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“There was an overwhelming sentiment against it,” Krivacka says. “The reaction toward it was that it was dirty, evil and not something that people in the state wanted. About 20 years later, we had a lottery.”

Krivacka also could not have predicted that in 2004, as a Nashville lawyer with Adams and Reese, he’d be lobbying for legislation that would have ultimately allowed casinos—another reputation-marred activity—in Shelby County. Although that effort failed and Krivacka counts himself as one of the many Tennesseans who have a hard time imagining casinos within state borders, he has seen firsthand how the highly unlikely can come to pass.

“It may take another 20 years, but the perception of gambling is rapidly changing,” he says. “The World Poker Tour and gaming events are gaining popularity. These tournaments are more like sporting events than this seedy activity called gaming.”

In fact, poker isn’t the only gaming activity gaining widespread acceptance. The American Gaming Association (AGA), a trade group that represents commercial casinos, reports in its “2007 State of the States” that 82% of Americans say casino gambling is acceptable for themselves or others, and in general, Americans view gaming as a matter of personal choice. In the last couple of decades, more states have turned to casinos to boost tax revenue, create jobs, spur economic development and help pay for necessities, such as education and health care. But does this shift in attitude mean that casino gaming is in Tennessee’s future? The answer is no. And yes. And both answers are shrouded by the lingering presence of the state’s geopolitical divide and its negative impact on Memphis, the Tennessee city with the most at stake in the debate.

The “All-in” Industry?
When it comes to casino gambling in the United States, Tennessee belongs to a distinct minority. Currently, 37 states are home to commercial casinos, racetrack casinos or tribal casinos. Eleven states have full-scale commercial casino gaming, 11 states allow full-scale gaming machines at racetracks, and 28 states have gaming on Indian lands.

One look at the revenue being generated and it’s easy enough to see why casino gambling has become so prevalent. In 2006, Indian-run casinos pulled in more than $25.7 billion. Because tribal governments are federally recognized as sovereign nations, states generally don’t receive tax revenue. Federal law does, however, necessitate that tribes establish a compact with the states within which they wish to operate. As a result, through the years some states have managed to establish (or are negotiating) agreements with tribes to receive a percentage of casino revenues. (In 2006, tribal governments generated $2.4 billion in state taxes, revenue sharing and regulatory payments.) Additionally, regardless of revenue, tribal gaming often generates jobs and economic development.

Yet, the real cash cows as far as states are concerned are the commercial casinos. Eighteen years ago, such endeavors were legal only in Nevada and New Jersey. This year, Pennsylvania became the 12th state to open its doors to commercial casinos. In 2006, before Pennsylvania joined the pack, the AGA survey estimated that commercial casinos in the United States contributed $5.2 billion in direct gaming taxes to state and local governments, a 5.5% increase from 2005 contributions. They earned $32.42 billion in gross gaming revenue (up from $16 billion in 1995), employed more than 366,000 people and paid $13.3 billion in wages. To put it in “smaller” terms, in May, the Associated Press reported that in the five months since opening, Pennsylvania’s commercial casinos had brought in $236 million, with about 55% going to the state in taxes.

Such figures exclude hybrid endeavors such as racetrack casinos, or “racinos,” which bring slot machines and video lottery terminals to horse and dog tracks. In 2006, with the addition of racino newcomers, Florida and Pennsylvania, and after a full year of operation with machines at tracks in Maine and Oklahoma, racinos generated $3.62 billion in gross gaming revenue and contributed $1.44 billion in direct gaming taxes to state and local governments.

Given the large amounts of money at stake and the tendency of politicians to drift toward large revenue resources, it’s likely that only the shine from the buckle of the Bible Belt has prevented more of a push for casino gambling. Since the 1990s, attempts to get casino gaming on the books, most of which have stemmed from West Tennessee, have been futile. The lottery, which Tennessee voters approved in a 2002 referendum, is the only form of legalized gambling taking place in Tennessee today, and many say that the legislature would not even have approved that had the clause forbidding “games of chance associated with casinos” not been included in the lottery amendment. Nonetheless, when it comes to casinos, Tennessee cannot be said to lack aspirants.

