Betting on the boats: Indiana's riverboat casinos; who are the winners?

• Author: Cadou, Bettie
• Position: Includes related articles - Cover Story

Only time will tell whether gambling will bring in riverboat riches or leave communities up a creek without a paddle.

Meanwhile, the roll of the dice has already shaken out some winners and losers. High on the list in the win column are lobbyists and lawyers who have scuttled on board to represent gaming companies or have invested in them.

"The riverboat legislation should be renamed 'The Attorney's Full Employment Act of 1993,'" says one critic of the masses of lawyers pulling in consultant fees from local government officials and gaming developers wanting hometown attorneys to smooth suspicions about out-of-state gambling interests. Ed Feigenbaum, a non-practicing attorney, went the peripheral route of producing the Indiana Gaming Insight newsletter. "Business is booming," says Feigenbaum, who also produces a legislative newsletter. The gaming newsletter, he says, did better in its first two months than his legislative publication did in its first two years.

Initially, riverboat developers already have gambled and lost a lot of money. They spent $1.4 million to campaign in 11 community referendums, and came up snake eyes in Warrick, Floyd, Clark and Porter counties. The lowest cost of a referendum was in Switzerland County at $9,000; the highest was Vanderburgh, where $180,000 was spent. Each gaming applicant is required to pay a $50,000 application fee that is neither refundable nor transferable. If an applicant wants to switch to another location, an additional $50,000 must be paid. Then, too, the developers have offered eye-popping gambling packages: about $57 million to the little Southern Indiana town of Rising Sun with a population of fewer than 2,500 and about $100 million to Lawrenceburg, which would see construction of hotels, restaurants, a marina and roadway access.

Big bucks, but a big return, too--something that's made the serious wooing of local officials worthwhile.

Once the froth from the initial launch of riverboat casinos has subsided, many companies will have regained their investments and begun profiting in a short time, says Lee Isgur, an analyst with Volpe, Welty & Co. in San Francisco. "Even if a casino puts down as much as $100 million on a riverboat, it may see that money returned in the first year of operation--some have returned their investments in three months," he says.

An example is Casino America, based in Florida with two boats along the Mississippi River. Its first-year profits were $72 million.

Because of lower overhead, riverboat casinos promise much faster return on investment than land-based operations. For comparison, Isgur points to the newly opened $500 million Treasure Island built by Mirage Resorts Inc. in Las Vegas, a company interested in bidding on the Hammond or Michigan City sites. Treasure Island may well make $100 million a year, he continues. "In three to five years, including maintenance and renovations, it could easily return its investment--which is considered a sharp turn-around in the big-money world."

As the feeding frenzy continues in the northern part of Indiana and the possibility of Chicago joining in with a riverboat complex of its own, there obviously will be huge profits generated in the region. But those with experience advise not to count too much on giant profits in the long-term.

The Illinois city of Joliet, for example, has been raking in more than $1.5 million a month for the past year, its share from Joliet-based riverboat gambling. But officials there know entertainment dollars stretch only so far. Jim Haller, director of community and economic development for Joliet, advises other cities to use the boom-dollars on one-shot projects such as a wastewater-treatment plant, sidewalks and curb repairs. "It's unwise to hire those sorely needed police or firefighters, because if the funding source dries up then you'll have to lay off people or raise taxes. The bubble is likely to burst anytime," he warns.

Haller is adamant that riverboats have not brought crime, prostitution or The Mob to his city--he says the most frequent calls the police get are from people who've locked themselves out of their cars--yet horror stories still filter back from Atlantic City and Las Vegas.

FBI special agents for Northwest Indiana William Jenkins and Louis Caprino Jr. said at a recent meeting that the organized crime group La Cosa Nostra has gotten a piece of the action wherever casinos have opened, whether through direct ownership or controlling businesses that...