OH Eyes 'Next Steps' After VLT Court Ruling

Ohio's governor said a court ruling on VLTs must be studied before action is taken.

Democratic Ohio Gov. Ted Strickland indicated Sept. 21 his administration is preparing to take the “next steps” in the wake of an Ohio Supreme Court ruling that says a statewide referendum is required before the state implements racetrack video lottery terminals.

The high court released its opinion Sept. 21. The group LetOhioVote.org challenged an early July directive by Strickland that racetracks install VLTs under the auspices of the Ohio Lottery to provide revenue to help balance the state budget.

The court said VLT provisions in enabling legislation “do not fall within any of the exceptions to the right of referendum in that they are not laws providing for tax levies, appropriations for the current expenses of state government, or emergency laws necessary for the immediate preservation of the public peace, health, or safety. Therefore, they are subject to referendum.”

The court in a 27-page document directed Secretary of State Jennifer Brunner to accept petitions necessary to hold a referendum, mostly likely in November 2010. VLT opponents have 90 days to submit the required number of signatures—roughly 241,000.

The court opinion doesn’t address whether the Ohio Lottery has the power to expand its offerings to include video gaming machines. In 2008, the lottery added Keno at about 2,000 outlets in the state under a directive from Strickland.

“This case is about certainty in Ohio’s budget,” the opinion says. “It is not about whether the governor and the General Assembly acted prudently in dismissing the peoples’ will—demonstrated time and again at the ballot box—to keep slot machines out of Ohio. The budget crafted by the governor and enacted by the General Assembly cannot be overturned by referendum.

“However, the people retain the right to prohibit by constitutional initiative slot machines of any type or by any name.”

The opinion concludes with the following: “The chaos that may follow this court’s decision cannot be blamed entirely on the majority opinion, which applies a narrow but plausible interpretation of our constitution’s limits on referendum. The governor and the General Assembly have sown the wind, and now with a budget thrown into complete disarray, we shall all reap the whirlwind.”

The state is counting on roughly $900 million a year in VLT revenue to balance the budget.

“We decided to pursue legislative authorization of video lottery terminals to help fill a state budget gap caused by the national recession without increasing taxes on working people or businesses during these economically challenging times,” Strickland said in his statement. “To balance the budget, protect investments in education, and continue providing many of the critical health and safety services that Ohioans rely upon every day, we also cut spending by more than $2 billion and reduced the size of state government to the level it was during the Reagan era.

“While I am disappointed by this decision, we need to fully review the court’s judgment before determining next steps. The Ohio Lottery Commission has modified its agenda for (a Sept. 21 meeting) which was to include the video lottery terminal implementation rules, to ensure adequate time to fully review and understand the impact of the court’s decision.”

The court opinion was released in the midst of negotiations for the sale of several racetracks in the state. In addition, racetrack operators were in the process of acquiring funding to pay a $65-million VLT licensing fee payable in five $15-million installments.

Only two harness tracks—Northfield Park and Raceway Park—paid the first installment by the Sept. 15 deadline.

On Sept. 15, Harrah’s Entertainment was approved to purchase Thistledown near Cleveland, Ohio, for $89.5 million—the first $42 million in cash, and the remainder pending implementation of VLT gaming. The company hasn’t yet commented on the latest developments, but on Sept. 22 announced its subsidiary, Harrah’s Operating Co., “is commencing cash tender offers for its outstanding debt securities” up to $175 million.

In a release, Harrah’s noted it also intends to seek $750 million in new term loans, and plans to use the proceeds “to refinance or retire existing debut, and to provide additional liquidity.”

Ohio’s two other Thoroughbred tracks also are in flux. Beulah Park has sued Penn National Gaming Inc., alleging the company breached a contract to buy the facility, while River Downs has struggled to find a partner to finance and operate VLT gaming.

Strickland’s VLT directive, as well as the accompanying legislation, contained no provisions for VLT revenue to go to purses. Horsemen and tracks have been negotiating a percentage, but the Ohio Supreme Court ruling lessens the urgency of a deal.