Combination of property tax reform, gambling plan may have lost appeal

Wednesday, December 24, 2003

By Bill Toland, Post-Gazette Harrisburg Bureau

HARRISBURG -- For months, Pennsylvania has been flirting with slot machine gambling in hopes the one-armed bandits can be turned into a $1 billion cure-all that will help pay for convention centers, hockey arenas and school property tax reductions statewide.

Gov. Ed Rendell

But the wild ride that was Gov. Ed Rendell's first year in office ended exactly where it started -- without a compromise on a measure that would bring slots to Pennsylvania's racetracks, big cities and resorts.

Whether there's any spark left in the idea depends on who's talking. Rendell is adamant that measures addressing both property tax reform and gambling expansion will be considered in January, within five or six work days after legislators return from their holiday break. Caucus leaders in both the House and Senate were close to a deal last week, he said, and simply ran out of time.

But some gambling opponents are skeptical of Rendell's predictions and are already declaring victory, saying slots are dead for now, and perhaps for a good while.

"We've seen it happen so many times," said Charlotte Stoddard, board member and former president of No Dice, a Pittsburgh-area anti-gambling group that crusaded against the Legislature's 1994 attempt to bring riverboat gambling to Pennsylvania.

"There will be this spurt of interest, and everybody says it's a done deal ... but I think [lawmakers] realized this is such a bad deal for Pennsylvania," she said.

Bad deal or not, plenty of legislators believe that this was the state's best shot at increasing the number of gambling sites. The property tax reduction tied to slots revenue would have fit nicely, in a political sense, with the state's higher income tax rate, which grows from 2.8 to 3.07 percent starting Jan. 1.,

Legislators were eager to use the slots-funded property tax reduction as cover for any flak they might catch as a result of the income tax hike. But now that the $1.3 billion tax increase is completed, some say there's no immediate pressure to work on the slots measure.

"I think the greatest prospect for slots was as part of a package with the budget and with property tax reduction," said Rep. John Maher, R-Upper St. Clair. "On a stand-alone basis, I'm not sure that any proposal will command a sufficient number of votes in both chambers to arrive at the governor's desk."

Maher, who voted in favor of a House slots bill this year, said he was surprised how the proposal continued to expand as the year went on, especially in the Senate. A Senate plan that in June called for 3,000 slot machines at each of eight racetracks had morphed by this week into a proposal that would have allowed slots gaming at up to 15 sites in Pennsylvania.

Tom Kauffman, executive director of the Pennsylvania Horse Racing Association, said legislators got greedy when they lobbied for slots in places other than racetracks. "The history of the lottery and of our industry shows people prefer gambling to grow in steps," Kauffman said. "This was a big leap."

Maher agreed, saying "greed caused the gaming proposal to collapse like a pyramid scheme ... I don't know that there's a cure for that." The 15-site proposal fell on its face partly because Sen. Vincent Fumo, D-Philadelphia, insisted that any slots bill must also reserve a casino or two for American Indians. The plan was never considered for a vote, and House Republicans blamed Fumo for wrecking the deal.

The House slots plan, approved in the summer, built on the Senate proposal to include slots at nine racetracks plus two non-track parlors, one in Philadelphia and one somewhere in the seven-county Pittsburgh region. Under that plan, each of the 11 casinos could have had up to 5,000 slot machines.

But the House plan, after it was returned to the Senate, never saw action and was buried in the Senate's rules committee.

Sen Jay Costa, D-Forest Hills, said legislative negotiators must tread delicately as they try to satisfy all of the key parties. The more slots licenses you add, the more votes you'll collect from the senators and representatives whose home districts now stand to receive a parlor. But you also anger the racetrack owners who, with every additional slots license, see their cut of the gambling pie diminished.

"There's that dynamic," Costa said. Finding the right balance, he said, will be the trick.

In a narrow sense, the failure to approve slots this year means Rendell was unable to deliver on one of his election promises.

More broadly, the slots collapse means Pennsylvania is still racing against its neighbors to see which state will legalize gaming machines first, and will get the first crack at attracting in-house and out-of-state gambling dollars and jobs. Slots are already legal in West Virginia, but Maryland and Ohio spent parts of this year, as Pennsylvania did, trying to iron out their own ways of expanding gambling.

In Maryland, various proposals are calling for slot machines at racetracks, in off-track casinos, in taverns, at Baltimore-Washington International Airport, and even in Baltimore's Inner Harbor area. Like Rendell, Maryland's rookie governor, Robert Ehrlich, campaigned on slots in 2002, saying gambling was needed to pay for the state's six-year, $1.3 billion plan to increase public school funding.

So far, though, Maryland's lawmakers haven't been able to find middle ground. The same goes for Ohio, where plans to legalize video slots at the state's seven racetracks have been spinning aimlessly for a year. Ohio voters, meanwhile, twice have defeated ballot referendums to legalize full casinos.

Sen. Jim Ferlo, D-Highland Park, said the state Legislature must agree on a deal that's first and foremost good for Pennsylvania, but he acknowledged that there's a competitive factor involved, as well.

"Certainly, you'd like to be one up," he said of Ohio's and Maryland's attempted forays into gambling. "There's always going to be elements of competition as we look outside our borders."

Ferlo said he thinks there's a 75 percent chance that a slots deal would be brought to a vote by the end of January. But he also said that the issue of Indian gambling, an unwelcome complication to slots talks, would have to be resolved before any bill moves forward.

That's because under federal law, tribes that meet certain qualifications are eligible to open casinos. Those casinos don't require state approval and often aren't subject to state taxes, and Ferlo is convinced that the potential for Indian casinos should be discussed before, not after, the fact.

Thomas Shaheen, a volunteer with Harrisburg's Pennsylvanians Against Gambling Expansion, said the slots issue wouldn't go away, because the racing and gambling industries have too much money tied up in lobbying to let it die. But he also was optimistic that the push would lose some of its steam in 2004.

"It's an election year" for House members and some senators. "They won't want to touch it," he said, except for a core group of legislators who have promised to bring slots to their home districts.

Rendell said this week that if neither the Senate nor the House advances a new slots plan by February, his office will put forth its own bills, and ask the General Assembly to vote on them.

In the end, Costa said, Rendell will be the linchpin to any deal, and that's cause for optimism for slots fans. "Now we have a governor committed to getting it done," Costa said. "We haven't had that before."

E-mail this story   Print this story