Is Grand Prairie the Next Sin City?
When the Chickasaw Nation took over Lone Star Park, it had more than horses in mind.
Things looked different at lone star Park six years ago. On a spring day in 2004, at a strategy session held at the racetrack’s Grand Prairie boardroom, big plans were unveiled. Architectural drawings sat propped on easels surrounding a lacquered table. The track’s operators looked at pretty green splotches of landscape and circular tree patterns. The green was complemented by bigger blocks of brown that hovered about the oval.
It was Lone Star’s dream world: a gambling mecca in the middle of a metropolitan area with more than 6 million people ready to pull the arm of a slot machine. There would be room for as many as 5,000 slots once those blocks of brown were turned into bricks and mortar.
“We weren’t just going to slap up a slots-machine barn. We were taking this very seriously,” says Corey Johnsen, who served as Lone Star’s general manager and later president until 2007.
But in the six years that have elapsed, the Texas Legislature hasn’t come close to considering statewide legalization of slot machines. Those plans and drawings have been packed away in a closet. Johnsen, along with most of the original developers of Lone Star, have left.
And so has the track’s business. Lone Star’s operator, Canada-based Magna Entertainment, declared bankruptcy after its delusional plan to dominate the horse-racing world fell under the weight of $958 million in debt and more than $600 million in operating losses the past six years at its nine racetracks and other properties.
Now Global Gaming Solutions, an entertainment and casino subsidiary of the Chickasaw Nation Indian tribe of Oklahoma, has agreed to buy Lone Star’s lease for $47.8 million. (Lone Star’s owner, the city of Grand Prairie, paid for the racetrack with a half-cent sales-tax increase and leases it to a track manager.) The Chickasaws have also dusted off Lone Star’s plans for a slot-machine operation—they didn’t really have a choice. It’s a strange turn of events: the tribe, until just a few months ago, was one of the many roadblocks facing legalized gambling in Texas.
With the successful operation of their WinStar Casino just 5 miles across the Oklahoma border, in Thackerville, the Chickasaws have soundly beaten Lone Star as a gambling destination for years. To maintain that edge against Lone Star, or anyone else in Texas with thoughts of pursuing casinos, the Chickasaws had joined others with gambling interests in bordering states and spent money to keep Texas’ anti-gambling candidates in office. They have contributed $362,000 to Texan political races since 2006.
But now they are ready to point their lobbyists in the other direction. Opinion is split on whether they will prevail. The state’s budget is being pulled down by continuing economic troubles. It’s conceivable the Legislature will try to fix it by allowing expanded gambling to go in front of voters in a statewide referendum.
On the other hand: why bother?
“I think they’re pissing in the wind,” says Robert Spellings, who lobbied in Austin for about 12 years on behalf of thoroughbred breeders. “If you’re trying to get any sort of gambling legalized in Texas, it’s a hard place to do business.”
“You couldn’t put an entertainment asset in a better location if you tried,” Elliott says.
Shortly after spending $80 million to acquire the slot-machine and horse-racing operation at Oklahoma City’s Remington Park, Global Gaming chief executive John Elliott was back on the hunt. In late October, he left the company’s headquarters in Ada, Oklahoma, for the oversized conference room of a New York City legal office to bid on the right to manage Lone Star through a federal bankruptcy auction.
Elliott, who came to Oklahoma by way of Australia, coveted Lone Star. Global Gaming already had submitted a bid of $27 million for the track. Federal judge Mary Walrath announced she would accept. It looked like the Chickasaws were getting a steal—until Walrath sided with Magna’s creditors, ruling that Penn National Gaming beat the deadline with a $40 million offer. The Chickasaws chose not to sue and instead decided simply to reraise Penn National.
The Chickasaws could afford to be confident. WinStar is the world’s fifth-largest casino, thanks in part to its location in the middle of the 200-mile gap between Dallas-Fort Worth and Oklahoma City. If that holding doesn’t generate enough money, the Chickasaws also have considerable investments in health-care and technology companies, as well as a bank. But if the political winds blow kindly in Texas, Lone Star could become the tribe’s biggest holding. “You couldn’t put an entertainment asset in a better location if you tried,” Elliott says.
