$5.2B wagered in machine bets at state's tracks

Southland bests Oaklawn in fiscal ’19, records show

Keith Ingram
Keith Ingram

Gamblers at the state's two racetracks wagered a total of $5.2 billion on slot and other betting machines and won $4.9 billion in prizes in the fiscal year that ended June 30, according to state records.

Players at Southland Casino Racing in West Memphis wagered $3.2 billion in total and won $3 billion in prizes in fiscal 2019, while those at Oaklawn Racing Casino Resort in Hot Springs wagered a total of $2 billion and won $1.89 billion in prizes, state Department of Finance and Administration records show.

In comparison, the Arkansas Scholarship Lottery reported revenue of $515.4 million from ticket sales and paying out $349.8 million in prizes in fiscal 2019.

The fact that more overall casino wagering occurs at Southland than at Oaklawn surprises some people in the state, said state Sen. Keith Ingram, D-West Memphis.

"Central Arkansas is not attuned to it over here, and they don't realize the impact that Southland brings to the table and tax revenue," he said. "When the [Mississippi] River in 2011 flooded Tunica, that business came to Southland, and it's just never went back to Tunica."

After deducting for prizes in fiscal 2019, that left $236.1 million in net revenue at Southland and $146.4 million at Oaklawn.

The state received $68.8 million of that in general revenue, with Southland paying $42.5 million and Oaklawn providing $26.3 million, according to state records.

[RELATED: See complete Democrat-Gazette coverage of casinos in Arkansas at arkansasonline.com/casinos]

The total amount wagered and won at Oaklawn and Southland on their legally described "electronic games of skills," and state and local government's share of the net revenue, has steadily increased since the 2005 Legislature authorized expanded electronic gambling at the two racetracks.

Under Act 1011 of 2005, "electronic games of skill" means "games played through any electronic device or machine that afford the opportunity for the exercise of skill or judgment where the outcome is not completely controlled by chance alone." For the average person, those were slot and poker machines.

Amendment 100 to the Arkansas Constitution -- approved by voters last November -- authorized the expansion of Oaklawn and Southland into full-fledged casinos and the licensing of a new casino apiece in Jefferson and Pope counties with the approval of local elected officials. The amendment also authorized sports wagering at the casinos.

Arkansas is the 25th state to legalize commercial gambling and the 41st state with legal casino gambling, including tribal casino operations, according to the American Gaming Association. Among Arkansas' surrounding states, there are commercial casinos in Louisiana, Mississippi, Missouri and Oklahoma and there are tribal casinos in Louisiana, Mississippi, Oklahoma and Texas, the association reported.

The commercial casino gambling sector in 2018 logged its fourth consecutive year of post-prizes gambling revenue growth, increasing by 3.5% to $41.7 billion, the association reported in June of this year.

State Sen. Will Bond, D-Little Rock, who voted in 2005 as a state representative for the measure that authorized electronic games of skill at Oaklawn and Southland, said last week that he was surprised by the amount of revenue growth since 2007 and was disappointed in the projected decline in state general revenue since adoption of Amendment 100.

Casino and lottery foe Jerry Cox said the growth in the tracks' machine wagering doesn't surprise him at all. "It's big business for them."

"A lot of money is changing hands and much of it stays in their hands unfortunately," said Cox, who is president of the Family Council. "They pull a lot of money out of the communities and they pull a lot of money out of the region and so that's the inherent problem with casinos. ... They were casinos really as early as 2007. We just didn't call them out, but now they are. Everybody knows what they are."

Besides the $42.5 million the state received from Southland's wagering machines, West Memphis received $3.54 million last fiscal year and Crittenden County received $1.1 million. The Arkansas Racing Commission's purses and awards fund received $2.3 million. Southland also set aside, per state law, $33.06 million to be used only for purses for live dog racing last fiscal year.

Beyond the state getting $26.3 million out of Oaklawn's betting machine net revenue, Hot Springs received $2.1 million in fiscal 2019, while Garland County received $732,110 and the Racing Commission's purses and awards fund received $1.46 million, records show. Oaklawn also set aside $20.4 million to be use only for live horse racing purses.

Under Act 1151 of 2005, voter approval of the expanded "electronic games" in Crittenden and Garland counties was required. Act 1151 -- sponsored by Sen. Bob Johnson, D-Bigelow -- narrowly cleared the Senate in an 18-14 vote before the House approved it in a 57-38 vote. Republican Gov. Mike Huckabee let the measure become law without his signature.

