justin.schneider@heraldbulletin.com

High-priced amendments could cripple slot machine legislation before it ever gets out of the gate.

On Tuesday, the Tax and Fiscal Policy committee of the Indiana Senate tacked on some costly amendments to House Bill 1835, which would allow slots at Hoosier Park in Anderson and Indiana Downs in Shelbyville. By a 9-3 vote, the committee reduced the number of slot machines to 1,500 per facility and increased a one-time licensing fee to $400 million.

Will Cummings is president of Cummings Associates, an East Coast consulting firm specializing in racing and gaming. Early on, he worked with Hoosier Park officials to determine the economic impact of the bill.

He said the number of slots, the tax rate and the sum of the licensing fee are the most important indicators of success. Now two of the three have changed.

“The original bill started out at $75 million (for licensing),” said Cummings, who projected total revenues for the two facilities at $533 million annually. “If that fee gets too high, the racetracks won’t have a lot of money left. I would be concerned.”

Indiana’s horse racing community also sees cause for concern.

The industry has lobbied for years to bring casino-style gaming to Indiana’s pari-mutuel tracks, which would increase purses and benefit owners, trainers and breeders while creating jobs and tax revenue. But the proposed fee would be hard for the struggling industry to swallow.

“We’re extremely glad to have a bill moving forward — that hasn’t been the case in recent years,” said Michael Brown, executive director of the Indiana Horse Racing and Breeding Coalition. “We recognize that there are some problems with the bill as amended, but there is a long way to go, yet. We’re hoping to communicate some of the difficulties we see with the bill.”

Brown said legislators understand the importance of the horse racing industry, which has a presence in each of Indiana’s 92 counties. But the licensing simply falls out of line with standards set in other states.

“Four-hundred million is considerably on the high end of anything we’ve seen in other states,” Brown said.

The amendment to increase the licensing fee was proposed by State Sen. Luke Kenley, D-District 20. State Sen. Tim Lanane, D-District 25, said Kenley wanted to ensure the state received full value for the license, not creating an indirect subsidy for slot machines operations.

“I think that fee warrants very serious consideration,” Lanane said. “I think (Kenley) wants to make sure that, if we’re going to sanction that kind of activity, that we get fair market value for the license. We need to reach a balance as to what is the fair value of the license and where you reach the tipping point.”

Lanane said the bill is eligible to go before the Senate as early as Monday. As sponsors of the bill, he and Sen. Robert Jackman, R-District 42, can control when it is called.

Indiana-owned Centaur Inc. became the sole owner of Hoosier Park last month when the company bought out the interest of Churchill Downs Inc. Centaur would be responsible for paying the licensing fee and for costs related to installing slot machines.

“The facility could not accommodate 2,500 slot machines,” said Rick Moore, president of Hoosier Park. “But the faster we set up a slot room, the faster we could start earning money back. We would be talking months, not years.”

On Tuesday, Moore sounded hopeful that state legislators would re-examine the licensing fee by the April 29 end of the legislative session. He said racinos have a proven track record of success when regulation does not make them cost-prohibitive.

“The model has worked in pretty much every state as long as the economics are right,” Moore said. “There is a point of diminishing returns. We have to be careful not to reach that.”

Anecdotal evidence suggests Centaur would be able to pay off even the astronomical licensing fee given time.

Mary Lou Coady, media relations specialist at Prairie Meadows Racetrack and Casino in Altoona, Iowa, said numbers there exceeded expectations during the racino’s opening weekend.

“Just 18 or 19 months after we opened, not only were we operating, but we retired $90 million in bond debt,” Coady said. “It drew in more people than they expected.”

Coady said around $1 million went through Prairie Meadows during that first weekend.