CONGREGATE GAMING IN KENTUCKY
by Paul E. Patton

This essay is not an endorsement of casino gambling but rather an examination of some of the issues involved.

Casino gambling is a fact of life at five different locations on Kentucky’s border and at least one more riverboat license has been awarded. There can be little doubt that over time this activity will have an adverse impact on Kentucky state government revenue and horse racing and the horse industry in Kentucky. We can deal with the loss of state revenue in a variety of ways but dealing with the impact on horse racing and the horse industry is another matter. I believe that this expansion of what I choose to call congregate gaming, that is the congregation of people at one central location to game in a social setting (such as bingo and race tracks as opposed to the more solitary gaming possible through the Kentucky lottery), will have a dramatic negative effect on horse racing and therefore horse breeding and the thoroughbred industry in Kentucky. This is Kentucky’s signature industry and we must act to counter this threat.

Expanding congregate gaming in Kentucky has been mentioned as a possible source of the funds needed to make up the lost revenue which tracks and racing purses will incur as a result of the competition from the riverboats. It has been represented that this expansion could generate substantial new revenue for the state, something on the order of two hundred to three hundred million dollars a year. This additional revenue could be the source of the funds needed to preserve the horse industry as we know it and there would be substantial excess revenue to support a major new initiative to preserve the unique aspects of many areas of rural Kentucky.

If we are going to preserve the rural character of Kentucky, whether it be the Bluegrass, Black Mountain, the wetlands of Western Kentucky or the rich farmland necessary to sustain our agricultural economy, we must purchase the land or compensate the rural land owners for the value of their land if it were used for other than agricultural purposes. At the same time, if we are to continue to grow as a society, we must have the resources to allow our urban areas to grow within their existing boundaries; we must recycle the decaying inner-city; we must recycle our urban industrial sites.

To do this we must have a substantial stream of revenue dedicated to this cause, preferably by constitution mandate. If, for example, $300 million were realized from this activity and 25% were dedicated to preserving horse racing and if that 25% were divided equally between the horse owner (through the purse) and the track owner (which is the way the takeout from the handle is divided at most tracks) then $37.5 million will be added to the $90 million existing purses in Kentucky or an increase of 42% in purses. Or conversely, the handle could shrink 42% and the pay out to the track and to winning owners would be the same as it is now. Each track would get its share of the pool based on its share of the total statewide handle so the tracks would have an incentive to concentrate on promoting horse racing.

This split would provide $225 million a year to purchase development rights on farmland or purchase outright other valuable and threatened natural areas. This fund would also be used to revitalize our towns and cities and remove urban blight. This would make Kentucky the leading state in urban revitalization and rural preservation and make Kentucky truly unique in the nation.

The proposal which has been discussed most often is the placement of video lottery terminals at existing race tracks. While this needs to be one of the options to consider, there are others. Another option would be the location of a limited number of land-based casinos at the major convention/destination sites in the Commonwealth.

If congregate gaming is to be expanded in Kentucky then it could also be utilized to increase travel to Kentucky which will bring new money into the state. This would be the result of locating these facilities in or near major convention hotels. There is no question that the location of a casino at a hotel increases the desirability of the hotel as a convention site or, for that matter, a preferred destination for many discretionary travelers.

If Kentucky were to permit an expansion of congregate gaming, we should make it available to several areas of the state. We should also use it to give people in neighboring states the opportunity to frequent Kentucky establishments just as neighboring states presently use riverboat casinos or video lottery terminals at race tracks to attract Kentuckians to game in their state, creating revenue for them. Indiana, for example, generates almost half a billion dollars a year from its riverboat casinos to improve services to its citizens, much of it Kentucky money. Missouri, Illinois and West Virginia also permit casino-type gaming. The location of 12 to 14 gaming establishments at strategic locations, primarily at the major entrances to Kentucky (principally interstate entrances) and with the consent of the voters in each city affected, would treat all parts of the state fairly, and make this form of recreation conveniently available to all Kentuckians.

The adverse social impact of gaming is well known. The question is, would expanded congregate gaming increase this obvious ill within our society? This is a question which needs to be examined and debated. Those people who do not have the ability to control their desire to gamble within their ability to afford it as a recreational activity have ample opportunity to game to excess in any part of the state right now. The lottery, bingo, horse racing and casino gambling on riverboats, not to mention legal private gambling, are available to every Kentuckian. Would 12 or 14 more facilities located at convention-type hotels make the situation worse? We need to know the answer to that question. There is another question that needs to be addressed. Are other states providing services to their citizens using Kentucky money and taking Kentucky jobs and threatening Kentucky’s most famous industry?

I fully realize the controversial nature of this concept but these issues should be debated. This is one of those issues which I believe should be validated or rejected by the people through a constitutional amendment process. The legislature and the citizens of Kentucky need to make a rational decision based on the facts. Simplistic or emotional arguments will lead us to the wrong conclusion. The issues raised in this essay are too important to be ignored.