The Long and Winding Trail
Although the state’s very name originates from an Indian word, there isn’t a federally recognized Indian tribe that holds Indian land in Tennessee. Because federal regulations for tribal casinos stipulate that gaming activities can only take place on such Indian land—land that the federal government holds in trust for a federally recognized Indian tribe—the likelihood of a tribe gaining a foothold here is extremely remote. Yet, a tiny window of possibility may exist. In 1992, the Mississippi Band of Choctaw purchased about 170 acres in Henning in Lauderdale County for several Choctaw families residing in West Tennessee. The tribe, which operates two casinos on its reservation in Philadelphia, Miss., has submitted a request to the Secretary of Interior to place the land in trust. Such a process could take several years, and the tribe did not specify a desire to use the land for gaming purposes (a requirement), says BIA spokesperson Gary Garrison.

If the land-to-trust application is approved, and the tribe decides in the future that it would like to operate a casino on the site, there would still be several hurdles to clear (per the Indian Gaming Regulatory Act of 1988), including the fact that gaming is illegal in Tennessee. “The fact that Tennessee has a lottery may give them an argument for gaming,” says Heidi Staudenmaier, an Indian law and gaming attorney with Snell and Wilmer in Arizona. “Arizona only had a lottery, but people felt it was sufficient to fall within the realm of Class III gaming, thus providing a reasonable argument that the tribes could have Class III gaming as well. In California, lawmakers had to amend the Constitution to allow for tribal gaming because [like Tennessee’s Constitution] it had a clause against Las Vegas-style gaming; however, this specific issue has not been tested all the way through the courts.”

In addition, the Secretary of Interior would apply a two-part determination that looks at whether the casino would be in the best interest of the tribe and whether it would be detrimental to the surrounding community. The governor of Tennessee would also have to approve the casino. Only three tribes have received off-reservation gaming approval since the 1988 IGRA. Garrison says the Department of Interior plans to produce regulations in the next couple months, including one that would consider how far the off-reservation land is from a tribe’s reservation, that will make garnering such status even more difficult.

Not surprisingly, Garrison and Staudenmaier say the chances are slim that the Choctaw could open a casino in Lauderdale County.

“I’d say the chances are one in a billion,” Staudenmaier says. “It’s a huge long shot.” Not that long odds have prevented continued discussion. Mary Ann Jarrett, the former mayor of Henning, says that she talked to the Choctaw about the possibility of getting a casino on the grounds throughout her tenure from 2001 to 2005.

“They called me often,” she says. “I even met with them with the attorney for the town of Henning. They wanted to get their land in trust and put a casino on it.” But even on a local level, there were obstacles. “We wanted them to do it, but we wanted them to give something back to Henning to help build up our downtown area,” Jarrett says. “They didn’t want to work with us on that. They said everything netted would go to Mississippi, where their chief state is.”

Furthermore, Jarrett says the former mayor of Lauderdale County was against the prospect of a casino, and would not provide the community sign-off necessary to gain trust approval, let alone a casino. But there’s a new county mayor now, and members of the Choctaw tribe have already approached him.

“They handed me paper work that stemmed around a casino, and they want me to meet with the Chief and go down to Philadelphia, Miss., to show me the potential,” says Lauderdale County Mayor Rod Schuh, who took office less than a year ago. “The previous mayor did not want the casino, so I guess since I’m the new boy on the block, they want to open that book back up. But right now, I don’t have an opinion on it one way or the other.”

Harry Thompson, a Choctaw who operates a tribal recreation facility on the Henning property, says members of the tribe who reside in Henning are interested in getting the land in trust so that “we can put some sort of factory or something there” that will improve their financial situation.

But Tennessee’s western border has not been the only place where Indian activity has led to casino talk. Across the state in Monroe County, a deal between the Eastern Band of Cherokees and Overhill Develop- ment, a Florida development company, has stirred up rumors that the $60 million, 44-acre resort Overhill is building on Tellico Lake in Vonore will include a lakeside casino. Though the Tennessee Valley Authority owns the land, it granted the Eastern Band a permanent recreation easement for the construction of the resort. The Cherokees are leasing the land to Overhill for about $50,000 a year, with the lease money supporting the Sequoyah Birthplace Museum, which the Eastern Band owns and operates to promote the appreciation of the history and culture of the Cherokee Indians in East Tennessee.

