In this three-part series, we’ll look at how Texas’s neighbor states – Oklahoma, Louisiana and New Mexico – could be impacted if the Lone Star State legalized gambling. Interestingly, all three states allow some form of legalized gambling.
In Part 1 of this series, we examined the relationship between Texas and Oklahoma. With Part 2, we looked at Louisiana. In this installment, we examine how New Mexico would be impacted by legal gambling in Texas.
A recent survey by the Dallas Morning News and the University of Texas at Tyler found that 57% of Texans support legalized casino gambling. Only 29% oppose it.
Part 3: New Mexico
New Mexico, a state of barely two million people, is home to 21 tribal casinos run by 14 tribes. It also has five commercial racinos run by the New Mexico Gaming Control Board.
Only two of the casinos sit within 130 miles of the Texas border. They are the Zia Park Hotel Casino & Racetrack in Hobbs and the Sunland Park Racetrack & Casino in Sunland Park. Sunland is just across the border from El Paso.
However, the Eastern New Mexico landscape is dotted with horse racing tracks across the arid desert. They hold tremendous potential for the state.
Hundreds of miles of wide-open plains and a strip of the Chihuahuan Desert create a substantial geographical buffer between mid-sized Texas cities and the New Mexico gaming economy. The cities of El Paso, Lubbock and Amarillo (combined population of 1.2 million) represent the greatest impact on gambling in New Mexico.
The race for a sixth racino
New Mexico currently operates five racinos but has licenses for six. In 2018, a race heated up between two Eastern New Mexico towns – Clovis and Tucumcari – to open the sixth.
The following year, a consortium of existing casinos and racinos and the New Mexico Horsemen’s Association commissioned an economic impact study. They wanted to analyze the prospect of a new casino or racino in Eastern New Mexico. The study found that by both opening a sixth racino and limiting gaming restrictions statewide, the state could increase their Gross Gaming Revenue (GGR) by 102%.
Moreover, the study found that “the majority of this gaming revenue would come from customers who live in Texas.” Three Eastern New Mexico casinos would account for the majority of the increased revenue. All of which seems like a win for the state.
The race, shockingly, fizzled out due to an idiosyncratic feature of New Mexico fiscal and economic policy: Prudence.
The New Mexico Racing Commission (NMRC), which oversees horse racing and racino development, decided not to green light a sixth racino. The decision came mainly because of pushback from Lea County, the area surrounding Zia Park.
Study analyzed Zia Park’s arguments
The consortium’s study found that a sixth racino “would generally not cannibalize a material number of in-state customers.” The distances between competing in-state markets and new racino sites in Clovis and Tucumcari are as follows:
These distances present enough of a geographical barrier to bettors and New Mexicans working in those markets to discourage them from making the commute, the study found. That conclusion negated the arguments of Lea County.
However, the study did find that when analyzing distances and drive times between Clovis, Tucumcari and Hobbs [Zia Park] and various feeder markets in Texas, “it is apparent that modest cannibalization of Zia Park customers from the Lubbock, TX feeder market could be expected.” Adding Amarillo, the drive times between these Texas feeder markets and the Eastern New Mexico casino/racino markets are as follows:
Considering these distances, Clovis and Tucumcari are both better positioned than the existing casinos in New Mexico to absorb West Texas customers. Thus, an argument emerges as to whether the Zia Park market would “lose” Texas gamblers to a sixth racino.
At this point, it is worth considering how legal gambling legislation in Texas would affect West Texas. The previous argument would be nullified if casino gambling became legal in Texas.
Texas’s (potential) casino/racino landscape
One of the strongest initiatives in Texas gambling legislation has been for the development of four resort casinos in four metropolitan areas: San Antonio, Austin, Houston and Dallas-Fort Worth.
To residents of Amarillo, Lubbock and El Paso – the cities that impact New Mexico gambling the most – all of those options are over 350 miles away. Further, pari-mutuel horse racing, previously legal but currently in limbo in Texas, is no closer: Dallas, San Antonio, Austin and Houston are the only options.
Considering those distances, any Eastern New Mexico casino is better positioned to serve West Texas markets than the current casino plans for the state. Thus, the most popular legalized gambling initiatives in Texas would likely not significantly impact New Mexico casinos. Eastern New Mexico casinos would still be the best gambling options for West Texans.
Depleted horse racing concerns NM officials
Since 2018, NMRC Commissioner Ismael Trejo has argued that adding a sixth racino would spread the horse racing industry too thin. Viewers would be forced to watch depleted races featuring five to six horses instead of the usual eight to nine.
Last month, Trejo testified on the reason for his consistent denial of a sixth racino, noting that the number of thoroughbreds in the country had dropped 50% since 2000. The data are confirmed by a report from The Jockey Club on the state of thoroughbred breeding in New Mexico.
The study notes that New Mexico bred 424 mares to stallions in 2021, down from 1,214 in 2001 It was a 65% decrease. The same is true for stallions. The state bred 53 stallions in 2021, down from 149 in 2001, a 64% decrease.
This dearth of thoroughbreds puts the industry in a very “fragile” place, Trejo said. Coupled with the impacts of the COVID-19 shutdown, NM’s gaming market may struggle to serve the waves of Texas gamblers.
New Mexico’s strict COVID-19 response
In 2020, New Mexico had the strictest COVID restrictions in the country based on a study by WalletHub. These restrictions did serious damage to the casino industry. As did the complete shutdown of all commercial gaming from March 16, 2020, to late February 2021.
The NMRC, for its part, completely shut down major events. One of those was the 2020 Sunland Park Derby (a lead-up to The Kentucky Derby). Race tracks were allowed to host races to empty stands in May 2020. But the casinos were still shuttered.
One New Mexico trainer summed it up.
“We depend on the money from the slot machines for our purses. It accounts for about 85 to 90% of our revenues.”
As a result, trainers took their horses elsewhere. And many went to Texas.
Entire operations moved from New Mexico to Sam Houston Race Park in Houston, which saw record handles for both 2021 and 2022. Many New Mexico trainers worry that those businesses won’t come back.
The Sunland Derby returned for the 2021-2022 season, posting an overall handle of $3.5 million. That total is down 27% from 2019, which posted $4.8 million.
With these trends in mind, the NMRC has held firm in its decision.
Commission has 90 days to act
The NMRC has been ordered by Albuquerque Judge Nancy Franchini to act within 90 days on a current bid for a new racino in Tucumcari. It would add 500 new jobs and collect $55 million in new revenue by 2025, according to projections. Most of that money would come from Texans.
Trejo has given no indication that he would support it. He said, as he has for the last three years, that “it just isn’t the right time.”
There is potential for the commission, which was recently completely restaffed by the governor, to overrule Trejo. There is also the potential to appeal the NMRC’s decision to Franchini. She could overrule if she determined the bid was denied for invalid reasons. The 90-day period will expire in mid-September.
New Mexico differs from Oklahoma and Louisiana
The influx of potential Texas gamblers into an already fragile system has proven to outweigh the economic boosts so far.
Due to the losses from COVID-19, this prudence separates New Mexico from other states neighboring Texas. They happily capitalize on their proximity to Texas gamblers.
Further, the geographical barrier that isolates West Texas creates an opportunity for New Mexico. They could craft a gambling region in Eastern New Mexico that would benefit from Texas gamblers.
Not to mention, it could rebuild the decimated horse racing industry in The Land of Enchantment.