Racing in the state has reached a sort of crossroads, Johnson told the state Senate in March 2005.

He said at the time that the state was close to having to decide whether to have such an industry in Arkansas. He said his measure would allow the racetracks a chance to compete with those in neighboring states.

In November 2005, Huckabee said a veto of the bill wouldn't have "meant anything" because the Legislature would have overridden it. So, he allowed it to become law but, as a "symbolic gesture," he didn't sign it.

The first full fiscal year that Oaklawn and Southland offered gambling machines was in fiscal 2008. The amount wagered totaled $505.1 million, and gamblers won $473.8 million of that, state records show. That left net revenue of $30.3 million, and the state's general revenue portion totaled $5.6 million.

Information about total wagering on horse racing at Oaklawn, on greyhound racing at Southland, and racing at other tracks in 2007 and 2018 was unavailable last week, said Scott Hardin, spokesman for the state Department of Finance and Administration.

Southland's total live greyhound wagering totaled $68.8 million during the 2007 calendar year versus $112.2 million in 2018.

Oaklawn's total live horse racing wagering totaled $63.8 million in the 2007 season and $41.2 million in 2018, according to finance department records.

[Interactive graphics not showing up? Click here to explore Oaklawn and Southland figures » arkansasonline.com/915payout]

Oaklawn's total wagering for horse racing during the 2007 season totaled $175.6 million and $209.6 million in 2018, according to its 2019 media guide.

Southland spokesmen could not be reached Friday afternoon for figures on total wagering on greyhound racing for these years.

In fiscal 2019, the state collected $2.2 million in general revenue from horse racing at Oaklawn and greyhound racing at Southland, according to the finance department.

The gambling machines at Southland have benefited Arkansas because in 2018, the track had "more than 3.3 million guests and had an economic impact of more than $148 million, including payroll, taxes and charitable contributions," said Glen White, a spokesman for the New York-based Delaware North that owns Southland. "The majority of guests came from the Memphis market."

With the planned expansion and new hotel, we will be able to draw guests from other markets further out and increase our impact on the economy." The expanded gambling space will be complete in the late summer in 2020 and the new hotel six months afterward, he said.

In response to written questions submitted Wednesday about Oaklawn's casino operations, spokeswoman Jennifer Hoyt on Friday afternoon replied, "No comment from Oaklawn at this time."

With the approval of the state Racing Commission, Oaklawn became a full-fledged casino and added live craps and live blackjack tables, starting April 1. Oaklawn began offering sports betting, starting July 1. Oaklawn's casino has 56,000 square feet of gambling space and hopes to open another 28,000 square feet by the end of Januar.

After getting the green light from the Racing Commission to become a full-fledged casino, Southland offers more than 2,025 gambling machines and 40 live table games, including blackjack, roulette and craps, White said. Southland's expansion ultimately will increase the number of machines to 2,400 and as many as 60 live table games in the late summer of 2020, he said.

"We are working toward having a technology partner for sports wagering and do not have a timeline for launch at this time," he said.

As for fiscal 2020 and future years, "we are confident that we will see double-digit percentage annual growth over the next few years," White said.

The two racetracks also will have competition from possibly two new casinos.

In June, the Racing Commission cleared the way for the Quapaw Nation to build a casino in Pine Bluff. The Downstream Development Authority of the Quapaw Nation started construction on Saracen Casino Resort, a proposed $350 million casino project near The Pines Mall in Pine Bluff.

In Pope County, Cherokee Nation Businesses reapplied for a casino license on Aug. 22 with the backing of the Pope County Quorum Court, three days after the Racing Commission opened a 90-day window for accepting another round of bids for a license in Pope County. In the first window for applications, the commission in June rejected five applicants for the Pope County casino because none of them contained endorsements from current local elected officials.

Under Amendment 100, a casino's net gambling receipts will be taxed at 13% on the first $150 million and 20% on receipts above. Net casino gambling receipts are defined as "casino gaming receipts less amounts paid out or reserved as winnings to casino patrons."

Of that tax revenue, 55% will go to state general revenue and 17.5% to the state Racing Commission for purses for horse and greyhound racing. Eight percent of the receipts will go to the county and 19.5% will go to the city. If a casino is not in a city, then the local tax receipts will go to the county.

