Slots in the city: a critical look at the balance of decision-making power in gaming legislation.

• Author: Becker, Eric B.

Introduction I. Gaming A. The History of Gaming in America B. The Modern Era: Casino Gaming 1. Voter Approval of Gaming-Enabling Legislation 2. Local Involvement in the Casino Licensing Process II. Local Government A. Principles of Local Government in America B. Local Involvement and Control 1. Local Participation in the Political Process 2. Local Expertise C. Regionalism and the Drawbacks of Local Control III. Who Should Decide If, Where, and How We Gamble? A. States Motives for Controlling the Gaming-Enabling Process B. Local Ramifications of Casino Gaming 1. Social Problems 2. Economic Transformation 3. Land Use IV. Case Studies A. Pennsylvania Case Study 1. Background 2. The Pennsylvania Race Horse Development and Gaming Act 3. The Hearing Process for the Philadelphia Slots Licenses 4. The Aftermath B. Detroit 1. The Michigan Gaming Control and Revenue Act 2. Local Control: The Development Agreement 3. The Casino Era in Detroit V. Comparing the Gaming-Enabling Process in Philadelphia and Detroit A. Mode of Legalization B. Local Involvement in the Licensing Process Conclusion INTRODUCTION

The last twenty years have seen a dramatic rise in commercial gambling across the United States. One by one, states have enacted gaming-enabling legislation in an effort to promote economic development and increase tax revenue from formerly illegal activities. Recently, legislators have begun to tap into major metropolitan markets by licensing casinos in closer proximity to highly populated areas, and even in some of the nation's largest cities. Many politicians and businessmen view gaming as a powerful economic and tourism development tool. The bright lights, ringing bells, and the prospect of large winnings all contribute to the allure of casino gambling. Unfortunately, some patrons experience the negative effects attendant to gambling. Additionally, as an industry notorious for illicit behavior, gambling must be heavily regulated to best balance the intended benefits with the wide variety of potential side-effects.

These issues can become increasingly complex when gaming proponents seek to place casinos in urban areas. For the past few years, the casino issue has proven highly controversial in Philadelphia. After Pennsylvania State Legislators decided that the City of Brotherly Love would play host to two slot machine parlors, by passing the Pennsylvania Race Horse Development and Gaming Act, the process has been anything but smooth. Many citizens groups and local politicians have expressed grave concern over having casinos in Philadelphia and have tried to create a role for local government in regulating gaming. Over four years later, casino developers have yet to break ground in Philadelphia. So far, few new jobs have been created, and only attorneys and the Justices of the Pennsylvania Supreme Court have seen an increase in the demand for their labor. A host of lawsuits have indefinitely delayed the process of building casinos in Philadelphia. Many of these problems could have been avoided if Philadelphians had been given an opportunity to participate in the matter. At a minimum, local actors could have been able to voice their opinions on gaming and the two casinos intended for the city.

This Note focuses on the ability of local governmental bodies and local actors to become involved when a state seeks to introduce casino-based gaming or license additional casino properties. Traditionally, states retain the power to make most gaming-related decisions, sometimes only allowing simple "yes or no" voter referenda. This Note argues that an increased role for local actors in bringing gaming to cities will best protect the interests of the people most affected by casinos.

Part I provides a brief background of gambling in America and the key aspects of gaming-enabling legislation in various states. Part II discusses local government law and theory. Part III examines aspects of casino gambling that highlight the importance of local involvement in the legislative and regulatory process. It also discusses case studies of commercial casino development in Philadelphia and Detroit. Part IV compares the introduction of gaming in the two cities to better understand the successful introduction of casinos in Detroit.

