Casino gambling tax revenue rises, but its future is uncertain

Published: Sun, February 17, 2013 @ 12:09 a.m.

Towns, schools win little as new funds represent a trickle of income lost

By Peter H. Milliken


Tax revenue from casino gambling is welcomed, but it falls far short in making up for millions in lost state funding, Mahoning Valley government and school officials say.

Revenue to Youngstown and to Mahoning, Trumbull and Columbiana county governments has risen steadily in the first three quarterly distributions.

Last month, public school districts were allotted their first semiannual distributions from the 33 percent gross casino-revenue tax, with amounts based on their student enrollments.

Total statewide distribution to schools was nearly $38 million or about $21 per child.

But in all cases, especially in school districts, the new gambling revenue is a small contribution to multimillion-dollar budgets.

“We’re going to be cautious with our projections because it’s a new thing. We don’t know what could happen,” said Carol McFall, chief deputy auditor of Mahoning County, based on the three installments of casino-tax revenue allotted to the county so far.

“We just don’t have enough experience with it to really get all gung-ho,” she added.

In the first distribution of casino-tax receipts to local governments last July, the city of Youngstown and Mahoning County governments each got $103,557; Trumbull County got $182,668; and Columbiana County got $93,899.

Those numbers doubled to $206,692 each for Youngstown and Mahoning County; $364,591 for Trumbull County; and $187,414 for Columbiana County in the next quarterly installment in October, according to Ohio Department of Taxation figures.

In the January distribution, the numbers grew again to $274,706 each for Youngstown and Mahoning County; $484,563 for Trumbull County and $249,084 for Columbiana County.

Casinos in Cleveland and Toledo opened last May, and the Columbus casino opened in October. A casino in Cincinnati will open March 4.

Under the casino tax-distribution formula, counties whose largest city’s population exceeded 80,000 in the 2000 U.S. Census share the revenues equally with their largest city.

That rule applies to Mahoning County and Youngstown, the county’s largest city, despite Youngstown’s population decline from 82,026 in 2000 to 66,982 in 2010.

“We are grateful to have this new stream of revenue, and council plans to use it wisely, given the economic difficulties facing the city with the reduction in income-tax revenue and cuts in support at the state level,” said Kyle Miasek, assistant Youngstown finance director.

The city doesn’t earmark casino-tax revenue for any specific purpose, but it goes into the city’s general fund for various operations. Last year, the city spent $39.6 million from its general fund.

Miasek, who was a state-revenue forecaster for 12 years in Connecticut before taking the job in Youngstown, said casino revenue should be treated as an “unpredictable windfall,” subject to the health of the economy, the public’s entertainment-destination preferences and other factors.

Because of the downsizing of the city’s larger employers, including the hospitals, Youngstown State University, the city itself and the post office, revenue from the city’s 2.75 percent income tax has declined. After slumping to a recession-induced low of $40.5 million in 2009, it was $43.9 million in 2011 and dropped to $42.4 million last year.

McFall projects Mahoning County will continue to receive about $275,000 in quarterly casino-tax revenue, but, even at that rate, it would be a small contribution to the county’s general fund, whose authorized total spending is $53.6 million this year.

Mahoning County commissioners approved putting 60 percent of the county’s casino-tax receipts in reserve for future debt payments and allowing the remaining 40 percent to be used for operations.

This formula remains in place until the reserve reaches 15 percent of the general fund, which would now be about $8 million, unless the commissioners unanimously declare a financial emergency.

Trumbull County officials used the first installment of casino-tax revenue to buy sheriff’s cruisers, said county Auditor Adrian Biviano.

They had intended to use such revenues for capital improvements, including building renovations, but, because of declines in other state funding, they’ll be forced to use it for operations, he explained.

This year’s casino revenue to the county, which Biviano estimates will total $1.2 million to $1.3 million, will not be sufficient to compensate for losses in other state funding, he added.

Casino revenue is unpredictable, he said. “We want to be as conservative as possible because it’s an unknown,” he said of gambling-revenue projections. “You can’t really plan because you have no number to base it on,’’ Biviano added.

