Arlington Chamber of Commerce, Arlington TX

Gambling gaining momentum, transportation goes into a ditch

As the heat of the summer settled over Austin in the last three weeks, state leaders have given a few not-so-subtle signals about where they are regarding the state’s chronic underinvestment in transportation infrastructure and the measures they’re willing to consider to address the projected $18 billion budget shortfall that will face the Legislature next January.

If the number of legislators who show up means anything, then the early July hearing by the ho-hum sounding Licensing and Administrative Procedures Committee demonstrated that there is a lot of interest in licensing, particularly licensing some form of gambling in Texas beyond pari-mutuel wagering and the Texas Lottery.

The nine-member committee was often outnumbered by legislators who dropped by to sit in on what will likely be the interim’s only mention of commercial gaming in Texas. Beyond those who have always advocated trying to recapture Texas gambling money that escapes to adjoining states, state budget officials indicated by their mere presence that they’re looking for revenue anyplace they can find it. House Appropriations Committee Chairman Jim Pitts of Waxahachie stayed for most of the hearing. Pitts is one of a handful of legislators who will have the final say over what the next biennium’s budget looks like.

As for the actual testimony, there was near unanimous agreement that a lot of Texas money goes to Louisiana, Arkansas, Oklahoma and New Mexico, both to full-blown commercial casinos and to video gambling terminals at horse-racing tracks, so-called “racinos.” Consultants supporting the racing industry estimated that about $2.7 billion a year goes to other states, a figure no one challenged . Click here for their report (PDF)

The difference between those two types of gambling sets up the first hurdle for Texas lawmakers – deciding what would be best for Texas. Some pragmatists suggest there is room for both, arguing each draws a distinctly different type of patron.

Horse-track enthusiasts argue they could be up and running quickly, providing revenue to the state through what were once called “slot machines” before the next two-year budget expires. Casinos, they argued, will take longer to build and won’t make a dent in the state’s shortfall in the next session. They also acknowledge a sober truth about horse racing in Texas: It’s dying. Nearby states where the purses paid to race winners are richer are drawing the most competitive horses, owners and trainers. Those purses are supported by money from the video gambling that co-exists at the race track.

As if to punctuate that notion, Rep. Kirk England of Grand Prairie attended part of the hearing – the part where the track owners testified – but he wasn’t on the panel when his father, Grand Prairie Mayor Charles England, also showed up to support the racino option. Lone Star Park in Grand Prairie is owned by the city, and it has been struggling for the last few years.

Revenue estimates for the various options are all over the place. John Heleman, the chief revenue estimator in the Texas Comptroller’s office, offered no concrete estimates of what Texas might expect from various gambling choices, but he did present some ranges based on activity in other states (click here for the report), and not just those bordering Texas. Curiously, he offered no figures showing what the casino industry contributes in direct taxes to Las Vegas or to Nevada, a number that is certainly available even if Vegas, given the scope of the industry there, is not an apples-to-apples comparison.

Some committee members chastised Heleman for saying that it would be difficult for legalized gambling to clear the necessary requirements in time to provide any meaningful revenue in the next two years, but committee Chairman Ed Kuempel of Seguin said that wasn’t a reason to wait for legalization.

“2013 isn’t going to be a heckuva lot better than 2011,” He said. “If you just put it off two more years, then you’re still two years behind.”

Supporters of the casino industry pushed for a comprehensive bill that addressed both racinos and several large, destination-resort casinos similar to those that populate the Las Vegas Strip. They argued those casinos can only be supported in the state’s large metro areas, and that for many of the biggest gamign companies, Texas is the only place in the United States that they’re interested in.

“Texas is like another country,” said Jack Pratt, a former casino owner and consultant who has been in the business for 50 years. “Those companies have very little interest in any other state.”

Pratt and representatives of the Las Vegas Sands company, owner of the Venetian casino and several behemoth resort casinos in Singapore and China, said the economic impact of the large resorts is much greater than the tax just on gaming proceeds. Figuring in meetings, hotel rooms, gift shops and food sales, they argue that in some places in Vegas, only 16 percent of the revenue is generated by gaming.

Pratt, who lives in Dallas, will speak at the Chamber’s Policy and Advocacy Board Meeting August 18. He said in a conversation after the hearing that if gaming is approved next year, the state could realize some revenue during the two-year budget cycle from licensing fees, which could be extremely lucrative.

Approval of an expansion of gambling in Texas would require a constitutional amendment – a vote of two thirds each of the Texas House and Senate – and a public vote in November of 2011. Gaming supporters say getting a bill out of the Legislature will be the hard part; all public opinion polling points to easy passage of an amendment if it gets to the voters.

If gaming appears to have some momentum, efforts to improve revenue for the state’s increasingly underfunded highway system were thrown into neutral if not reverse last week. On Wednesday, July 14, Lt. Gov. David Dewhurst announced a series of changes in committee assignments and chairmanships, the most significant being the removal of Dallas State Senator John Carona as chairman of the Senate Transportation and Homeland Security Committee.

Carona has been a fearless advocate for increasing revenue – including the motor fuels tax – to provide funding for a system that, increasingly, is projected to fall far short of being able to meet the state’s needs in relieving congestion, accommodating growth or even being able to meet its current road maintenance obligations. He has carried the bill the last two sessions to increase funding, challenging state leadership and the no-new-taxes-ever-for-any-reason crowd along the way.

Dewhurst hasn’t explained the move other than to note some reassignments were necessary because of the resignation of Senator Kip Averitt of Waco. And there are some background hints about some other discontent, but very little public discussion. In any case, replacing Averitt as chair of Natural Resources didn’t require triggering all the dominos that fell. Carona was taken completely off of Transportation and made Chairman of the Business and Commerce committee, itself a powerful and important committee. Opinions about the move vary, but most insiders believe it was a clear signal to transportation advocates that state leadership wants nothing to do with addressing the transportation issue despite it being a high-profile, major item for most metropolitan areas for the last four legislative sessions.

Carona acknowledged as much when he accepted the new chairmanship, saying the leadership wasn’t going to do anything so he might as well go where he can be productive.

Transportation remains a critical issue on the Arlington Chamber’s legislative agenda, and the Carona expulsion is a definite setback. While committee vice-chairman Kirk Watson of Austin is also an aggressive advocate, it was important to have Carona, a Republican, leading the charge. Watson will be speaking at a Chamber Legislative Luncheon on August 19. Click here to sign up for that luncheon.

Senator Tommy Williams of The Woodlands replaces Carona as chair of Transportation. Williams’ views on the issues are largely unknown, though at a joint meeting of the Transportation and Finance committees earlier this year, he wondered aloud why advocates who had pushed for a menu of fees for a local option transportation funding mechanism in previous sessions didn’t just ask for a sales tax increase.  He must have not been paying attention when North Texas lawmakers, led by Carona, tried exactly that four years ago, and were thrashed by business interests who see raising the sales tax – if it were to ever happen – as their initiative to bolster state programs they benefit from.

For a complete list of the new committee assignments, click here.

For transportation advocates, the Carona action makes what was already a steep, uphill climb tantamount to scaling s shear rock wall without any climbing gear. Still, as with other items on the Chamber’s legislative agenda, it’s important to keep advocacy for the issues in front of lawmakers even if there is no will to address the issues this time around. It isn’t like the problems are just going to go away no matter how much Dewhurst, Perry and others want to avoid them.