Arkansas Embraces Legal Gambling

Oklahoma tribes play large roll in passage, but might not benefit equally

Two years ago, when the religiously conservative state of Arkansas voted to legalize medical marijuana, lobbyist Don Tilton asked himself why—unlike the surrounding states of Oklahoma, Missouri, Kansas and Mississippi—Arkansas refused to legalize casino gambling.

“We legalized medical marijuana, something none of the surrounding states would do,” Tilton says. “Yet unlike the other states, we refused to legalize casino gambling.

“I thought, ‘What the hell’s the deal here?’”

A 2005 ballot initiative allowed “skilled-based” slot machines at Arkansas greyhound and thoroughbred racetracks. But frequent ballot initiatives to permit casino gambling encountered the wrath of the state’s moral majority.

Sensing a changing public attitude toward “sin industries,” Tilton telephoned John Berrey, chairman of the Quapaw Nation of Oklahoma. Tilton’s firm, the Capital Group, was under contract by the Quapaw to purchase the tribe’s ancestral lands in southeast Arkansas.

Tilton told Berrey—whose tribe operated two casinos on its northeast Oklahoma reservation—that the time might be right to float another casino gambling ballot initiative in Razorback country.

“I laid out my thinking about why it might be the right time to consider gambling in Arkansas,” Tilton recalls. “John Berrey is a very shrewd man. He got real quiet. Finally, he said, ‘Is that it?’”

“That’s the best I got today,” Tilton replied.

“Well, let’s get started,” Berrey said.

Both the Quapaw and Cherokee Nations were anxious to protect their northeast Oklahoma gambling industries from encroachment from potential casino development across the Arkansas state line.

 

Election Victory

Thanks largely to an initiative campaign funded with nearly $6 million from the Quapaw and Cherokee tribes, Arkansas citizens in November voted 54 percent to 46 percent to adopt Ballot Issue 4, a constitutional amendment allowing four casinos in the state.

Ballot Issue 4 designated that two casino licenses would go to Southland Gaming & Racing, a greyhound dog track in West Memphis, and Oaklawn Racing & Gaming, a thoroughbred track in Hot Springs.

Two other licenses would be awarded to Jefferson and Pope counties, near the communities of Pine Bluff and Russellville.

The casinos would operate as commercial ventures—subject to state taxes and regulations—and not gambling under the Indian Gaming Regulatory Act, by which tribes are exempt from taxation and given primacy to regulate their casinos.

“The people of Arkansas made it clear they wanted to improve the state’s economy, create new jobs and keep money in Arkansas,” Berrey says. “We are grateful for the support of the tens of thousands of Arkansas voters who made the choice to bring expanded casino gaming to the state.

“Arkansas is our homeland and we are eager to move forward, working together with the local government in Pine Bluff and Jefferson County to establish a casino resort that honors our legacy and provides opportunity for the region.

“This casino resort will be a source of pride for the community. It will create hundreds of jobs and generate millions of dollars in taxes that will help improve the city and county’s infrastructure and quality of life.”

Berrey and the Quapaw’s Downstream Development Corporation are looking to open a casino and 12-story hotel in Pine Bluff as early as 2020. They have already received letters of support from Pine Bluff Mayor Shirley Washington and the Jefferson County judge, which in Arkansas serves as the county executive.

Mayor Washington pledged to make the economically struggling municipality a tourist destination. A Quapaw casino will help do the trick.

“I’ve been impressed by the professionalism and loyalty to our community that I’ve seen from Downstream and the Quapaw Nation,” Washington said in a letter of endorsement.

“Through our discussions over the last several months, it’s clear that Downstream wants to be a key partner in the growth and development of our city.”

The Quapaw have a strong relationship with Pine Bluff residents, acquiring property in what were the nation’s ancestral lands before a forced removal to Oklahoma in the 1800s. Quapaw Chief Saracen is buried there.

“Our strategy has always been to try and get back to where we’re from,” Berrey says. “It’s a mandate from the tribe to get back home.

“Pine Bluff is a beautiful, old Arkansas city. It’s gone through some rather hard times. We found a welcome group of people there. We’ve been cultivating our relationship for a long time.”

Although Ballot Issue 4 allows local officials to write more than one letter of support, Berrey is convinced promised exclusivity from municipal and county officials will ward off casino proposals from other potential tribal and commercial casino operators.

