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Lawmakers question casino expansions and new laws

Thursday, September 20, 2007

INDIANAPOLIS (AP) -- A top lawmaker suggested Wednesday the Indiana Gaming Commission overstepped its bounds by allowing two riverboat casinos to proceed with large expansions by becoming more like buildings instead of boats.

Democratic state Rep. Scott Pelath of Michigan City and some other lawmakers also criticized new agency rules that require the state to consider seeking money or other benefits from those seeking to sell their interest in a casino or pari-mutuel horse track.

Pelath, chairman of the Administrative Rules Oversight Commission, told gaming commission officials that the General Assembly "has always been pre-eminent in creating policies" on legalized gambling but in these matters was left out.

Ernie Yelton, the gaming commission's executive director, said new construction standards allowing the casino expansions and the new ownership transfer rules were allowed under state laws.

The gaming commission adopted new building standards recently because the U.S. Coast Guard said it would no longer be certifying riverboat casinos in Indiana. Argosy Casino in Lawrenceburg and Horseshoe Hammond in Lake County are using the new standards to greatly expand their casinos to be more like buildings.

But Pelath said the expansions began before the new state standards were adopted.

"I just don't believe they would have embarked on these buildings without having been given confidence on some level that they were going to end up being able to do the projects they envisioned," he said.

Although state law no longer requires casinos to cruise, they still must be self-propelled. Operators of the expanding casinos say they will be, and Yelton has said that meets state law requiring casinos to be boats and not barges. Barges would allow gambling companies to build larger casinos more cheaply.

Legislators have considered allowing barges in the past in exchange for major fees but have not done so. But Pelath said the expanding casinos fit his description of a barge.

"A barge is what a barge does, which is sit there and be real big," he said. "And whether you strap a motor onto the back of it, it doesn't make it not a barge."

Pelath also said that such major expansions could affect the balance of the gambling market, and the General Assembly should have been the body to decide if they could proceed.

Yelton said the commission warned the companies that they were taking a risk by starting their expansions before the new building standards were adopted. The new rules are largely based on Coast Guard standards, he said, not on the expansion plans.

He also said that state law did not limit the number of slots or other gaming positions on casinos on Lake Michigan and the Ohio River, and if lawmakers wanted such restrictions, they could enact them.

Some lawmakers also are irked at emergency rules adopted by the Indiana Horse Racing Commission and gaming commission that require the state to consider seeking money or other benefits before allowing ownership interests to be sold.

Gov. Mitch Daniels proposed the rules after the General Assembly enacted a law this year allowing each of the state's two pari-mutuel horse tracks to have 2,000 slot machines in exchange for a $250 million payment.

Daniels said he did not think Indiana government was getting enough money for the racetrack slot licenses, and rules should be created to ensure that the state benefits if track owners get a "windfall" for selling their interests. He said the law does prohibit majority track owners from selling their interests for five years.

LHT Capital recently decided to sell its minority interest in Indiana Downs in Shelbvyille, and as part of the new rule, must pay the state $9 million that will be used for some form of property tax relief.

The new rules are temporary now but gaming officials are seeking to make them permanent. They also apply to riverboat casinos.

Yelton said he agreed with Daniels' philosophy behind the rules -- that the state should benefit if a casino or track owner makes a significant profit for selling its ownership in a license that allowed it to make great sums of money.

But Sen. Lindel Hume, D-Princeton, said it was "on the borderline of extortion." And Pelath said it violated legislative powers.

"I'm absolutely certain we didn't delegate taxing authority to the gaming commission, and it wouldn't even be constitutional if we did," he said.

Pelath said he would talk with others on his panel about possible legislation to address their concerns in the 2008 session.

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