Given the size of the resort—it will include a marina, restaurants, lakeside cabins and a villa—and the fact that the Eastern Band already operates a casino across the border in North Carolina, the rumor mill has been in full operation. So much so that in April 2006 Richard Gehring, Overhill project manager for the Sequoyah resort, submitted a somewhat exasperated letter to the Tellico Lake Community in an attempt to quell the rumors:

“It may be topical to raise a casino issue since there is an ongoing debate about amending federal legislation. But that does not change the reality of the project. … During the entire planning and approval time numerous inferences and rumors have continued to arise that a casino or gaming facility was somehow going to occur, either on land or on water. Each time the subject came up all parties involved in the project flatly denied any such element was included or would be allowed.”

Despite this, hope still lingers among local officials. Vonore Mayor Fred Tallent, who is in favor of a casino, is not convinced the issue has gone away. “I think it’s in the cards,” he says.

The Gaylord Angle
Gehring is not alone in having to answer, again and again, questions concerning possible casino-related objectives. In fact, one can build quite a circumstantial case for why Nashville’s Gaylord Entertainment Co. might be interested in bringing casino gambling to the Midstate. After all, CEO Colin Reed, as well as several of his management team, are ex-Harrah’s execs. The Gaylord Opryland Resort & Convention Center is a mammoth entity on par in size and scope of service with the largest Las Vegas-sized resorts. And Gaylord even has a riverboat, the General Jackson Showboat, that would seem ready-made for conversion into a river-bound casino. As speculation goes, it seems reasonable enough, but that does not lessen Reed’s public frustration at having to answer the same question.

In a February Q&A session with The Tennessean, in response to the question, “Is [casino gaming] something that the company wants to do?” Reed replied: “Even if the answer was yes—which it isn’t—it can’t happen. It can’t happen because the state of Tennessee doesn’t have gaming.”

Despite such assurances, the community surrounding the Opryland Resort & Convention Center must harbor some fears that gaming is in Tennessee’s future—the zoning application for the Resort’s new tourism development on a nearby 105-acre site explicitly excludes the prospect of gaming.

The Revenue-free Fait Accompli
For two-thirds of the state, discussion of casino gambling is little more than intriguing cocktail conversation—a collection of “did you knows,” “how about thats,” and “what ifs.” For East and Middle Tennessee, there’s no pressing financial need to spur casino-friendly initiatives, little day-to-day reminder of its absence, and outside of the circumstantial case one can make for it being a good fit with Gaylord, few realistic contenders in terms of location. For West Tennessee, and in particular Shelby County and the city of Memphis, it’s a different story. “Memphis needs it,” Rep. Cohen says. “It’s crazy for Memphis not to have it. Memphis could be a phenomenal riverboat gambling town. Instead, all the jobs and taxes are going to Mississippi. Mississippi should be sending us a thank-you letter every week.”

“The reality is, Tennessee already has gaming,” says Shea Flinn, the interim replacement for Cohen’s vacant Tennessee State Senate seat during the most recent legislative session.

“People in Memphis can drive across the bridge and be in Arkansas to gamble in five minutes,” continues Flinn, who during his stint introduced a resolution that called for a constitutional amendment allowing casino gaming in Tennessee. “In 25 minutes, they can be in Mississippi. Combine that with the reality that is Internet gambling—all the harm we’re going to have is here, and it’s not going to go away. We have the disease, but we don’t have any of the benefits from the increased revenue, which is staggering.”

Staggering indeed. In November 2006, Southland Park Gaming and Racing in West Memphis, Ark., introduced about 800 automated “games of skill”—electronic games where the outcome is not controlled by chance alone. In its first three weeks, the greyhound race track reported gross wagers of $6.7 million, with about $5.4 million in payouts to bettors, according to the Associated Press. Those same three weeks netted West Memphis a check for more than $20,000 and Crittenden County one for more than $6,000. Taken together, the haul from Southland and Arkansas’ thoroughbred track in Hot Springs yielded $324,039 (from an 18% privilege fee levied on net revenue from the electronic gambling) for the state that month. Such numbers have to be especially galling to officials struggling to pull Shelby County out of a $1.7 billion debt.

