Editor's note: One in a series of articles about the decision Colorado voters face in November regarding sports betting in the state.
BLACK HAWK, Colo. — To label any of Colorado’s three historic gaming communities as “casino towns” drastically overstates the term “town.”
Like any small town, Black Hawk, the closest of the trio to Denver, has a post office, a fire station and a convenience store. But it’s hard to find any of these small town staples in Black Hawk, or sister towns Central City and Cripple Creek, over the flashing lights of the casinos dispersed between them.
Nearly three decades after voters broke with years of gambling opposition to permit commercial casinos as a means to help preserve the towns, they now have a chance to help preserve the casinos. Facing increasing competition and stagnating revenues, the casinos hope voters will approve legal sports betting. Not coincidentally, these casinos would be the only eligible proprietors.
Colorado gambling stakeholders are waiting until final ballots are submitted Nov. 5, not just for the outcome, but because of the uncertainty. Limited polling shows a tight contest, and Colorado’s checkered relationship with gambling — and taxes — makes the outcome impossible to handicap.
“I’ve tried to quit guessing what voters will do,” state Sen. John Cooke, the bill’s co-sponsor, in an interview with Gambling.com. “All you can do is hope and pray.”
The most bullish sports betting backers, be it in the Colorado legislature or a casino’s corporate board room, know a low-margin offering like sports betting won’t provide a new gold rush to the historic towns. But that hasn’t stopped "yes" campaign supporters from raising more than $1 million to back what the ballot calls “Proposition DD.”
Colorado’s constitution has rendered a question that ostensibly asks voters to permit sports betting as a means to fund water reclamation projects into one that reads like a tax increase. Though a “yes” vote means this “tax” would only apply to sportsbook owners, Proposition DD proponents fear the opening line — “Shall state taxes be increased…” — will scare voters.
Should that message not convince the majority, a “no” vote would keep the ban, and billions of black market sports betting dollars would remain separated from the three gaming communities. At the same time, up to $29 million in annual resources for water projects will remain unfunded at a time when state conservation advocates say they are needed now more than ever.
Black Hawk, Cripple Creek and Central City would be the largest beneficiaries of sports betting but Proposition DD will go far beyond the town limits.
To add more critical mass, lawmakers believe this election will be the last best chance to approve Colorado sports betting for a decade or even longer.
About 35 miles from Denver on a quiet autumn morning in Black Hawk, it’s not the lights of the casinos but the noise from their outdoor speakers that disrupts what would otherwise be a sleepy small town Main Street.
Originally a town of literal mom-and-pop owned casinos, corporate conglomerates have scooped up the mountain town casinos. Black Hawk’s primary thoroughfare now looks like a miniature, mountain-themed Las Vegas designed by a postmodernist forty-niner.
On Main Street in Black Hawk, all the casinos seem to melt into each other, each having seemingly crammed in as many slots machines as possible. The casinos generate more than $800 million in revenue annually and an average of 20,000 visitors just to Black Hawk every day.
Lawmakers are keenly aware of the populace’s gambling stances. Any new gambling option outside the towns is essentially dead on arrival in the legislature. This strengthens the casinos while further perpetuating this de facto prohibition outside town limits.
And while casino gross revenues have continued upward in the three towns, a comparatively slow growth rate last year, especially within the context of a booming local economy, stakeholders looking for new ways to attract visitors.
In this setting, Colorado lawmakers are now trying to advance legal sports gambling, which would be exclusively controlled by the mountain town casinos.
Inside Ameristar Casino Resort Spa, it's not hard to imagine a sportsbook slid in between the “Cavegirl Dawn” slots and Timberline Grill.
Colorado casinos like Ameristar, and others throughout the country, are embracing the concept of “resort” (and sometimes “spa”). They are finding new ways to attract non-bettors, and more and more are replete with restaurants, shops, concert halls.
Sportsbooks could be that next offering.
