SPECIAL REPORT PART SIX

It’s a mild April evening at Prairie Meadows Racetrack and Casino in Altoona, Iowa, and the racing season is just getting under way.

Outside, fans cheer raucously as jockeys in brightly colored silks hunker down on the backs of sleek thoroughbreds. The ground shakes with the rumble of hooves as a pack of racehorses thunders around the oval dirt track. An occasional breeze carries the pungent scent of fresh manure.

Inside the casino, other people sit in front of colorful, clanging slot machines, feeding coins and tokens. The players are completely absorbed, barely able to take their eyes off the spinning bars, much less talk to a reporter. They’re hoping for the flashing lights, ringing bells and crash of falling coins that signal a jackpot.

These scenes could be repeated in Bangor – if Maine voters are willing to gamble on slots to help prop up the city’s harness racing operation. On the ballot with the Indian casino referendum this fall will be an unrelated question asking voters to allow construction of casinos with slot machines at the state’s two harness racing tracks – Bangor Raceway and Scarborough Downs. And on June 10, Bangor voters will be asked to approve a similar question involving only Bangor Raceway.

Bangor’s historic but ailing harness racing track is the focus of a redevelopment plan that, if successful, would generate new income for the region, attract new fans and help the harness racing business. No plan has been produced for Scarborough Downs yet.

The goal is to attract thousands of new customers – not necessarily those who bet on racehorses – to play up to 1,500 slot machines in a $30 million gaming complex, which one day could include a conference center, hotel and year-round entertainment.

The problem

In recent decades, harness racing has struggled in Maine as attendance has shrunk. In Bangor, where a private corporation rents the racetrack facility from the city, critics have complained that harness racing was draining local tax money because of operating losses in the 1980s and 1990s.

Nationally, racetracks have been losing money to Internet betting, bingo and scratch tickets. Maine is among more than a dozen states that are looking to slot machines to generate new revenues for racing, as well as for ailing state coffers.

Last fall, the city was approached by new track operator Capital Seven LLC, owned by Nevada businessman Shawn Scott, with plans to develop a “racino,” industry jargon for a racetrack with a “slots parlor.”

As things stand, only six states – Iowa, Delaware, Louisiana, Rhode Island, New Mexico and West Virginia – have racetrack casinos. However, with dozens of states in economic turmoil, more and more are giving them a close look.

Scott promises to improve the racing facilities in the project’s first phase. But, additional expansions, such as a hotel and conference center, hinge on the revenue from slot machines. Before slots can be installed, Scott must win approval in a local referendum on June 10 and in the statewide vote on Nov. 4.

What Scott proposes for Bass Park is in some ways similar to what has emerged in Altoona. The casinos would be the same size, but the racing facilities in Bangor currently are smaller than in Altoona. Details of other amenities for Bangor have yet to be worked out.

The politics

In recent talks with the city, representatives from Capital Seven and Pierce-Atwood Consulting, the Portland-based firm Capital Seven hired to help bring its plan to fruition, said they were confident about winning city approval in the local referendum June 10. They said that a Bangor win would bolster their chances of success in the November referendum, when Maine voters will consider a tribal casino as well.

Political pundit Christian Potholm, a Bowdoin College political science professor, has been watching the tribal casino controversy unfold as foes continue to build up steam in the southern part of the state. But he noted relatively little attention is being paid to the racino plan.

“It’s been under the radar,” Potholm said, and that could work to the advantage of supporters.

“I think they’ve adopted the right strategy,” he said.

By keeping a low profile and getting the local referendum on a June rather than November ballot, he observed, racino proponents very well could succeed in staving off opposition like that emerging in southern and coastal Maine, where the anti-gaming group Casinos No! is gearing up for what many expect will be a tough and costly battle.

Casinos No! also has indicated its opposition to the racino, but has focused most of its energy on fighting the much larger tribal casino plan. Gov. John Baldacci has voiced opposition to both plans as well.

Potholm observed that supporters of both plans are talking up the new jobs and revenues that gaming would bring to Maine’s struggling economy. That message likely will resonate in the northern two-thirds of the state, where recent months have seen wide scale layoffs in the pulp and paper and related industries.