1. GAMING

   Gaming or gambling is defined by Black's Law Dictionary as "the act of risking something of value, esp. money, for a chance to win a prize." (1) Gamblers participate in the activity by placing wagers (2) in a variety of formats. Gaming is regulated at both the federal and state level. (3) Federal gambling statues primarily serve to prohibit gaming activities and related financial transactions. In the United States there are five types of legal gaming: (1) charitable gaming, (2) commercial casino gaming, (3) lotteries, (4) Native American gaming, (5) and "pari-mutuel" wagering. (4)

   Commercial casino gaming is the largest segment of the gaming market. (5) Casinos typically offer "banked" games in which the casino itself is participating in the game by taking wagers from patrons. (6) Commercial casinos exist in a variety of forms, the most recognizable being Las Vegas-style casinos, which are land-based and typically include entertainment and hospitality facilities beyond gaming. (7) Another common type of casino is the riverboat casino. Riverboat casinos exist in two distinct forms, "excursion" (mobile), and "dockside" (permanently moored boats). (8) An additional form is the "racino," a casino that is located at a previously existing "pari-mutuel" racetrack facility. (9) Commercial casinos are extremely popular in the United States as 56.2 million people made 371 million trips to casinos in 2006. (10)

   Pari-mutuel wagering is a form of gaming in which the total prize pool is based on the amount of money wagered by all participants. (11) Americans participate in pari-mutuel wagering when betting on horseracing, dog racing, jai alai, or similar games and events. (12) Forty-three states have authorized pari-mutuel wagering. (13) The racino form of commercial casino gambling involves other forms of gaming being introduced at a licensed pari-mutuel facility. (14)

   1. The History of Gaming in America

      While the commercial casino many Americans associate with gambling is a recent invention, humans have been gambling for thousands of years. (15) Throughout history, governments have taken an active role in regulating gambling, frequently levying taxes on the activity. (16) The rationales behind gaming regulation have varied in different eras and across cultural boundaries. (17) Some governments simply sought to raise revenue, while others forbade or severely limited gambling as contrary to religious ideals. (18)

      When settlers first came to what is now the United States, they brought gambling with them, eventually leading Puritan leaders to enact gaming regulation as they felt that gambling was a waste of time and therefore part of the greater sin of idleness. (19) Nonetheless, America was developed with funds derived from gambling; colonial governments used lotteries to finance the development of the colonies as they lacked the power to tax residents directly. (20) Following this lead, many early American ventures relied on lotteries to raise revenue. (21) However, around the turn of the nineteenth century state governments began to legislate against lotteries, and by the time of the Civil War there was a nearly nationwide ban on gambling activity. (22)

      In the post-Civil War era gambling reemerged in various forms. (23) Some southern states returned to lotteries to address financial hardships. (24) Additionally, gambling was prevalent on riverboats cruising the Mississippi and in gaming halls and saloons across the expanding Western frontier. (25) Unfortunately, gambling was frequently accompanied by negative side-effects such as crime, violence, and poverty. State sanctioned lotteries eventually fell victim to criminal influences, leading regulators to end this form of legalized gambling. (26)

      The demise of lotteries brought gambling to a halt by the end of the nineteenth century. (27) As states continued to pass laws prohibiting gambling, many local governments took an active role in enforcing the bans, as well as creating local ordinances that further defined what types of gambling-related conduct were illegal. (28) The bases for modern gaming regulation legislation are rooted in the legal frameworks banning both commercial gaming and various types of illegal gambling. (29)

      Like many activities prohibited by the government, gambling did not wither and die. (30) Extensive illegal gambling, ranging from underground card rooms and lotteries to bookmakers involved in sports gambling persisted. (31) Unfortunately, despite the development of a wide array of legalized gambling, the criminal element followed gaming into the modern era. As aspects of gambling are "easy to manipulate and have historically been subject to fraud," (32) both organized and white-collar crime have been associated with the industry. (33) Gambling in America's first casino town, Las Vegas, was in part developed and controlled by organized criminal enterprises. (34) "Street crime" has also been a problem associated with gambling. (35) Many compulsive gamblers resort to crime to finance their habits; others become mired in alcohol and illicit drug abuse. The long-standing presence of both illegal gambling and related crimes have proven that strict regulatory schemes are necessary to mitigate these societal harms.

      For most of the twentieth century, states statutorily banned gambling, and many allowed local governments to enact specific gaming-related laws. (36) Some local governments further suppressed gaming activities, often enacting much harsher limitations than those imposed by state laws. (37) The power for local governments to pass these types of laws stems either from direct grants by the state legislature within the legislative scheme...