W.Va. track owners prepare for competition

Vicki Smith

Tuesday, March 18, 2003 | 9:46 a.m.

CHARLES TOWN, W.Va. -- Ken and Lisa Butler didn't know what to expect as they piled into a car with friends one Tuesday morning in March, bound for the Charles Town Races & Slots.

It might, they worried, be dark, dingy and ... well, tacky.

But after a 90-minute drive on scenic country roads, they found a series of gleaming, artfully constructed gambling rooms with 2,700 machines and themes such as Slot City, where faux rooftops and other architectural details are splashed with colorful lights.

"It's beautiful!" said Lisa Butler, a nurse from Fredericksburg, Va. "It's very classed-up. It's awesome."

Penn National Gaming Inc. has spent at least $150 million since 1997 to get just that kind of reaction, building West Virginia's largest and most lavish slots-only casino in the state's Eastern Panhandle.

It's an investment that also has paid off for state government, generating hundreds of millions of dollars for state agencies and programs.

And Penn National is not done yet: Under way now is construction of an entertainment complex and another 800-machine gambling room.

Similar to the owners of three other tracks around the state, Penn National is building a destination resort in Charles Town to keep ahead of long-expected competition from Pennsylvania and Maryland, which account for nearly 50 percent of its clientele.

Pennsylvania lawmakers are debating whether to allow slots at four tracks: The Meadows in southwestern Pennsylvania; Pocono Downs near Wilkes-Barre; Penn National near Harrisburg; and Philadelphia Park in Bucks County.

Maryland Gov. Robert Ehrlich wants slots at Pimlico in Baltimore, at Rosecroft in Prince George's County, at Laurel Park in Anne Arundel County and at a track planned for Allegany County in western Maryland.

Destination resorts, however, are more than just racetracks with slot machines on concrete floors. They are Las Vegas-style complexes with dining, lodging, shopping and entertainment -- glitzy facilities that draw repeat visitors who spend a full day or more.

Mountaineer Racetrack & Gaming Resort in Chester, at the tip of the state's Northern Panhandle, has a new hotel, convention center, performance arena and spa, as well as upscale restaurants and bars.

"We've differentiated ourselves just from a marketing standpoint. We're going to grow irrespective of Pennsylvania," said Ted Arneault, president and CEO of Mountaineer's parent, MTR Gaming Group.

About 30 percent of Mountaineer's gamblers are from Pennsylvania. Arneault expects to lose some, but not many.

"When (Las Vegas casino developer) Steve Wynn had The Mirage on one corner and Treasure Island on the other, both of them grew," Arneault said. "We see everything that's happening in Pennsylvania as a net plus."

West Virginia's slot machine success began with an experiment in June 1990, when the Lottery Commission let Mountaineer install up to 165 terminals to save the dying horse racing industry.

In 1994 lawmakers passed the Racetrack Video Lottery Act. That let local voters approve slots for the state's two dog tracks, Wheeling Downs in the Northern Panhandle and Tri-State Racetrack & Gaming in Nitro.

Voters rejected slots in Charles Town the first time, then approved them in 1996. The four tracks now have approval for a combined 11,000 machines and the ability to ask for more.

Today racetrack slots are an indispensable and ever-growing stream of revenue for state government: The $6.9 billion that gamblers wagered in fiscal 2001-02 generated some $230 million for the state, up from $147 million the previous year.

The profits have funded everything from parking garages and veterans' memorials to tourism promotions.

Slots also have delivered on the promise made to West Virginia's horsemen, allowing Mountaineer and Charles Town to run some of the best thoroughbreds for the biggest purses in the United States.

John Finamore, senior vice president of regional operations for Penn National, expects to feel some impact if slots go into Laurel and Pimlico, only an hour's drive away.

"But it doesn't mean that overnight we lose business," he said.

It would take years for Maryland to build the kinds of facilities West Virginia already has, he said. And many patrons come from just across the state line.

"It's faulty logic to say we're going to lose it," Finamore said. "Gamblers are like any other consumers. They go where it's convenient. They go where it's comfortable. They go where they're used to it. They're going to continue to come here."

Lucette King would opt for convenience and go to Maryland if she had the choice. The retiree from Woodbridge, Va., drives 90 minutes to gamble twice a week in Charles Town with companion Noail Brooks.

"We need this kind of entertainment locally," King said. "People drive from all around to come here. We've been coming since it opened."

Pansy Gibson said she, too, might opt for the shorter drive from Woodbridge. Then she thought again.

"No, I wouldn't do it," she said. "I would come here because to go to Maryland, you'd have to sit in traffic for two hours.

"I know what Maryland is," she said. "It's just traffic and congestion all the time. It's a totally different experience here. We're only 25 minutes from D.C., but this is so much better."

Pennsylvania, meanwhile, presents a lesser threat to the thoroughbred tracks because both MTR Gaming and Penn National have toeholds. MTR is building the $56 million Presque Isle Downs near Erie, and Penn National already controls two tracks in Pennsylvania.

Still, track operators and their key beneficiaries -- state budget architects -- will be monitoring the impact on profits.

Arneault, who has been pushing for legalization of table games, envisions a day when lawmakers will yield to his argument that such games would keep West Virginia ahead of its neighbors.

He proposes a bill that would let racetracks offer live versions of poker, blackjack and other games that patrons now play on touch-screen machines.

"I will be relentless in my pursuit of that," Arneault said. Table games could create as many as 400 jobs at Mountaineer, which already employs 1,800 and keeps 3,500 horsemen in business.

"We're in a dynamic market. Instead of looking at our tracks as something we have to tolerate, let's keep them No. 1," Arneault said.

"Pennsylvania and Maryland are being much more aggressive than we were," he said. "What's taken us seven years, they want to accomplish in two years. So let's go for the gold.

"We'll take it head-on and be very aggressive, and we're asking the state and the Legislature to work with us," he said.

House Speaker Bob Kiss believes the Legislature is not yet ready to endorse table games but will watch the bottom line.

"We're not going to try to beat Pennsylvania and Maryland to the punch, said Kiss, D-Raleigh.

"I'm of the opinion that even if Maryland and Pennsylvania do this, our numbers will not retreat. They just will substantially slow in growth," he said. "There is a fundamental difference between revenues slowing and retreating. If you saw retreat, a contracting budget ... that might be something we'd consider."

More important to legislators would be any impact on jobs.

Layoffs, particularly in the struggling, historically steel-driven Northern Panhandle, "could be something that would be critical enough to cause some action," Kiss said.

"We've never authorized gambling for job creation so much as job preservation. Clearly, though, the tracks have gone to a mode where they're not only protecting but creating jobs," he said. "The dynamic now might be with those jobs. Would they come under that umbrella of preservation?"

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