“It’s one more reason to take the trip up the hill to visit us and come have a good time, come spend the evening or the weekend,” said Ameristar General Manager Sean Demeule in an interview with Gambling.com. “I have discussions with folks who say ‘it would be fantastic to be able to (place a sports bet) in Colorado.’ This would be one more reason to keep folks in the state and one less reason to have to go all the way to Vegas.”
Our View: Proposition DD is a safe bet for Colorado https://t.co/NGPX96mzV0— Vail Daily (@VailDaily) October 15, 2019
David Farahi agrees. Chief operating officer of Monarch Casinos, which owns properties in both Black Hawk and Nevada, he has seen first-hand the appeal of legal sports betting.
“We do have many guests that place sports bets and blackjack or slot machines. But there are some guests that the only game they like to play in the casino is sports betting,” Farahi told Gambling.com. “So there is some overlap, but there are certainly some guests that would be new to a casino if you added a sportsbook.”
While casinos consider brick-and-mortar sportsbooks, the potential online wagering will likely be far more lucrative. States with mobile wagering have seen 80% or more of their bets placed online. Lawmakers approved each of the eligable casinos one online license should Proposition DD pass in what they considered a move necessary for a successful market.
Since the Supreme Court struck down the federal sports betting ban in May 2018, 13 states have opened sportsbooks. In a little more than a year, that group has accepted more than $10 billion in wagers with the majority coming online.
Along with Washington D.C., five additional states have passed laws to approve sports betting, including Colorado. In Black Hawk that would likely mean a physical sportsbook in Monarch as well as an online offering.
But Farahi, who also serves as president of the Colorado Gaming Association, knows sports betting — even the online options — won’t be a game-changer for Monarch Casino & Resort Black Hawk.
“In Nevada, sports betting accounts for around 3% of total gaming revenue, sometimes even less than that, so it’s not a huge needle mover for the traditional operator,” Farahi said. “It’s a new amenity. It’s exciting, there’s a lot of buzz about it around the country today, but I think there’s a misunderstanding about how large the revenue and profit is from this business."
"I don’t think it’s as high as some people talk about.”
But Colorado casino heads are still supportive. They just have to be guarded with their comments because neither the would-be proprietors, nor anyone else in the state, can say for certain what they expect from voters when they try to understand Proposition DD.
“I think that if you asked people, ‘Do you want to legalize sports betting?’ a majority of people would say yes,” Farahi said. “But the ballot language is a little confusing because of the way it has to be worded because of Colorado law.”
In most other states, sports betting could be legalized as soon as the governor’s ink touched paper. In Colorado, few pieces of legislation — especially related to taxes — are ever that simple.
Colorado has some of the most stringent budget restrictions of any state, requiring a balanced budget that also meets pre-set thresholds for education and health care funding. Most significantly, the Colorado Constitution includes a “Taxpayer Bill of Rights,” or TABOR, an anti-tax advocate’s dream and a nightmare for any lawmakers looking to raise a tax. TABOR requires any new tax be approved by a statewide voter referendum. This even applies to small measures like Proposition DD, which can only generate $29 million in revenue and only applies to sports betting operators.
TABOR restrictions explain why voters must approve the sports betting tax as well as why Proposition DD is worded as a tax increase, when that doesn’t begin to explain the true intent of the ballot measure. TABOR authors wanted a way to squash all taxes, and this constitutional amendment has, not surprisingly, served that purpose well.
In the months since the sports betting bill passed, these backers have had to fight their hardest battle yet – informing the public what their bill actually was.
From Black Hawk to Denver, from Durango to Greeley, and from anywhere else across Colorado, Proposition DD stakeholders believe the measure would easily pass if it was simply explained as a way to legalize sports betting to fund state water projects. For months all efforts by the “yes” camp have centered on this explanation.
“I think a ‘tax that only casinos pay’ should be tattooed on my forehead,” said Curtis Hubbard, a spokesperson for the Vote Yes on Proposition DD campaign, in an interview with Gambling.com. “I use that phrase five or six times in every conversation.”
Water has also played a key role.