The “Tunica Miracle”
Yet Southland’s revenue is just a drop in the bucket compared to Tunica’s spoils. Tunica’s nine casinos, along with a tenth in Lula, Miss., generated $1.25 billion in gross gaming revenue in 2006, making the Tunica market the sixth largest casino market in the nation, according to the AGA. As a result, the Tunica Convention and Visitors Bureau reports $46.6 million went into county coffers, and $93.2 million went to the state. The first Tunica casino opened in 1992. Since then, the casino industry has created more than 16,000 jobs in what was once a struggling county with an agrarian economy. In 1992, the county’s budget was $3.5 million. In 2006, it was $56.6 million.

“People thought the world was going to end when Mississippi legalized casino gambling, and it turns out that it has been easily absorbed and led to great state benefits,” says Pace Cooper, CEO of Memphis-based Cooper Hotels, the largest multi-unit hotel operator in Tennes- see. “It’s a shame to watch the flight of activity and potential revenue leave Tennessee.”

More than 10 million tourists visit Tunica County every year, spending an average of 2.8 nights and $465 per trip, according to the Tunica CVB annual report. Based on its Tunica Visitor Study, in which thousands of people were surveyed, the report estimates that about 59% of Tunica’s visitors went to Tunica to gamble.

Granted, the same report states that 20% of the visitors surveyed also took advantage of Memphis activities, so the Bluff City is reaping some benefits from what the Tunica CVB calls the “Tunica Miracle.” In fact, the Memphis and Tunica convention and visitors bureaus launched a joint campaign last September to attract visitors from Birming- ham and Huntsville. Tunica CVB spokesperson Claire Pittman says the campaign, in which each CVB spent $250,000, generated 14,000 hits on the Memphistun- ica.com Web site. The two CVBs plan to launch another campaign this fall.

“A lot of research has shown that when people choose Tunica as a primary destination point, they factor in a side trip to Memphis,” says Kevin Kane, president and CEO of the Memphis CVB. “They bring in people that we may not bring in, and we bring in people that they may not bring in. They are part of our hospitality industry. We market them like we market Graceland, almost.” The Memphis CVB should certainly be commended on its efforts, and perhaps a small piece of Tunica’s casino tourism pie is enough to satiate state officials. But, as Cohen, Cooper and others point out, it’s not just tourists who cross the border to put quarters in the Mississippi slot machines. From Jan. 1, 2007 to Mar. 31, 2007, the Mississippi Gaming Commission estimated that more than one million Tennesseans visited North River casinos (Tunica/Lula). That’s more than 32%—the largest percentage of any state—of Tunica/Lula’s more than 4.1 million casino patrons during that three-month period. Arkansas residents made up the second largest amount of visitors (17.08%), with Mississippi in third place (16.36%). In 2003, the Memphis Flyer estimated that Tennessee residents generated roughly $365 million for Tunica’s casinos.

Today, former Shelby County commissioner and current Memphis mayoral candidate, John Willingham, one of Shelby County’s biggest casino proponents, estimates that about $800 million in Tennessee money goes to Tunica casinos each year and that about 8,000 Shelby County residents work in Tunica casinos. That’s 8,000 contributions to Mississippi in income tax deductions every payday.

Not that all Shelby County officials believe that casinos are the answer. “I have not been a big proponent of [casino gaming],” says Shelby County Mayor A C Wharton Jr., “because I think our state would do better to pursue sources where there is long-term benefit in terms of cash and spinning off job skills that can be used in higher paying positions. There may be a short-term benefit, but we don’t want to bank on it for the long haul.”

Ironically, Mississippi’s gaming industry has yielded several white-collar benefits for Memphis, along with the “higher-paying positions” of which Wharton speaks. In 2006, Harrah’s Entertainment, which owns three of Tunica’s nine casinos, established a regional headquarters in the Concord EFS building. Another casino player, Myriad Entertainment & Resorts, which is currently building a 540-acre casino resort in Tunica, relocated its headquarters from Canada to Memphis this year.