Seated across from Elliott in the New York City law office was a contingent from Penn National that, much like the Chickasaws, has been doing its level best to draw gambling money out of Texas. It had recently spent $200 million on Zia Park in Hobbs, New Mexico. For almost three hours, they had court clerks sifting through bid after bid—Elliott remembers 43 rounds of it—before Global Gaming pushed in for nearly $48 million and Penn National got up from the table.
The asset Elliott finds himself with, as it stands now, looks distressed. Last year, Lone Star saw double-digit decreases in wagering during the thoroughbred season, the time of year when wagering is at its highest. Nationally, horse racing has mirrored the economy. December 2008 closed with a 20 percent drop in wagering over the previous December. For all of 2009, wagering decreased double digits from the previous year.
Lone Star is getting hit with a double whammy. Recreational gamblers—those not willing to dig into the complexities of studying a racing form—are willing to drive to places like WinStar to get the easy gratification of pulling the arm of a slot machine. And the sophisticated bettor, looking for deep fields of quality horses, has been frustrated as more horses are being shipped to tracks with bigger purses. At Delta Downs, not far from the Texas border in tiny Vinton, Louisiana, the addition of more than 1,500 slot machines has enabled the track in a typical day of racing to offer at least $150,000—sometimes more than $200,000—in purses. That surpasses Lone Star’s offering of roughly $121,000 for quarter-horse racing (sometimes barely more than $100,000) and represents a more than 500 percent increase from 2001, when there were no slots at Delta.
Frank Stronach, the founder and megalomaniac running the bankrupt Magna Entertainment, thought he would combat this at Lone Star by installing a new type of wagering machine that would cater to the person looking for fast action. He called it the Horse Wizard. It was ill-conceived and cost Magna an additional $15 million when it tanked. Plus, it bothered fans at Lone Star because a lounge housing the machines was built right in the middle of the first-floor concourse area, blocking foot traffic between some of the main bays of the traditional wagering windows. Nothing blocks the money wagered at racetracks and casinos over the border.
And now come the budget problems the Legislature will face in January 2011. The state comptroller’s office reported in November that sales tax and natural-gas tax collections fell more than $1 billion short of projections during the 2009 fiscal year. Numbers like those can make slot machines look attractive. “Various states have liberalized on this topic,” Elliott says. “And I imagine Texas would take more of a look at this just because of the economics of it.”
“We’re a bunch of gamblers. We’ll get on a plane to Vegas or Mississippi, and we’ll take a run at their casinos,” he says, “but we don’t want it in our backyard.”
Robert Spellings makes it sound like Texans view casino gambling as they would a nuclear dump. “We’re a bunch of gamblers. We’ll get on a plane to Vegas or Mississippi, and we’ll take a run at their casinos,” he says, “but we don’t want it in our backyard.”
But Spellings agrees that if the issue were presented properly—with all economics investigated—it could pass a statewide vote to amend the Constitution. The problem is getting it there, which requires a two-thirds vote in the Legislature. The horse-racing lobby has not even been able to advance a bill on that subject out of committee since 1995.
For aspiring politicians in Texas, the surest way up the ladder has been to take up the cause against gambling. Senator John Cornyn did this when he was state attorney general in 1999 and worked to shut down casinos operated by two of the state’s Indian tribes. (The Tiguas were making $60 million a year with the Speaking Rock Casino outside El Paso, and the Alabama-Coushatta casino collected about $9 million in the first nine months of operation near the East Texas community of Livingston.)
Still, now that the Chickasaws have changed course on the issue, there is rekindled hope that Texas horse racing, and Lone Star Park, will finally get slot machines.
“There will be legislation proposed in 2011,” says Johnsen, the former Lone Star executive who is consulting with Global Gaming. “Global Gaming and the Chickasaw Nation are well-funded. They understand the politics. They’re patient, and they’re long-term players.”