“There might be some attempts from other casino companies, but we’re not really concerned,” Berrey says. “We are viewed by local officials differently from commercial operators.

“We have a lot of support. We have community involvement. We made a lot of friends there. There’s a lot of excitement.”

Ballot Issue 4 requires a minimum investment of $100 million, a substantial sum for a city in need of jobs and economic development.

“What I know about the people in Jefferson County—the elected officials there—is that they are desperate for jobs,” says state Rep. Doug House of North Little Rock. “They need something to revive their local economy and the city of Pine Bluff and Jefferson County.

“People have been noticeably and steadily leaving for the last 20 years. Crime is up. And so they’re hoping what happened in Tunica County, Mississippi will happen there,” House says of the economic explosion casino gambling created in the once-impoverished region of the Magnolia State.

 

Cherokee Nation Challenge

The Cherokee Nation, meanwhile, has aspirations of building a casino resort near Russellville in Pope County, not far from where the tribe operates nine casinos in northeast Oklahoma. The tribe failed in attempts to get an initiative on the 2016 ballot.

“Arkansas, being an adjacent state, would be a logical extension of our operations here in Oklahoma,” says Chuck Garrett, vice president of Cherokee Nation Businesses, the economic arm of the tribal government with health care, aerospace, technology and other enterprises.

But developing a casino in Pope County is problematic.

Pope County voters approved an ordinance requiring county officials to hold a referendum before issuing letters of support for a casino in the county. The ordinance is likely to be challenged in the courts.

“That’s a lingering question, whether state law trumps a local ordinance,” says Scott Hardin, director of communications for the Arkansas Racing Commission and Department of Finance and Administration, which will regulate the fledgling casino industry.

If the Pope County ordinance is upheld, it could be difficult for casino developers to get local approval of a casino referendum.

Although Issue 4 got the approval of 54 percent of the voters statewide, more than 60 percent of Pope County citizens rejected the initiative.

“That’s going to be a hard sell,” Tilton says of Cherokee and other potential casino operators hoping to develop a casino resort in Pope County.

“It’s questionable whether Pope County will get a casino,” House says. “It’s pretty easy to say the population there does not want it.”

But Pope County voters who rejected Issue 4 were primarily concerned with maintaining local control. Garrett is optimistic the Cherokee Nation can convince Russellville of the benefits of a casino in generating jobs and economic development.

“I don’t think you can necessarily conclude the Issue 4 vote represents their final opinion on whether they want a casino and the economic development that results,” Garrett says. “When all the facts are presented, a casino might be a very compelling economic opportunity.”

Cherokee Nation’s impact on the Oklahoma economy exceeds $2.03 billion, according to Oklahoma City University economist Russell Evans, including nearly 18,000 jobs and $785 million in wages and benefits.

“The Cherokee Nation is here to improve the lives of Cherokee people, and doing so improves the lives of all Oklahomans,” Cherokee Nation Principal Chief Bill John Baker says.

“Our focus is creating jobs, investing in vital infrastructure, building homes, improving health care, supporting education and making a difference in the lives of children. Those activities aren’t just an investment in Cherokee Nation. It is also an investment in Oklahoma.”

 

Competition is Likely

Ballot Issue 4 gives Southland in Crittenden County and Oaklawn in Garland County exclusive rights to casino licenses.

And the Quapaw have exclusivity provisions in their endorsement letters from Jefferson County and Pine Bluff officials.

But the constitutional amendment permits county and municipal officials to issue more than one letter of support, allowing potential competition for licenses.

“We have received calls from groups out of Las Vegas” along with tribal operators in Louisiana and commercial companies in Mississippi, says attorney Alex Gray of Driving Arkansas Forward, a group that worked for passage of the ballot initiative.

“There is a significant amount of interest in the two new licenses” in Pope and Jefferson counties, Gray says.

“You’ve got the entire gambit. You’ve got large, corporate casino companies with multiple locations in multiple states. Then you’ve got tribes. There are a lot of different groups looking into opportunities in Arkansas.”

“We do expect to get multiple applications,” Hardin says of state regulators. “From what is being reported, there is certainly a lot of interest from a variety of companies. We are hearing reports that companies are expressing interest in both Pope and Jefferson counties.”

Operators will be required to pay a $250,000 license application fee and invest at least $100 million in their casino development. They will be levied a 13 percent tax on the first $150 million in net gambling receipts, rising to 20 percent on any additional income.

