INDIANAPOLIS – Beer and barbecue aren’t the only draws to Daddy-O’s Bar & Grill in the small town of Paris, Ill., 15 miles from the Indiana border. The prospect of winning pulls in customers, as well.
Since the neighborhood bar installed five video gaming terminals in late 2012, patrons feeding $1 bets into the virtual slots have won more than $3 million, in payouts ranging from 40 cents to $500.
“We open at 7 a.m. and some days people are already lined up at the door,” said Rodie Neibarger, dayshift bartender and daughter of Daddy-O’s owner. “We get all kinds of people, coming from all over.”
The crowds are worrisome for officials back in Indiana, where tax revenues from gaming are plunging faster than predicted. Indiana’s take from gaming has been steadily dropping since the recession of 2008, but the trend appears to be accelerating with increased competition from neighboring states.
A July report from the state budget agency showed gaming tax revenues fell more than 50 percent faster in the first six months of this year than analysts predicted in December.
Ed Feigenbaum, who tracks casino revenue for his Indiana Gaming newsletter, said July was the weakest month for Indiana’s casinos in more than a decade.
“We thought we’d see some rebound this summer, but it hasn’t happened,” he said.
Competition intensified a year ago, when Ohio legalized casino gambling and the sparkling new $400 million Horseshoe Casino opened in downtown Cincinnati. It immediately siphoned customers from three southeast Indiana casinos, where business is still dropping by the double digits, according to the Indiana Gaming Commission.
Compounding the trend are 17,000 video gaming terminals in bars, restaurants, and truck stops throughout Illinois. There are even some in a suburban Chicago flower store and scuba shop, where merchants secured liquor licenses to make them eligible for the machines.
Since the video slots went online, gamblers have fed about $8.5 billion into the machines and won back more than $7.7 million.
That’s good news for Illinois, which collects 30 percent of the winnings as tax revenue to pay for roads and infrastructure.
But Illinois’ gain has been Indiana’s loss.
In July 2012, Indiana’s 11 riverboat casinos and two racinos – where casino games are offered in conjunction with racetracks – paid $45 million in admission and wagering taxes to the state. A year later, that number was down to $39 million. Last month, the state collected $32 million.
When Indiana’s casinos were booming, they produced nearly $1 billion a year in state and local taxes. Gaming tax revenues dropped to under $700 million last year.
Feigenbaum said the state’s gaming venues have been adding new amenities and lobbying the Legislature to loosen rules so they can add more gaming dollars.
But, he said, “There is no magic fix.”
Feigenbaum said the fast rise of video gaming in Illinois caught Indiana casinos off-guard.
“These things just seemed to come out of nowhere,” he said. “When you look at the money they’re bringing in in Illinois, it’s the equivalent of adding two new casinos. Nobody thought they would have this kind impact on Indiana.”
In Illinois, the gaming commission continues to approve video gaming terminals, even over the objection of that state’s casinos. An average of 850 machines are coming on line a month. Venues are allowed up to five machines.
That’s enough for Charles Hunter, commander of the Veterans of Foreign Wars Post 3601 in Paris. Since the VFW installed five gaming machines in its bar, which is open to the public, customers have wagered more than $2 million, and the post has made $177,000 from the machines. The state has taken $53,000 in taxes.
“On Friday and Saturday nights, there’s a line of people waiting at the machines,” Hunter said. “If you’ve got an extra buck or two in your pocket, it’s a handy way to gamble.”
“Just look at gas prices,” he said. “You can take the money you’d spend driving to a casino and put it into one of these machines and maybe make a few bucks.”
Indiana’s lawmakers have resisted doing much until now, given Gov. Mike Pence’s opposition to what he calls an “expansion of gaming” in Indiana. But declining gaming tax revenues may prompt them to act.
Later this summer, Rep. Tom Dermody, R-LaPorte, will convene a study commission to consider changes to the state's gaming laws that could boost casino attendance. Among the potential proposals: live dealers for the racinos’ games, poker games in the casino hotels, and the relocation of the casinos off their riverboats and onto land.
"There’s got to be some opportunity for agreement,” Dermody said. "If we do nothing, revenues are going to continue to decline. At some point, even if you don’t support gaming, you have to understand the impact of what losing these dollars mean.”