In terms of jobs, he said, the Indian casino, expected to be situated near Maine’s southern border, likely would draw much of its work force from outside the state, while the Bangor project would employ mostly Maine residents because of where it would be situated.

Iowa’s top attraction

With its red roofs and colorful flags flying from its parapets, Prairie Meadows looks like a theme park castle. The six-level complex stands in sharp contrast to the surrounding flatlands of farms and roads laid out with checkerboard precision as far as the eye can see.

The state’s only horse racing track, Prairie Meadows occupies 233 acres of former farmland, about 10 miles from downtown Des Moines. Meets for Thoroughbreds and American quarter horses are held here as well as harness racing.

While Bangor Raceway’s operator is a for-profit corporation, Prairie Meadows is operated by a nonprofit organization, in accordance with Iowa state law. The Racing Association of Central Iowa, or RACI, board rents the land from Polk County, but owns the facilities.

The complex includes a one-mile dirt track, as well as a main building that houses a grandstand and a casino with 1,500 slot machines in which visitors can place wagers from a penny to $100. A restaurant, lounges and concessions, clubhouse facilities and a simulcast center offering daily betting on horse and greyhound races help round out the attractions.

The stable area has 27 barns with 1,450 stalls, three dorms for stable workers, a vet barn and a training track. Prairie Meadows hopes to add a hotel and an amphitheater, media planner Mathew Janes said recently while conducting a tour.

Twice named Iowa’s top attraction by the state tourism division, Prairie Meadows has received 23 million visitors since it opened its casino in 1995.

“We’re not really in the middle of a tourist area but we’re convenient. We’re right off the Interstate,” observed Mary Lou Coady, director of racing communications.

Its primary draw is the population living within an hour’s drive, Janes said. A scan of the parking lot bore that out. The vast majority of the vehicles displayed Iowa license plates, most of those from Polk County.

A Prairie Meadows promotional brochure states: “When you play at Prairie Meadows, your dollars stay and work in central Iowa.”

Economic engine

Since 1995, Prairie Meadows has evolved into an economic force for Altoona, a city of less than 11,000, as well as for the entire state.

Despite competition from 15 casinos, including 10 located on riverboats, and two greyhound tracks in Iowa alone, Prairie Meadows pulls in an average of 7,500 visitors a day, Janes said. That total swells by 3,000 to 4,000 during the racing season, which runs from April to November.

Locally, Prairie Meadows is credited in large part with creating spinoff development and growth. From 1990 to 2000, Altoona’s population grew 43 percent, according to U.S. Census figures.

“This used to be known as a small, bedroom community,” Coady said. “Now there’s a Wal-Mart, strip malls that weren’t there before and we have all kinds of fast-food places and restaurants. We have several housing subdivisions because of this.”

Prairie Meadows is Polk County’s third-largest source of annual revenue. It has provided an estimated $250 million for education, human services, economic development projects and property tax relief since 1996. It has paid $220 million in state gaming taxes since 1996. Since then, it has donated more than $30 million to nearly 600 charities.

Randy Pierce, Altoona’s finance director and city clerk, says the track contributes 1 percent of its slots income – about $650,000 to $700,000 annually – to the community and pays property taxes on its buildings and equipment. The city has used that money to reduce its tax burden and to build a new fire station and library, an outdoor water park and a skateboard park.

Margaret Ray, visiting research scientist at the University of Arizona’s Race Track Program, calculated the annual economic impact of live racing at Prairie Meadows at $51.3 million in 2001. Of that total, $4.8 million came from tourists from out of the immediate area, and $912,262 from out-of-state customers, who account for an estimated 6 percent of all visitors.

Prairie Meadows also has created jobs. It employs 1,100 and has an annual payroll of $36 million, according to track officials.

Bangor Raceway, a much smaller operation, now offers 140 seasonal jobs. Daryn Demeritt, communications director for Pierce Atwood Consulting, says the racino would turn that into 314 year-round jobs, most of them full-time, with an estimated $5.3 million payroll. Those jobs do not include the dozens of seasonal workers who would be employed through the harness racing operation, Demeritt said.

Though Capital Seven earlier projected total revenues at $84 million, it since has revised that total down to $75.3 million – $71 million of which would come from slot machines. The figures were adjusted to reflect the findings of a study by economists with the University of Maine, which was funded by Capital Seven. The state would receive about $18 million – or 25 percent of the projected $71 million gross income from slots (income after payback to players).