Oaklawn Racing & Gaming has announced plans to spend more than $100 million over the next two years to build a 200-room hotel and expand its casino by 28,000 square feet. Southland also plans to expand its operations.

Southland and Oaklawn opposed prior ballot initiatives to launch a casino industry in Arkansas, partnering with religious leaders to defeat efforts to get the issue on the ballot.

But Southland this year helped fund Ballot Issue 4, comfortable that limited gambling and spacing operations in four “quadrants” of the state would limit competition. Oaklawn took a neutral position on the initiative.

“Since this was a question for voters, Oaklawn took no position prior to the election,” Jennifer Hoyt, media relations manager, said in a statement.

“Now that voters have spoken, Oaklawn will move forward as legislation and regulation permit, and continue with preparations for the 2019 live racing season.”

“Southland Gaming & Racing is pleased to have the opportunity to enhance our entertainment and gaming offerings in West Memphis,” Corporate Communications Director Glen White says.

“We thank the voters for their trust in us. We will increase our investment, provide more jobs and continue to offer a great experience for our guests.”

Meanwhile, Family Council President Jerry Cox says his group will continue to oppose casino gambling.

“This is a bad deal for Arkansas,” Cox says. “These casinos are going to be festering sores in our communities. They’re going to pull money out of the local economies and plunge some of our poorest families deeper into poverty.

“Out-of-state gambling interests spent millions of dollars to persuade Arkansas voters to approve this amendment, creating a casino monopoly for the Cherokee and Quapaw Indian tribes along with owners of casinos in Hot Springs and West Memphis.”

House says there are sacrifices to be made in launching a statewide casino industry.

“It will help the local economy to a certain extent,” House says. “But there is a noticeable social cost. We know that with pretty good certainty.

“People gamble away their paychecks on Friday afternoons, and consequently there are ramifications for the family.”

 

Revenue Shortfall Anticipated

The Arkansas Economic Development Institute, in a study commissioned by Driving Arkansas Forward, predicts that Ballot Issue 4 can generate $5.8 billion in statewide economic activity over a period of 10 years.

The study says the casino industry would create 6,000 jobs and $39 million in annual state and local revenue.

But the Department of Finance and Administration anticipates a $36 million revenue shortfall in fiscal years 2020 and 2021 as licenses are issued and the casino industry is under development.

The shortfall may grow if the Pope County ordinance is upheld by the courts.

Slot machine revenue from Southland and Oaklawn amounts to about $64 million a year.

“We anticipate that revenue will drop significantly over the next couple of years due to the timeline of other casinos getting up and running,” Hardin says. “That will probably take at least a year and a half.”

In an effort to speed up the approval process, Ballot Issue 4 set June 1 as the target date to issue licenses.

Unlike many states turning to casino gambling as a tool to alleviate budget deficits, the Arkansas legislature did not play a role in the Ballot Issue 4 campaign.

It was instead an alliance of tribes and racing interests, local officials and real estate investors.

“The state did not come to us and say, ‘Would you run this? We need additional tax revenue,’” Gray says of Driving Arkansas Forward. “This was really something talked about over a slice of pizza and a beer at lunch. We decided we’d go for it.”

Driving Arkansas Forward promoted a message of economic development and tourism. Organizers urged casinos as a means of keeping gambling revenues from flowing to surrounding states.

“They’ve been preaching for years to keep the money at home,” House says.

“Local people would be hired to work in the casinos. They’d be given jobs. Local suppliers would be contracted to provide goods and services. Local builders would build the facilities and so on and so forth.”

“There had been several attempts over the years” to legalize casino gambling in Arkansas, Tilton says. “But the timing just wasn’t right.”

With the nationwide spread of commercial and tribal government casinos, anti-gambling advocates in Arkansas and elsewhere have failed in attempts to link gambling with crime and moral corruption.

“I think you’ve seen the normalization of a lot of things that 10 years ago would have been insanity,” Berrey says. “I think it’s the changing times. The whole United States is becoming more tolerant of what some people thought were sinful activities.”

“We figured the timing was right,” Tilton says. “We had good polling. We developed our message off the polls. We educated people exactly what this meant for the state of Arkansas. We made it about jobs and economic impact.

“In our polling we found many people—more than half—as born-again Christians. They are a considerable bloc.

“But many of these same people said, ‘How can we turn our backs on jobs? How can we turn our backs on economic development?’”

Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at dgpalermo1@gmail.com.

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