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Article Excerpt
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.
I. 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)
A. 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 or is implied by a lack of statutory language reserving all rights to control gaming with the state. (38)
On the other hand, some state statutory schemes preempt local governments from promulgating laws related to gaming. (39) As with other issues of local control, if state law comprehensively controls an area of law, such as gaming, courts traditionally defer to the state and prohibit the local actors from taking independent action. (40) Additionally, if a state's constitution contains provisions regarding gambling, courts will usually limit local government attempts to promote or suppress such activities. (41)
B. The Modern Era: Casino Gaming
Today gaming is one of the most highly profitable (42) and strictly regulated (43) industries in the United States, with legalized commercial gambling occurring in all but two states. (44) Although Nevada legalized casino gaming in 1931 (45), the modern era of gambling in the United States truly began in the 1960s. (46) In 1964, New Hampshire became the first state to host a modern lottery, (47) prompting many other states to provide for legalized forms of gambling in the following years. (48) Yet, for nearly fifty years Nevada would remain the only home to casinos in America. It was not until 1976 that New Jersey passed legislation aimed at revitalizing the beach resort of Atlantic City through the introduction of casinos. (49) The New Jersey legislature wanted to ensure the propriety of the industry by limiting casinos to Atlantic City as well as various other restrictive policies. (50) New Jersey's entrance into the world of gaming brought the state sizeable tax revenues, and in turn opened the eyes of many American legislators to the benefits of playing host to casinos. The last twenty years have seen a dramatic rise in gambling activity in the United States: there are now twenty states hosting commercial casinos. (51)
While most states share the primary goals of increasing tax revenue and economic development when introducing casino gambling, enabling legislation and gaming regulation differ greatly from state to state. Some regulatory schemes place limits on the number or location of gaming facilities, while others choose to restrict the games that operators can conduct in their facilities. No matter the stated goals of introducing gaming, all states have implemented some form of regulation to protect gamblers, prevent crime, and mitigate potentially negative side-effects of gaming. (52)
In creating a regulatory structure, state legislators must fully consider the benefits that they hope their state will receive from gaming operations, and define a set of goals for their state. (53) Lawmakers should also clearly define a comprehensive public policy when enabling gaming. (54) Moreover, all comprehensive gaming laws should address licensing, operational controls, law enforcement, taxation, and accounting and auditing functions. (55)
Three dominant models for regulation have developed: the "Nevada model," the "New Jersey model," (56) and various "Hybrid models." (57) The Nevada model of gaming regulation seeks to maximize economic benefits by creating a relatively free environment for gaming operators to respond to market demand for their services, while still ensuring that operations are legitimate. (58) Nevada gaming legislation neither limits the number of gaming licenses available in the state nor places geographic restrictions on gaming facilities. The New Jersey legislature took a vastly different approach to gaming regulation. The New Jersey regulatory model focuses on the potential negative effects of casino gaming and reserves power to the state over nearly every aspect of the casino industry. (59) One similarity between the two models is that both states rely on two separate administrative bodies to regulate gaming. (60) The third framework, the "Hybrid" model, has been used by many of the states that introduced casino gaming in the last twenty years. (61) Hybrid models typically limit the number of gaming establishments and rely on a singular agency to perform all regulatory functions related to the industry. (62) The Hybrid model has proven popular and is in place in one form or another in many of the jurisdictions that have legalized gaming. (63)
Within these greater regulatory frameworks gaming legislation varies greatly. One such aspect of gaming legislation is the level of involvement for local actors in the gaming-enabling and casino licensing process. Local involvement in the process includes both actions taken by local governments and by voters who can voice their opinion by voting on the legality of gambling in their state, city, or county.
1. Voter Approval of Gaming-Enabling Legislation
In order for casino gaming to be legalized in a state, that state must take action to pass gaming enabling legislation or modify current laws to enable new forms of wagering. (64) Some states require voter approval before bills can pass into laws and the process of enabling gaming can begin. For example, the voters of New Jersey (65) and Michigan (66) participated in statewide referenda approving commercial gaming in their respective states, while voters did not have the opportunity to voice their opinions at the state level in Pennsylvania or Iowa. (67) Statewide referenda voting on gaming allows all voters, not only those in close proximity to potential casinos to participate in the decision-making process.
Another form of direct democratic participation in gaming-enabling legislation is voter referenda at the local level. Gaming-enabling legislation can limit citizen participation in the gaming enabling process by allowing only those in the city or county where a potential gaming establishment would be located to vote on the issues. For instance, gaming legislation in both Iowa (68) and Mississippi (69) provides for votes at the county level before a riverboat casino can be issued a license to dock and begin gaming operations. One key distinction between the two states is that in Iowa the state legislature requires a county referendum as part of the licensing procedure, whereas in Mississippi local residents must take affirmative steps to compel a...
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