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Voters put gaming on
hold (for now)

Nov 9, 2004 7:14 AM

Even though voters last week rejected eight proposals to expand gaming nationwide, experts said the industry experienced no serious setbacks and its long-term prospects were still positive.

"All in all, we feel the results were a net neutral to modest positive for gaming," said Deutsche Bank analyst Marc Falcone.

Falcone added that two measures that were approved by voters — expansion of slot machines in Oklahoma and Florida — will benefit slot makers such as IGT and Alliance, and even the failure of the California initiatives still leaves the door open for Indian tribes to renegotiate their compacts and expand their gaming offerings.

"We’ll likely see more gaming in the U.S. over the next five to 10 years," Falcone said.

But for now, proposals to expand gaming were defeated in California, Iowa, Nebraska, Washington and Michigan, as well as the tiny U.S. territory of Guam in the north Pacific.

Here is a recap of last week’s ballot measures:

”¡ California: Voters rejected two separate propositions, both of which were opposed by Governor Arnold Schwarzenegger. One proposition would have legalized up to 30,000 slot machines at 11 ard clubs and five racetracks if tribes failed to agree to a 25 percent gaming tax. The other would have allowed tribes to offer unlimited slots in exchange for paying a state gaming tax of about 9 percent.

Gov. Schwarzenegger opposed the measures because they would have undermined his efforts to renegotiate compacts with California tribes. So far, the state has rewritten compacts with about half a dozen tribes.

”¡ Iowa: Voters in three rural counties rejected casino referendums. (Casinos are already approved in seven Iowa counties.)

”¡ Nebraska: Voters defeated two proposals — the first was a constitutional amendment that would have legalized two casinos anywhere in the state; the second would have allowed for two casinos in Omaha and 4,900 slot machines in bars, keno parlors and Nebraska racetracks.

The election results were good news for Ameristar and Harrah’s, which both operate casinos in Council Bluffs, Iowa, which is across the river from Omaha. However, Las Vegas Sands (which owns The Venetian) and Boyd Gaming’s Coast Casinos were both in the running for a Nebraska gaming license if the casinos were legalized.

”¡ Washington: Voters rejected a proposal to legalize up to 18,225 slot machines at non-tribal businesses such as taverns and bowling alleys.

”¡ Michigan: Voters approved a measure that requires any future gaming expansion, including the legalization of racinos, to be approved by voters. Exempted from the proposition are three existing casinos in Detroit.

By making it more difficult to legalize racinos in Michigan, racetrack operators such as MTR Gaming (Jackson Raceway) and Magna (Great Lakes Downs) will have a more difficult task getting slots approved for their tracks.

”¡ Guam: Voters soundly defeated a gambling initiative that would have allowed for casinos on the island territory, about 1,000 miles northwest of Hawaii.

Gambling opponents said the rejection of new gaming was a possible "tipping point" in the fight against gambling.

"These results indicate there is a backlash of ”˜enough is enough,’" said Tom Grey, executive director of the National Coalition Against Legalized Gambling. "The question is not about whether people gamble. It’s whether we put it on Main Street and call it good."

In California, the defeat of the two initiatives came just five years after the landslide that legalized Indian casinos.

"This may well mark a turning point, a seismic change in attitudes toward gambling," said Harvey Chinn, executive director of the California Coaltion Against Gambling Expansion.

Most Wall Street analysts, however, agreed that the forecast for gaming was still favorable. Steven Kent of Goldman Sachs said the election results would have "minimal impact" on stock prices.