Proposal 1 – Where’s the Meat?
By Dr. Donald F. Holecek, Director of the MSU Tourism Resource Center

As an economist by training with a long running interest in the gaming industry, I can’t resist focusing this column around Proposal 1 on this year’s Michigan ballot.  The gaming industry has come a long way along the road to respectability over the last decade or so.  At the Global Gaming Expo earlier this month, it was reported by the American Gaming Association (AGA) that about 85% of the U.S. population finds gaming to be an acceptable form of adult entertainment.  This rate of acceptance has increased steadily over the years but is unlikely to go any higher given the firmly held anti-gaming views of the remaining 15% of the U.S. population.  And, of course, the AGA does not claim that all or even most of those who are “ok” with gaming regularly gamble.

Proposal 1 would require that all new gaming venues be approved via statewide and local ballot initiatives.  Advocates are promoting it as a “Let the Voters Decide” initiative.  On its face, this would appear to be a fair and democratic way to decide the issue of where new gaming venues should be located.  But, when one examines the groups that funded collecting the signatures to get Proposal 1 on the ballot and who are now paying for advertising designed to convince us to vote for it, one must question whether they are motivated by their democratic beliefs or personal economic interests.   Are they interested in protecting us from the ills associated with gaming or in protecting their established gaming interests?  With the possibility of state authorized video lottery terminals (think slot machines with a twist) at Michigan race tracks now prominently visible on the Michigan gaming landscape, one can safely conclude that Proposal 1 is designed to stifle competition from “racinos”.  Proposal 1 will not curb expansion of gaming in Michigan, rather it will influence who will profit from its expansion.  And, despite promoting it as the “Let the Voters Decide,” initiative voters will have nothing to say about where new gaming venues will be located since Proposal 1 does not apply to established casino interests.

As one would expect, the leading opponents to Proposal 1 are those whose economic interests will be enhanced were it to fail at the polls in November.  These include those supporting the Agriculture Enhancement legislative package that would bring racinos to Michigan’s racetracks.  In a prior column (Issues Concerning Racino Development in Michigan), I expressed my support for this legislation, so I won’t dwell on my arguments for supporting it here.  But, at the heart of my support is that racinos would enhance competition in Michigan gaming which will ultimately benefit: the gaming public (consumers), more Michigan communities than currently realize economic benefits from being part of the gaming industry, the tourism and agriculture industries, and most probably those with existing vested interests in gaming.

The latter supposition may not sit well with existing casino interests, so I’ll share what I heard two of the most prominent executives in the gaming industry say at a panel discussion moderated by Larry King at the Global Gaming Expo.  When asked by Larry if they felt threatened by major new casino developments in California, which has been a primary source of Nevada’s casinos’ profits, both Gary Loveman, CEO of Harrah’s, and Terri Lanni, CEO of Mandalay, responded with a strong no.  The reasons they advanced for this position included: 1) competition is good for the industry, 2) growth is good for the industry, 3) the industry needs to focus its energy and political activities on matters such as excessive taxation of the industry rather than on creating barriers to competition which consume political capital and lower the public’s image of the industry.  To support their position that competition from Indian casinos in California were not hurting their businesses, both noted near record earnings from their Las Vegas properties.  Given that Las Vegas casino dollars were the primary fuel employed to curb expansion of Indian casinos in California, Lanni’s and Loveman’s responses to King’s question appear to represent a 180-degree change from the Las Vegas industry’s earlier position.  Maybe the competition wasn’t as harmful as expected?  Maybe they were successful in developing effective coping strategies?  Maybe there was enough unmet demand to keep Nevada casino profits growing as well as supplying a profitable market base for California’s new casinos.  Just maybe, existing casinos in Michigan will survive and prosper for similar reasons if racinos become a reality here?

Feel free to write to dholecek@msu.edu or call me at 517-353-0793 to share your thoughts about this topic.

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To view Michigan State University Extension’s 2004 Statewide Ballot Proposals bulletin, go to: http://www.msue.msu.edu/home/Proposal_04.pdf

Visit the Michigan Voter Information Center at http://www.sospublius.org/ to view a copy of the ballot you will see when voting on November 2. 

Michigan's Legislature at your fingertips. Search through this session's legislation, check your legislator's voting record, or even stay updated by email as bills move through the legislature at http://www.michiganvotes.org/.