Against the Odds
Ultimately, the arrival of casino gaming in Memphis faces a much more daunting obstacle than gaining sufficient local support. Take Flinn’s most recent attempt to get gaming on the books. “The legislation that I introduced calls for a referendum,” Flinn says. “Put it to the people of Tennessee, and let them speak.” Though it stalled after Flinn’s successor, Sen. Beverly Marrero, declined to support the measure, even with Marrero behind it, getting a constitutional referendum called would not have been so easy.

The referendum process requires the House and Senate to approve a resolution proposing such an amendment by majority votes (50 of 99 House representatives and 17 of 33 senators) during a two-year General Assembly term. A two-thirds vote of each chamber (66 representatives, 22 senators) is then required during the next two-year legislative term, and finally, Tennesseans must approve the proposed amendment with a majority vote during a gubernatorial election—the next one being in 2010.

Previous attempts, like the 2004 “Save the Pyramid” effort that Krivacka worked on, encountered little support outside Shelby County. The legislation, which was introduced by Rep. Larry Miller (D-Memphis), came about after Minnesota-based casino development firm Lakes Entertainment began studying, on behalf of the Shelby County Commission, the viability of turning The Pyramid into a casino.

“We were very excited about buying land around The Pyramid, as well as operating a hotel and casino in The Pyramid,” says Jim Hamilton, an attorney who represents several gaming companies, including Lakes.

Willingham, who worked closely with Lakes in fleshing out the proposal, says a conservative projection by Lakes estimated that a Pyramid casino would generate at least $30 million a year each for the city, county and state. The facility would also have employed about 2,000 people, and the casino operator would have absorbed the Shelby County and Memphis-owned Pyramid’s $32 million debt.

Perrin Shappley, a Tennessee gaming consultant who worked with the Save the Pyramid group, says the necessary legislation to open the door to such a casino began as a caption bill written to amend the constitution to allow the legislature to authorize casino gambling only in Shelby County.

“We were trying to keep it isolated in the southwestern corner of the state because we knew there would be major resistance in Middle and Northeast Tennessee,” Shappley says. “Eventually, it would have been a bill that would have allowed a referendum within each county, so that the residents of each county could ultimately decide if they wanted it.”

Shappley says the group encountered some East Tennessee support due to the fact that, in a similar Memphis-to-Tunica relationship, tourists and residents cross the border in droves to go to the Cherokee casino in North Carolina. With Lakes’ lobbying clout, the resolution won approval in House and Senate subcommittees but lost momentum after Gov. Phil Bredesen cast doubt on the proposal in an interview. As reported in The Tennessean and The Memphis Commercial Appeal in February 2004, Bredesen said, “The lottery is not a month old. I think the issue of extending gambling any further than it is in the state probably ought to stop right there for five to 10 years, and then let’s look at where we are.”

Shappley says Bredesen, who declined comment for this article, softened his position when he saw that the proposal had local support from the Memphis City Council and the Shelby County Commission.

Meanwhile, The Pyramid is still empty. Although more than a year ago, Bass Pro Shops signed a letter of intent with Memphis to open a mega-store there, the project appears to be on the backburner.

“I think [a casino] is the highest and best use for that property in Memphis and in particular with the situation in North Mississippi and the drain on Memphis,” says former Sen. Bill Bruce, who, also an Adams and Reese attorney, lobbied on behalf of the Save the Pyramid effort.

And while citing challenges associated with Tennessee, such as the “East vs. West” division, and the Bible Belt mentality, Lakes Vice President Richard Bienapfl says, “opening a facility in Tennessee would be very much of interest to us in the future.”

Yet, Bruce and Cohen are skeptical about whether Tennessee will take the plunge anytime soon.

“Maybe I’m bleak,” Cohen says, “but I’ve seen so much opposition to the lottery over the years and gone through so much frustration and disillusionment, that I can’t see the people I know who will be serving in the General Assembly voting for it.”

Bleak words indeed from the man who saw firsthand the sea change in attitude toward a state lottery. But Cohen’s pessimism may be grounded in a simple understanding of how different the political environment is now for casino proponents compared to that faced by supporters of a state lottery.