When not explaining the taxes, advertisements have extolled the virtue — and even necessity — of a “yes” vote to protect not just water, but agriculture and even the state’s very way of life. Even if you don’t support sports betting, the ads imply, you obviously support our farmers.
“There aren’t enough voters to win this thing that care about sports betting,” Hubbard said. “There are enough voters to win this thing that care about water.”
If that appeal works, sports betting would be legal as soon as May 1, 2020 and the first physical and online sportsbooks would open likely on or shortly after that date. The majority, if not all, of the eligible casinos will probably open both options. Assuming Colorado follows the trajectory of other states, a handful of both types of sportsbooks should open before the end of 2020, with up to a dozen or so likely taking bets sometime in 2021.
TABOR requires a cap on tax revenues after which point all excess money is returned to the taxpayer. Lawmakers set the Proposition DD cap at $29 million which, based off revenues in other states, will be a hard threshold to top.
Sportsbooks typically keep 5% profit margins, meaning for every $100 wagered a sportsbook keeps $5. That $5 would be taxed at 10%, which means the state will recoup $.50 for every $100 bet. To exceed $29 million in tax revenues, Colorado bettors would have to wager more than $5 billion in one year. Nevada accepted about $5 billion in total bets last year, a figure Colorado is unlikely to reach.
Still that means important revenues to fund key water projects that could have statewide benefits. With lawmakers hamstrung by state budget restrictions, the additional revenue could prove critical for a vital, and underfunded, government program.
Since there is literally no registered funding to oppose the measure, and traditional anti-gambling groups like the church have largely remained on the sidelines, backers are hopeful this one-sided appeal will draw voters to the “yes” camp. Though $1 million is less than many supporters hoped for with such a wide-ranging campaign (an Arapahoe Park casino expansion measure rejected by voters drew more than 30 times that total) they are cautiously optimistic that what they see as common sense will prevail.
Republicans like Cooke, one of the bill’s sponsors and biggest advocates, has time and time again tried to push Proposition DD against the anti-tax sentiments of many of his constituents. No advocate for taxes himself, Cooke has beseeched his fellow conservatives to support what appears a tax, but in reality takes no direct cut from their individual finances.
“In supporting DD we emphasize this is a tax on the casino, on their profits, and not the general public,” Cooke said. “Hopefully this message gets across somehow. This has been one of our biggest issues as a Republican.”
Timing complicates things further. An odd-year ballot measure, with no marquee race such as the presidency or senate seat at the top of the ticket, will almost assuredly draw fewer voters than what Colorado expects in 2020 or even what it attracted in 2018. Those voters tend to be older and more conservative, demographics that don’t bode well for a measure that legalizes sports betting to fund water projects in the form of a tax increase.
Other key backers such as co-sponsor and House Majority Leader Alec Garnett have turned to print media editorial boards in an effort he hopes will also help sway voters who otherwise wouldn’t care about (or be exposed to) ads charting the plight of the state’s ecological viability.
But even one of the bills’ biggest cheerleaders accepts the headwinds TABOR cast upon legal sports betting. Like seemingly everyone else in Colorado, Garnett and his fellow lawmakers have no idea what will happen.
Largely unscientific polls show between 20 to 30 percent for the measure, between 20 to 30 percent against and between 20 to 30 percent unsure in the weeks leading up to Election Day. That does little to clarify what could be a razor-thin outcome.
Lawmakers understand 2019 is their best chance for legal sports betting and new water project funding – and quite possibly their last. If voters won’t support legal wagering now, when backers have almost sole control over the narrative for doing so, they will be less likely to do so when a new incarnation of the proposal is fighting for space in the more crowded 2020 ballot, and ballots further in the future.
Garnett has no intention to re-introduce the measure should it fail in 2019, and it seems unlikely anyone else could, or would want, to pick up the baton in the immediate future.
That means no legal sports betting and no new water projects, despite what many see as overwhelming public support for both.
“The legislature will say ‘the people spoke,' ” Garnett said, “and we’re not going to go against the people.”
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