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High stakes competition

by Nora Edinger

REGIONAL EDITOR

CLARKSBURG -- The spokeswoman for the state Lottery Commission said West Virginia gambling interests are in fighting shape should Pennsylvania's General Assembly legalize slot-machine gambling -- as it appeared to be heading as of last week.

Libby White, Lottery Commission marketing director, said the key to protecting an industry that now contributes more than 10 percent of the state's annual budget is diversity. Specifically, she said the four West Virginia racetracks that likely would be hardest hit by expanded Pennsylvania gambling have pursued broader attractions in recent years.

"They definitely are a gambling destination," White said of facilities that already have racing, slot machines and other video lottery games. "(But) they're a tourism destination. They're a conference destination. ... They've positioned themselves well for any kind of competition."

The potential slots legalization in Pennsylvania would be the first serious competition to West Virginia's extensive gambling offerings.

To date, none of West Virginia's border states offers either slot machines or the video poker style games this state legalized in January 2002. The latter games also are legal at small "casinos" or "betting bars" that operate outside of any connection with the racetracks, a situation also unique, regionally, to this state.

In Pennsylvania, the Senate already has approved a revenue-enhancing bill that would allow slot-machine gambling at nine state racetracks. Last week, the House amended the bill to also allow two non-racetrack slot-machine sites, one in Pittsburgh and one in Philadelphia, according to the governor's office. On Friday, the House passed the governor-backed amended bill by a vote of 120-81, which must now return to the Senate for amendment approval.

While the Philadelphia Daily News reported last week that some Senate Republicans are balking at the amendment, a Wall Street Journal article predicted earlier this year that Pennsylvania would be the state in the U.S. most likely to expand legalized gambling this year.

The race is on

Pennsylvania's interest in expanding gambling and West Virginia's interest in protecting its gambling customer base are economic ones. The Pennsylvania proposal, for example, would bring a non-racetrack slots site to Pittsburgh to help fund a new arena for the professional hockey team. It would also bolster that city's budget.

For West Virginia, Lottery Commission figures show gambling now provides about $400 million in state revenue per year, or more than 13 percent of the state's $3 billion budget. Gambling revenue is tapped for everything from college scholarships to senior services to economic development.

White said, because West Virginia's population is relatively small, a portion of that revenue depends on residents from surrounding states crossing the border. That is one reason she does not believe the small video-lottery "casinos" that dot the North Central landscape would see much threat from slot machines in Pennsylvania.

"It's a very different market. The racetrack video lottery is a destination ... Your (non racetrack) video lottery is more localized in its market," she said.

She compared track/slots gambling to going to a large mall versus running to a local video-lottery retailer for more frequent gambling in the way one might go to the corner market.

White said West Virginia's mall-like tracks/slots locations will feel the heat from any slot-machine activity just across the border. But, it is something they were expecting and preparing for by pursuing a model developed in Las Vegas.

That model involves attractions geared at entire families, some members of which may not be on site for gambling. She pointed to Mountaineer Racetrack and Gaming Resort, one of two racetracks in the Northern Panhandle, as an example.

That facility, based in Chester, offers thoroughbred racing, 3,000 slot machines, 359 hotel rooms, a golf course, a spa/fitness center, a convention center, a theater, fine dining and entertainment, according to Mountaineer spokeswoman Tamara Pettit.

"We logically expect competition. The long-term impact of the competition on the (racetrack video) lottery depends upon the services and not just on the gambling," White said. "I don't think that an entity that positions itself purely as a gambling site could survive long."

She said diversification plans have also occurred at the other Northern Panhandle racetrack and at two more in the Eastern Panhandle and near Charleston.

Caryn Gresham, spokeswoman for the West Virginia Division of Tourism, said the tracks have also developed vacation packages with nearby attractions. The division is entirely supported by gambling proceeds from the tracks.

"They see the value of where they fit into the community and where other community businesses fit with them," Gresham said.

On the flipside of any new competition from Pennsylvania, Mountaineer's Pettit noted that MTR Gaming Group, Inc., Mountaineer's parent company, is making a move of its own. Ted Arneault, MTR's president and chief, has acquired one racetrack license in Erie, Pa. and is pursuing another near Pittsburgh. Any slots locations in the latter area would be the most immediate competition to Mountaineer.

Pettit indicated both tracks would add slot machines if they become legal in that state. Pennsylvania, as well as several other states, refers to such mixed gambling sites as "racinos."

Arneault, who declined to be interviewed for this story, has also suggested that West Virginia legalize casino-style table games at racetracks to enhance their allure. That proposal has not been seriously considered by the state Legislature to date.

Other competition

While Pennsylvania may be the most likely border state to raise the stakes, it is not the only one that has or is considering new forms of gambling as a revenue boost.

Ohio, for example, recently considered slot machines, according to Lottery officials there. That state's governor threatened to veto any slots bill that did not require a state-wide referendum, however, and nothing has passed to date.

Maryland has considered expansion but has not acted on it.

Jennifer Cunningham, communication specialist with the Kentucky Lottery Commission, said there is scuttlebutt in that state about expanding gambling to contend with a new Lottery effort by its neighbor, Tennessee.

A Virginia Lottery official said he was unaware of any expansion plans in that state.

Regional editor Nora Edinger can be reached at 626-1447 or by e-mail at nedinger@exponent-telegram.com