In 1993, Oregon's Þrst tribal casino opened, and today, eight of Oregon's nine federally recognized tribes operate a casino under the 1988 National Indian Gaming Regulatory Act. A ninth is in negotiations.
Tribal casinos don't pay taxes like other businesses. The property, for starters, is federal land, so tribes pay no property taxes. Tribes are sovereign nations and pay no federal or state income tax, although tribal members pay personal income tax.
But the casinos contribute to the community through methods negotiated in their compacts with the state.
The Grand Ronde, for example, earmarks 6 percent of casino proÞts for the Spirit Mountain Community Fund, which goes to nonproÞt and charitable organizations in 11 western Oregon counties, including the three Portland area counties, said Justin Martin, tribal spokesman. The fund donated $4.5 million last year, and sometime this month will surpass the $20 million mark in donations since its creation in 1997.
The fund also contributes to police and Þre departments in Polk and Yamhill counties its immediate neighbors to help defray the cost of service demands created by the casino. The fund pays for six full-time positions on the Polk County sheriff's ofÞce.
Kulongoski's veto of the stadium-for-casino deal came without a meeting between the governor and the tribe. But the Grand Ronde is encouraged by his silence on the casino question beyond ballparks and hopes to meet with him soon about an off-reservation casino in Portland.
'It's in a holding pattern,' Martin said. 'We'd like to have that conversation with the governor if off-reservation gaming is allowed in Oregon.'
Regulations are customized
There's no one right way or wrong way to structure commercial gambling. It depends on the speciÞc needs of a community, and they all look different, said Louis Toscano, who was senior policy adviser for Jim Whelan, mayor of Atlantic City, N.J., from 1990 to 2001.
For example, Atlantic City, marking its 25th anniversary of casino gambling this month, allows casinos only in hotels with theaters, restaurants and at least 500 rooms. Some local Atlantic City restaurants, though, closed because of competition from the hotels. New Orleans saw what happened and crafted its law to forbid casinos from operating restaurants, a move to protect the city's famed eateries.
The 12 Atlantic City casinos a 13th will open in July pay normal property and income taxes, a room tax and a special 8 percent casino tax on gross receipts earmarked for senior citizen and human service programs. New Jersey casinos paid $342 million in taxes in 2001.
The tax rate for the casino industry ranged in 2001 from a low of 6.25 percent in Nevada to a high of 50 percent in Illinois. Mostly, states use the money for education, but each has its own allotment strategy.
'As a short-term panacea for budget problems,' Toscano said, 'it can't be beat. It's largely recession proof. People are always going to gamble. None of these guys here is going under.'
A Portland casino, though, could mean a reduction in lottery revenue. State surveys show lottery sales drop near the site of new tribal casinos. In addition, the lottery receives 80 percent of its revenue from video poker, which also is popular at casinos. And more than 50 percent of lottery spending comes from the three Portland area counties, which also would provide the customer base for a Portland casino.
'They're in direct competition with us,' Oregon Lottery's Torres said. 'It could have an effect, sure.'