Portland Meadows and the Oregon Lottery Desperately Seek Answers for a New Casino Across the River

The best bet for Oregon's only horse track? Changing state law.

(Colin Andersen)

Portland Meadows, the only commercial horse-racing track in Oregon, celebrated its 70th birthday last year. In a legislative hearing earlier this month, the track's general manager and its lobbyist pleaded with lawmakers to help the track, located in North Portland just east of I-5, last a little longer.

They sought permission to install 40 new Oregon Lottery video terminals—effectively, slot machines—on top of the 10 they have right now.

"We're trying to keep the track alive," Mike Dewey, the track's lobbyist, tells WW.

House Bill 2971, which seeks the lottery machine expansion, is just one of the reasons Oregon's tortured relationship with gambling is front and center in Salem. The conversation matters to all Oregonians, not just gamblers, because the lottery is the state's second-largest source of revenue after income taxes.

And like Portland Meadows, the Oregon Lottery's business model is under threat. A new competitor could hasten cuts in public services that lottery money provides.

After years of legal challenges that went all the way to the U.S. Supreme Court, the Cowlitz tribe of Southwest Washington is set to open the new Ilani Casino in Ridgefield on April 24.

Located 25 miles north of downtown Portland, the $510 million, 100,000-square-foot casino will feature eight restaurants, including a Michael Jordan's Steak House, big-name entertainment, 75 gaming tables and—most threatening to Oregon interests—2,500 slot machines.

It's an understatement to say the new casino represents unwelcome competition to Portland Meadows, the state treasury and Oregon's own Native American tribal casinos.

"It's going to have a big economic impact on us," says Justin Martin, a lobbyist for the Grand Ronde tribe, owners of Oregon's largest casino, Spirit Mountain, which at 63 miles from Portland is far less convenient for local gamblers than driving to Ridgefield.

State officials have been bracing themselves for Ilani's impact. The Oregon Office of Economic Analysis, which prepares budget forecasts, expects the new casino to slash lottery revenues by $110 million a year, about 12 percent of the current total. Oregon Lottery dollars go to fund education, parks and economic development.

Nearly half of the state's video lottery terminals are in the metro area, data show, and those terminals are clustered heavily at the south end of Portland's two interstate bridges crossing the Columbia River. Washington does not have a lottery.

Bob Whelan, an ECONorthwest economist who has studied gambling for years for the Oregon Tribal Gaming Alliance, says the impact of Ilani will be enormous.

"It's going to have the same impact as the smoking ban," Whelan says, citing a 2007 prohibition on smoking in bars that sent state lottery revenues into a tailspin from which it took a decade to recover.

One way for the lottery to fight back is to increase the number of video terminals (terminals account for more than 70 percent of lottery revenue). But research done last year found Oregon is already oversupplied with gaming options: Spending on gambling as a percentage of personal income is already about 1.5 times the industry's "saturation level."

There's also a legal barrier to expansion: Currently, lottery retailers other than Portland Meadows are limited to six video terminals per location, part of the state's constitutional ban on private casinos. That ban is the reason a major new casino serving Portland is opening in Washington rather than under private ownership in Oregon.

The ban stems from 1984, when Oregon voters approved state-run gambling but also specified that private interests not be allowed to operate casinos. Just what constitutes a private casino has been a matter of contention ever since.

In 1995, lawmakers passed a bill that would have allowed Portland Meadows to operate 75 video lottery terminals, but then-Gov. John Kitzhaber vetoed the bill because it would have turned the horse track into a casino. An Oregon Supreme Court ruling that year clarified that "voters intended to prohibit the operation of establishments whose dominant use or dominant purpose, or both, is for gambling."

But the state has struggled to enforce the ban. The term "dominant use" has never been defined legally, so the lottery employs a 50 percent test—retailers should get more than half their revenue from sources other than gambling. Except they often do not.

A 2015 state audit found that many lottery retailers—so called "lottery delis"—fail to meet the test. That would make expanding the lottery difficult, even if lawmakers and the governor decided it was good policy. (Gambling critics oppose the expansion of the lottery, saying the costs of gambling addiction outweigh the benefits.)

Voters like the prohibition on private casinos, even if it's illusory. In 2012, with the potential of Ilani on the horizon, Oregonians rejected overturning the private casino ban by 72 to 28 percent. The proposed private casino in Wood Village would have sent 25 percent of revenues to the state—about the same amount that will now be lost to Ilani.

So in effect, while Oregon pretends nontribal casinos are illegal, dozens of them operate in low-rent strip malls, while Washington welcomes a half-billion-dollar investment that will employ 1,200 people.

House Speaker Tina Kotek (D-Portland), whose district includes Portland Meadows, waged war in recent years against the concentration of lottery delis on Hayden Island, just south of the I-5 bridge.

Kotek's spokeswoman says the speaker wants to see the effect the Ilani casino will have before making a policy response. Gov. Kate Brown's spokesman referred questions to the Oregon Lottery.

Lottery spokeswoman Joanie Stevens-Schwenger describes the Ilani as "a really serious threat." She says her agency is responding by replacing its nearly 12,000 video lottery terminals with state-of-the-art machines that are comparable to those in casinos, can  be remotely reprogrammed and will provide immediate feedback so the agency can offer the most attractive games. The lottery is also considering offering products online and reviving sports betting, although neither of those initiatives is ready to go yet.

Portland Meadows' bill died April 17, but the track will probably continue to seek new revenue sources.

Horse racing nationally is in long-term decline. The amount wagered on races has shrunk by a third over the past 15 years, and polling shows Americans have lost interest in the sport. Portland Meadows augments its race card with a variety of other wagering options: betting on races at other tracks; betting on historical races; a large poker room; and 10 video lottery terminals, already more than any other location in Oregon.

Portland Meadows (Natalie Behring)

The Oregon Lottery takes no position on Portland Meadows' desire to increase the number of machines it offers. But the track's effort to diversify faces another hurdle.

Lawmakers are also considering banning for-profit poker rooms, which openly operate in violation of state law and Portland city code.

Portland Meadows operates one of the city's two biggest poker rooms and is currently battling a suspension of its city license. The track's management opposes House Bill 2190, which would allow only nonprofits to host poker games.

Tom Rask, a Portland lawyer who represents Washington card rooms, says Oregon's reliance on gambling for state funding may be tempting policymakers and regulators to cut corners—whether by failing to enforce the prohibition on casinos or not policing poker rooms.

"If they want to allow casino gambling and poker, they should ask the voters," Rask says. "Otherwise, they should enforce the laws on the books."

Willamette Week’s reporting has concrete impacts that change laws, force action from civic leaders, and drive compromised politicians from public office. Support WW's journalism today.