According to the study, the racino would generate $95.6 million in sales revenue in the Bangor area, including $6.8 million in wages and salaries for 504 full- and part-time jobs not connected to the casino.

Renovations and construction, slated to begin this fall and continue into 2006 if approved, could result in an additional 527 construction jobs, $9.1 million in wages and salaries and $1.1 million in state and local taxes during that period.The portion Bangor would receive from slots remains under negotiation, as is the amount Capital Seven would pay for its lease. The city also would receive property tax payments for buildings and equipment, but that amount depends on the extent of development, also being negotiated now.

Slow start

Things weren’t always rosy at Prairie Meadows. Indeed, horse racing here was slow to leave the gate.

The racetrack was born in the early 1980s, when Iowa’s economy was in dire straits. Land values plunged, hitting the state’s farms and agriculture-related businesses hard. In an effort to revive the economy, state lawmakers sought ways to diversify the agricultural industry and stimulate economic development.

In 1983, the state enacted the Iowa Pari-Mutuel Wagering Act, allowing nonprofit groups created to promote the livestock, horse or dog breeding industries to apply for a license to conduct horse or dog racing.

Prairie Meadows received a horse racing license in 1984, broke ground in 1987 and opened for racing in 1989.

It went bankrupt two years later.

“There was little understanding of horse racing [in the area],” Coady said. The closest racetrack, now defunct, was nearly three hours away, in Omaha, Neb.

Prairie Meadows discovered that Greater Des Moines, population 425,000, couldn’t profitably support the track.

Having seen growth potential in Iowa’s horse industry, track supporters approached the state with a plan to use revenue from slots to repay debt, sustain the track and supplement race purses (the amount of money won), especially for Iowa-bred and -owned horses.

Supporters of the Bangor Raceway proposal say the income from slots would provide millions of dollars annually for purses and agricultural fairs, which in other states has had a significant impact on the equine industry, including horsemen, breeders, suppliers and farmers.

Polk County voters approved slots in 1994, with 62 percent in favor and 38 percent opposed.

A telephone survey of 600 voters conducted this spring by the Bangor Business Journal found that 61 percent of those who responded favored allowing slots at the city-owned raceway.

Enter slots

The Altoona casino opened April 1, 1995, with 750 slot machines. In its first weekend, it raked in nearly $1 million. Within 20 months, the RACI board was able to retire $89.3 million in debt.

“We went from being the redheaded stepchild to, now, everyone wants to be part of us,” Coady said. Slot revenues account for 98 percent of Prairie Meadows’ income.

On a recent Tuesday morning, the casino was busy despite the fact that the summer tourism season hadn’t started. Most of the daytime players at the slots were retirees. A good number of them were equipped with walkers, canes or portable oxygen tanks.

As night approached, a younger crowd, a broad cross-section that ran the gamut from local professionals to truckers, replaced the seniors.

Des Moines pharmacist Shelley Kitsis is a casino regular. She said she plays the slots monthly, usually on weekdays to avoid the weekend crowds.

“I come out here to unwind after work,” she said while dropping quarters into a slot machine. “It’s a lot of fun and Des Moines doesn’t have that much to offer.”

According to Prairie Meadow officials, at least some of those who come to the casino for slots also bet on horse races.

“There is some crossover, but it’s hard to track,” Janes said.

Looking ahead

Because the Bangor proposal is still in the negotiation phase, much about its impact remains unknown.

Questions that remain unanswered include the project’s potential impact on the residential neighborhood that abuts Bass Park, how much new traffic the proposed facility might generate, what the benefits to the city might be and what, if any, additional city services would be required.

As the project moves forward, it will be undergoing scrutiny by the city’s planning, engineering and environmental officials, said Jonathan Daniels, the city’s business and economic development director. It will go before the planning board and City Council for approval – the same hoops any other major development would have to go through.

According to a recent report by analysts from Bear, Stearns & Co. Inc. of New York, dozens of states are bracing for budget shortfalls this year, Maine among them. If the economy remains weak, potential revenue from slots could make racinos an attractive option.