BusinessTN

The year was 1989. Legislative intern Paul Krivacka was dining with then-State Sen. Steve Cohen. Five years earlier, Cohen had introduced his first lottery bill to the Tennessee legislature. As the man who would become the “Father of the Tennessee Lottery” talked about his legislative baby, the young college student had serious doubts.

“There was an overwhelming sentiment against it,” Krivacka says. “The reaction toward it was that it was dirty, evil and not something that people in the state wanted. About 20 years later, we had a lottery.”

Krivacka also could not have predicted that in 2004, as a Nashville lawyer with Adams and Reese, he’d be lobbying for legislation that would have ultimately allowed casinos—another reputation-marred activity—in Shelby County. Although that effort failed and Krivacka counts himself as one of the many Tennesseans who have a hard time imagining casinos within state borders, he has seen firsthand how the highly unlikely can come to pass.

“It may take another 20 years, but the perception of gambling is rapidly changing,” he says. “The World Poker Tour and gaming events are gaining popularity. These tournaments are more like sporting events than this seedy activity called gaming.”

In fact, poker isn’t the only gaming activity gaining widespread acceptance. The American Gaming Association (AGA), a trade group that represents commercial casinos, reports in its “2007 State of the States” that 82% of Americans say casino gambling is acceptable for themselves or others, and in general, Americans view gaming as a matter of personal choice. In the last couple of decades, more states have turned to casinos to boost tax revenue, create jobs, spur economic development and help pay for necessities, such as education and health care.

But does this shift in attitude mean that casino gaming is in Tennessee’s future? The answer is no. And yes. And both answers are shrouded by the lingering presence of the state’s geopolitical divide and its negative impact on Memphis, the Tennessee city with the most at stake in the debate.

The “All-in” Industry?
When it comes to casino gambling in the United States, Tennessee belongs to a distinct minority. Currently, 37 states are home to commercial casinos, racetrack casinos or tribal casinos. Eleven states have full-scale commercial casino gaming, 11 states allow full-scale gaming machines at racetracks, and 28 states have gaming on Indian lands.

One look at the revenue being generated and it’s easy enough to see why casino gambling has become so prevalent. In 2006, Indian-run casinos pulled in more than $25.7 billion. Because tribal governments are federally recognized as sovereign nations, states generally don’t receive tax revenue. Federal law does, however, necessitate that tribes establish a compact with the states within which they wish to operate. As a result, through the years some states have managed to establish (or are negotiating) agreements with tribes to receive a percentage of casino revenues. (In 2006, tribal governments generated $2.4 billion in state taxes, revenue sharing and regulatory payments.) Additionally, regardless of revenue, tribal gaming often generates jobs and economic development.

Yet, the real cash cows as far as states are concerned are the commercial casinos. Eighteen years ago, such endeavors were legal only in Nevada and New Jersey. This year, Pennsylvania became the 12th state to open its doors to commercial casinos. In 2006, before Pennsylvania joined the pack, the AGA survey estimated that commercial casinos in the United States contributed $5.2 billion in direct gaming taxes to state and local governments, a 5.5% increase from 2005 contributions. They earned $32.42 billion in gross gaming revenue (up from $16 billion in 1995), employed more than 366,000 people and paid $13.3 billion in wages. To put it in “smaller” terms, in May, the Associated Press reported that in the five months since opening, Pennsylvania’s commercial casinos had brought in $236 million, with about 55% going to the state in taxes.

Such figures exclude hybrid endeavors such as racetrack casinos, or “racinos,” which bring slot machines and video lottery terminals to horse and dog tracks. In 2006, with the addition of racino newcomers, Florida and Pennsylvania, and after a full year of operation with machines at tracks in Maine and Oklahoma, racinos generated $3.62 billion in gross gaming revenue and contributed $1.44 billion in direct gaming taxes to state and local governments.

Given the large amounts of money at stake and the tendency of politicians to drift toward large revenue resources, it’s likely that only the shine from the buckle of the Bible Belt has prevented more of a push for casino gambling. Since the 1990s, attempts to get casino gaming on the books, most of which have stemmed from West Tennessee, have been futile. The lottery, which Tennessee voters approved in a 2002 referendum, is the only form of legalized gambling taking place in Tennessee today, and many say that the legislature would not even have approved that had the clause forbidding “games of chance associated with casinos” not been included in the lottery amendment. Nonetheless, when it comes to casinos, Tennessee cannot be said to lack aspirants.