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State may impose $100 million fee to move Gary casino to Borman Expressway site
2019 Indiana General Assembly

State may impose $100 million fee to move Gary casino to Borman Expressway site

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INDIANAPOLIS — The owner of the Majestic Star casinos may be required to pay the state a $100 million fee, and give up its second gaming license, in order to leave its Lake Michigan dock and open a land-based casino adjacent to the Borman Expressway in Gary.

The House Public Policy Committee significantly revised Senate Bill 552 Wednesday in ways that potentially limit the relocation plans of Spectacle Entertainment in Gary, deny Spectacle the chance to open a new casino in Terre Haute and slow Gary's ability to redevelop Buffington Harbor.

State Rep. Ben Smaltz, R-Auburn, the committee chairman who authored the changes, said his goal was not to reduce economic development opportunities for Gary, but to carefully and deliberately manage the continued development of Indiana's gaming industry in a way that benefits all Hoosiers.

Under the plan, Spectacle Entertainment would be permitted to open a new casino at an inland Gary location only if it pays $100 million to the Indiana Gaming Commission, and relinquishes its second owners license for the Majestic Star, which currently operates as a single gaming facility but under state law is considered two separate casinos.

"The licenses, in my opinion, and I believe it would be accurate to say, are the property of the state, that we are able to, if the location moves, change the conditions of those licenses," Smaltz said. "It's not as though we're going in and taking the licenses away where they sit."

State Rep. Todd Huston, R-Fishers, said it's unprecedented for an Indiana casino to be allowed to move off its dockside footprint, and permitting Spectacle to do so in Gary, and to use the second license in Terre Haute, would significantly boost the company's fortunes.

"There is value to that move," Huston said. "I think all the taxpayers, all the people of the state, should have the aspect to benefit if we believe that's the right thing to do from the public policy standpoint of the state."

Smaltz later admitted the $100 million fee is something of a placeholder that will be finalized as the proposal continues through the long legislative process ahead. There's also no specific use for the money included in the legislation.

John Keeler, Spectacle general counsel, said having to pay that fee, and surrender the second license, would "make it a little harder" to follow through on the company's plans to open a new $300 million Gary casino, including a 200-room boutique hotel, that Spectacle anticipates could annually generate $75 million in net new revenue for the state and create 400 additional jobs at the inland location.

"It's a pretty significant price," Keeler said.

Spectacle also might have to pay another fee of $50 million, or more, if it wants to reacquire the second license to open its planned $150 million Terre Haute casino, since the legislation directs the gaming commission to implement a competitive bidding process for the relinquished license.

On the other hand, Smaltz said the Majestic Star casinos simply could remain on Lake Michigan, and Spectacle then would not have to pay a fee connected to the inland move or give up its second license.

That, however, would derail Gary's plans to redevelop Buffington Harbor into an intermodal shipping and warehousing hub that uses Gary's water, rail, highway and air connections to offer businesses an alternative to moving goods through Chicago, plans that require the Majestic Star to leave its current site.

That vision already was on somewhat shaky ground as Smaltz told The Times that he is not planning to hold a committee hearing on Senate Bill 66, creating a state-city compact to lead, organize and oversee the redevelopment of Buffington Harbor.

If the compact legislation does not advance out Smaltz's committee it cannot receive a final vote in the House. Though, it would not be totally dead, since it did pass the Senate, and could be inserted in other pending legislation later in the process.

State Rep. Sean Eberhart, R-Shelbyville, questioned the need to attach a $100 million fee to the Gary casino move, since with it the state is poised to grow its gaming tax revenue, and may not see any benefits in Gary, or anywhere else, if things remain status quo.

"To me that's a tough one to swallow. That's an extreme amount of money," Eberhart said.

"If we had a private company, whether that's a manufacturer or some other private company, come to us and say, 'Hey, we want to invest $300 million on the Borman in Gary and we want to invest $150 million in Terre Haute,' we'd get out our checkbooks as the state of Indiana. We would be writing them a check. We would be giving them incentives. We would be begging them to make that investment."

"So it's kind of ironic that, instead, we turn around and we're asking for $100 million to make that investment," he added. "And this is a fee based on licenses that already exist. Both these licenses are in play."

In response, Huston insisted the fee is not a money grab. He said existing state law makes it clear that the licenses are a revocable privilege granted by the state and are not the property of the license holder.

"The state is heavily involved in the regulation of gaming and whatever we do has to be in the best interest of not just one particular community, it has to be in the best interest of the overall state," Huston said.

The revised legislation also eliminates a "hold-harmless" provision approved by the Senate that would have ensured other Northwest Indiana casino cities received no less than their 2019 gaming tax revenue if a new Gary casino in a comparatively better location attracted players that otherwise would gamble at the casinos in Hammond, East Chicago or Michigan City.

"I think if we try and make everybody harmless we're going to wind ourselves completely up in a ball," Huston said.

The committee also agreed to change the measure to eliminate the option of wagering on sporting events through mobile devices, forcing Hoosiers to visit a casino to bet on a game.

"I worry about having the tentacles of gaming in all of our communities and just becoming a pervasive way of recreating at great expense," Smaltz said. "I just see it as a very first step to a very large expansion to every community in the entire state of Indiana."

Ultimately, the panel voted 12-0 to advance the gaming proposal to the House Ways and Means Committee, led by Huston, for a further review of its financial impact on state and local revenue.

Huston said he expects the plan will change again in his committee, probably some more when its before the full House, and be further revised when members of the House and Senate meet in conference committee to craft a final, compromise proposal that must be re-approved by both chambers to advance to the governor.

"Nothing, absolutely nothing, from this point forward will be easy about this," he said.


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