Donations, issues, candidates intersect this fall

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Published: August 11,2003

Count on impressive maneuvering by political candidates and casino executives as political donations, gaming issues and campaigns intersect this fall.

Even though both gubernatorial candidates — Democratic Gov. Ronnie Musgrove and Republican contender Haley Barbour — have both pledged not to take donations from casinos, they have collected contributions of more than $100,000 from casino executives.

According to the latest contribution reports, the Musgrove camp has tallied around $73,150, including $40,000 from Las Vegas highroller and Horseshoe Casino chief Jack Binion and $25,000 from the Mississippi Band of Choctaw Indians (MBCI), which has, among other businesses, the Pearl River Resort, home of Silver Star and Golden Moon casinos.

Other Democratic Party contributors include Cathye Ross, vice president of marketing for Grand Casino ($2,500), Bayview Partners, developers of the proposed Rock-n-Roll Casino in Biloxi ($2,500), Hollywood Casino general manager John Osborne ($1,000), Casino Magic general manager John Ferrucci ($850), Beau Rivage general manger Jeff Dahl ($700), Grand Casino Gulfport former general manager Joe Billhimer ($600) and Copa Casino executive J.R. “Rick” Carter ($250).

The Barbour camp has received at least $29,000 from casino industry executives, including $25,000 from MBCI, $2,000 from American Gaming Association CEO Frank Fahrenkopf Jr., who is a close personal friend, and like Barbour, is former chairman of the National Republican Party, $1,500 from Treasure Bay Corporation CEO Bernie Burkholder, $300 from Grand Casino Gulfport former general manager Joe Billhimer, the only casino executive to contribute to both camps, and $200 from Grand Casino executive James Hoskins.

“We don’t have a political PAC, so political contributions are primarily left up to the decision-makers at each of the individual companies and, like any other industry in the state, you’ll see a variety of participation,” said Andy Bourland, executive director of the Mississippi Gaming Association. “I know there’s a keen interest in the race for governor, and clearly committee chairmanship races — finance, appropriations and education — have more of an impact on potential gaming matters.”

Denise von Herrmann, dean of the University of Southern Mississippi Gulf Coast, said casino executives have made “defensive contributions” and want to make sure that “no matter which way the political winds blow, they’re not considered out of favor.”

“They won’t greatly favor one side over the other until they’re quite confident who’s going to emerge the winner in a number of statewide races,” she said. “They’re being careful and cautious as in any other industry. In Nevada, you have a history of the industry carefully supporting both sides in any hotly contested race and strongly supporting their friends when their friends are in state seats.”

Robert Ingram, executive director of Greenwood-Leflore-Carroll Economic Development Foundation, who co-authored a comprehensive casino study when he was executive director of the Center for Community and Economic Development at USM, said in the long run, political donations are a non-factor.

“The money isn’t going to change the way Musgrove or Barbour feel about the casinos,” he said. “Whichever one wins isn’t going to do anything that would change the laws to benefit the casinos anymore than now, and I don’t think any candidate is going to get enough casino money to change his mind about the industry. It’s not so much what you gain from donations, but making certain that you aren’t going to be hurt.”

The potential to increase gaming taxes is the primary issue casinos are concerned with in the upcoming legislative session, said Bourland.

“We believe it would have not only detrimental effects on the gaming industry, but literally would put several companies out of business rather quickly,” he said. “The Legislature’s own studies specifically suggested that if there was a 3% or 4% increase in gaming taxation, it would create a tremendous bump in the tax rate, would literally put six or seven companies out of business and would unemploy 5,000 to 7,000 people.”

The impact a gaming tax hike would have on suppliers and vendors, Mississippi companies with longstanding relationships with the industry, seems to go unnoticed, said Bourland.

“The tax increase potential has a ripple effect that doesn’t just affect gaming, but also the business community in general,” he said.

The free market system that Mississippi modeled after New Jersey and Nevada fosters a relatively pro-business climate, said Bourland.

“The Legislature has created one of the healthiest gaming jurisdictions in the country, firm but fair,” he said. “All you have to do is look at some of the other jurisdictions that have tried to go through tax increases and you can see the dramatic impact it’s had.” (For the last two years, Indiana has raised gaming taxes, resulting in immediate casino employee layoffs and investment cutbacks because of implications from the tax increases.)

As long as state lawmakers understand that gaming revenue gains are offset by unprecedented money spent on out-of-state advertising and marketing to bring visitors to Mississippi, there should be no problem, said Bourland.

Von Herrmann, co-author of the gaming study completed in 2000, said researchers initially discovered that a substantial number of properties would be forced into bankruptcy if the gaming tax was increased because the operating margins at the time of the study averaged 2% to 3%.

“If those margins have narrowed and taxes increase, then the number of bankruptcies would increase,” she said. “After all the changes in tourism habits since 9/11, the economy and maturation of the industry, I suspect there’s been a lot of change in the gaming market itself.”

The gaming industry isn’t asking for incentives, just to remain status quo, said Beverly Martin, executive director of the Mississippi Gulf Coast Gaming Association.

“This is an industry that, unlike Nissan or others, hasn’t received one tax break from the state,” said Martin. “Although some think we have a low tax rate, for every dollar we spend on casino facilities, we have to invest the same amount in other land-based facilities. While it’s not a direct tax, it is an investment into economic development of the community.”

Casinos have raised the bar for area businesses, much to the benefit of its employees, said Martin.

“People in this area were sorely lacking health insurance benefits before the gaming industry arrived,” she said. “Restaurant workers were rarely able to get any insurance because the restaurants couldn’t afford it. When the casinos came in and offered insurance, restaurants, which were getting more business, could afford to offer it, too. Competition for workers brought about offerings from other small businesses, too. That would be jeopardized if the gaming tax is increased.”

Education is a secondary, but very vital, issue concerning the casino industry, said Bourland.

“The industry hasn’t lobbied hard on that matter,” he admitted. “We certainly have supported legislators who have come from gaming areas and have supported strongly the idea that state institutions should be allowed to teach gaming management courses. I find it terribly ironic that we can’t create an educational situation for our own residents to take advantage of one of the economic engines of the state and to help prepare them to better move into senior level positions, while at the same time a university from out of state (Tulane) or a private school can set up those
courses and make money from it.”

Von Herrmann, who has researched the gaming education issue, said casinos want people with business degrees who have exposure to the gaming environment and its peculiarities.

“The industry is asking for very li

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