In a Public Relations Quarterly article titled “The Tennessee lottery battle: education funding vs. moral values in the Volunteer State,” writer Randy Bobbitt sets the scene. “When the Tennessee State Assembly returned from its holiday break in January 2001, the state was facing a $480 million budget deficit for the previous fiscal year and a projected shortfall of $900 million for the year upcoming,” he writes. “Faced with that bleak picture, lawmakers had three choices, each of them unpleasant, but not equally so. One was to raise the state sales tax. A second option—the most politically dangerous one—was to establish a state income tax. A third was to ask voters to lift the constitutional ban on ‘games of chance’ and move forward with Sen. Steve Cohen’s proposed state lottery.”

Granted, Bobbitt’s take on the issue is a bit simplistic, but the attitude of which he speaks represents how unpopular measures can gain support in the presence of fiscal crisis. These days, Tennessee’s financial situation is very different—the buzzword isn’t deficit, it’s surplus. The Tennessee government took in more than $300 million dollars in extra revenue this spring. Meanwhile, TennCare cuts, along with the 2002 penny sales tax increase and the lottery, have helped shore up the state’s fiscal footing.

After the Turn
As much as tax-induced horn-honking may have helped push the state as a whole toward acceptance of a state lottery, one should not underestimate the power of a simpler statewide message. In every town near a border, people would travel in droves to convenience stores every time one of the other states’ lotteries rose to a certain level. As friends, family and co-workers drove from Knoxville to Williamsburg, Ky., from Chattanooga to Ft. Oglethorpe, Ga., from Nashville to Franklin, Ky., or even just crossed the street from Bristol, Tenn., to Bristol, Va., the message was clear: the lack of a lottery was a boon to our neighbors and a constant drain on us. The papers wrote about it. Local television news covered it. Today, residents of Nashville, Knoxville and Chattanooga, and therefore many of the politicians

who represent them, are not very inclined to empathize with Memphis about much of anything, particularly when it comes to casino gaming. But gaming industry officials openly express their certainty that casinos will make their way to every state, except maybe Utah, within the next 20 years. Though Tennessee, they say, may be one of the last, the state will eventually cave when even more of its neighbors join the fold.

Of Tennessee’s eight border states, Mississippi and Missouri already have casino gaming, and Alabama and North Carolina each have some form of tribal gaming. Arkansas, having cracked the door with its “games of skill” at racetracks, will likely kick that door wide open after the legislature tastes a full year of the gaming tax revenue. In Kentucky, where the horse track industry has been lobbying for casino gaming for the past 15 years, the issue has recently gained new momentum as Democratic gubernatorial primary winner Steve Beshear has touted gaming as an option for meeting the state’s financial needs. And while neither Georgia nor Virginia are discussing gaming much right now, a group of downtown Atlanta business leaders did recently ask a consulting firm to study the impact casinos would have on Atlanta. (The firm concluded that one casino could generate up to $1.7 billion in economic impact, create 10,800 direct jobs and yield $135.3 million annually for the state, according to the Atlanta Business Chronicle.)

When it comes to the casino gaming industry, the fact that Tennessee ties Missouri as being the state with the most states bordering it is more than just a piece of trivia. Nowhere is this more evident than in Shelby County, where residents like Rep. Steve Cohen and Shea Flinn have seen firsthand how the negatives accompanying the industry (crime, addiction, etc.) pretty much ignore state boundaries. And those same boundaries effectively dilute the one positive impact most everyone acknowledges—buckets and buckets of cash for municipal, county and state coffers. Ultimately, whether the Volunteer State legalizes casino gaming next (highly unlikely), next to last (possible) or never (also highly unlikely), in terms of impact, casino gaming is already being felt.

For now, with the industry massed in Mississippi and Missouri, it may not seem so pressing—the industry is “over there”—but soon enough, especially if Kentucky joins the ranks of the casino-friendly, it’ll feel more like “right here” no matter where you are. With that in mind, state leaders would do well to decide now how best to react. Will Tennessee beat ’em, join ’em or find some way in between? Step right up. Place your bets.

Feedback: Katie Porterfield

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