To put the casino-tax income projections in perspective, Trumbull County’s general fund budget is about $43 million this year.

Biviano also cited an October 2009 Ohio Department of Taxation projection that video-lottery terminals installed at all Ohio racetracks could reduce casino revenue by as much as 27 percent.

The Ohio Lottery Commission reports that six of Ohio’s seven racetracks have applied for or received VLT licenses.

Yet another threat to casino revenues is unregulated gambling at Internet cafes, which the County Commissioners Association of Ohio would like to ban.

“We are getting it every quarter. We never know how much,” Columbiana County Commissioner Jim Hoppel said of casino-tax income.

The amount is uncertain because the public’s gambling-destination choices are unpredictable, he said.

Columbiana County’s annual general fund budget totals about $18 million.

In that county, the casino-tax money has been used to replace the county-jail roof and pave the county courthouse parking lot. Commissioners plan to use it to demolish the vacant former county Job and Family Services building and toward meeting the maintenance needs of about 30 county-owned buildings, Hoppel said.

Collectively, Mahoning County’s school districts were allotted $722,597 in the first installment for schools last month, while Trumbull County’s schools were allotted $670,020 and Columbiana County’s schools, $350,893.

The biggest beneficiaries were school districts with the largest enrollments.

Schools officials said they’re treating the casino-tax income, which is going into their general funds, as an uncertain revenue source, which does not compensate for losses in other state funds in recent years.

Some of the larger Mahoning County school district casino-tax revenue numbers reported by the Ohio Department of Taxation were: Youngstown City Schools, $112,994; Austintown schools, $112,459; Boardman schools, $95,563; Canfield schools, $60,448; Poland schools, $45,987; and Struthers City Schools, $41,915.

“Every dollar counts,” said Brian Rella, interim Youngstown City Schools treasurer. However, he said the money won’t have a major impact on the district’s $100 million annual operating budget.

“In a $39 million budget, $95,000 is not a whole lot,” Richard Santilli, treasurer of Boardman schools, said of circumstances in his district.

“We’re appreciative of anything that the state is going to give us, but we’re also recognizing the loss” of about $2.7 million in other state-funding sources between 2012 and 2013, he added. “We lost roughly $2.7 million, and they gave us $95,000,” he said.

“I would be conservative with the estimates because I have my doubts in the long run that the gaming industry is going to be generating huge profits to divide up between the counties and schools,” Santilli said.

“Is there a saturation point?” Santilli asked, noting the gaming industries in West Virginia and Pennsylvania that predated that of Ohio. “I wonder if we’re a few years too late,” he said.

Pattie Kesner, Canfield schools treasurer, said she’s not making any projections for casino-tax revenue because the amount is too small and unreliable to do so.

The January installment is 0.26 of 1 percent of the district’s $23.7 million annual operating budget, she said.

In Trumbull County schools, some of the bigger numbers were: Warren City Schools, $110,499; Howland schools, $62,574; Niles City Schools, $54,051; and Hubbard City Schools, $40,501.

“We don’t have any special plans for that money,” and it isn’t earmarked for any specific purpose, said Aaron Schwab, communications coordinator for the Warren City Schools, which has an annual operating budget of about $62 million.

In Howland, the first casino-tax installment constitutes 0.22 of 1 percent of the district’s $27.6 million annual general-fund budget, said Tom Krispinsky, schools treasurer.

The casino income doesn’t even come close to compensating for an $800,000 decline in real-estate tax revenue from September 2011 to September 2012 or for the $560,000 drop in state tangible-personal property tax money from 2012 to 2013, he said.

In Columbiana County, some of the large allocations were: East Liverpool City Schools, $46,682; Salem City Schools, $43,453; and Beaver Local Schools, $41,230.

In Salem, where the school district’s annual general fund budget is about $18 million, James E. Wilson, schools treasurer, said of the casino money: “There’s a lot of uncertainty. ... I’m not going to count on it.”

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