Before the amendment took effect, Act 1151 of 2005 taxed 18% of Oaklawn's and Southland's "electronic games of skill" net wagering machine revenue for state general revenue; and 1.5% for the city and 0.5 % for the county in which the facility was located. The law also required each facility to set aside 14% of net wagering machine revenue in a separate account to be used for purses for live horse racing or greyhound racing, plus pay 1% of the net wagering machine revenue to the Racing Commission's purses and awards fund.

Under Amendment 100, August is the first month in which Oaklawn and Southland paid a lower tax rate.

The state finance department reported $2.5 million in gambling tax collections in August, a drop of $3.1 million, or 54.9%, from a year ago, but the total was about $200,000 above the state's forecast.

State officials project to take in $31.2 million in fiscal 2020 in casino general revenue -- down from $69.7 million in fiscal 2019, which included several hundred thousand dollars in casino license fees beyond the state general revenue of about $68.8 million.

But the state's latest projections show that figure will grow to $55.9 million in fiscal 2021 -- with $24.7 million dedicated for state highway projects -- and steadily increase to $81.8 million -- with $50.6 million for highways by fiscal 2028.

"The focus of revenue forecasting in Arkansas is over 2-3 year periods only," said the state's chief economic forecaster, John Shelnutt. "In this context, a casino in Pope County is not considered in either the early or updated estimate."

"All the sites described in the Casino Amendment were evaluated for net wagering revenue volume with a conservative slant and conservative timelines," he said in a written statement. "Given the aggressive ramp up of EGS machines in recent years, it is reasonable to assume casino operations will not represent major new windfalls in state revenues. Local tax revenue distributions and new sites will represent major changes in gaming revenues selectively," he said.

Casino tax revenue beyond $31.2 million each fiscal year will be diverted to the state Department of Transportation under Act 416, which also will guarantee the department a minimum of $35 million from casino taxes, a restricted reserve fund and other sources.

Act 416 also will levy a new wholesale tax on gas and diesel fuel, which is projected by state officials to raise about $58 million a year for state highways. Also, increased registration fees for hybrid and electric vehicles is expected to raise about $1.9 million a year. The new tax and fee increases go into effect Oct. 1.

In total, Act 416 is projected by state officials to raise about $95 million a year for highways, and about $13 million more a year for cities and counties.

Sen. Terry Rice, R-Waldron, who sponsored the measure that became Act 416, said he's not comfortable linking highway funding and casinos, but that was what was settled on after multiple failed attempts by lawmakers to find money for highways. "I personally do not like that part of it."

Rice said it will probably be the "only potential sizable growth for highway money and, in that, I think it will be substantial."

"I think the casinos will produce the revenue that has been projected and very possibly more." he said. "I am not a big casino fan."

Cox said relying on casino revenue for Department of Transportation funds "is a terrible idea.

"Governments should never rely on tax revenues from things that are harmful to citizens. That would be alcohol, tobacco, marijuana, any kinds of gambling, because then if we are not careful that the state gets in a position where it wants those vices to pull more money out of people's pockets so the state can get its share and I think that's a very bad road to get on and be on because we ought to be encouraging our citizens to engage good behavior rather than bad," he said.

"I know people would say, 'Well, if you tax it like cigarettes, they are taxed at a very high rate, maybe that discourages smoking,'" Cox said. "I really don't know if it does or not. I guess it probably does with some people because it gets too expensive. But in the long-run, I wonder if the state is not in a position where we are dependent on some of these vices and the taxes they bring in."

Ingram, who is the Senate Democratic leader, said the choice is between casino revenue or no revenue to help with highways. "I think the potential for growth will definitely be on the rise."

Gov. Asa Hutchinson said Friday in a written statement that "Amendment 100 to our constitution requires the state to collect the casino revenue tax.

"At this point, it is not relevant to complain about tax revenue from casino gambling. That issue was decided when the voters of Arkansas voted to create four casinos in our state, and the voters set the rate of taxation."



Jerry Cox



Will Bond


Bob Johnson


The Sentinel-Record/CASSIDY KENDALL

Cecil Thronberry of Bryant places a wager using a new sporting kiosk on Aug. 29 at Oaklawn Racing Casino Resort in Hot Springs. Combined wagering at Oaklawn and Southland in West Memphis totaled $5.2 billion in the latest fiscal year, according to state records.

SundayMonday on 09/15/2019

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