Industry calls Ohio lawmaker's bill to tax gaming credits a loser



An Ohio senator is seeking a tax on promotional gaming credits at the Buckeye State’s 11 casinos and racinos.

Gaming operators and a casino expert oppose Senate Bill 140, which was introduced this month. That opposition includes Hollywood Gaming at Mahoning Valley Race Course, operated by Penn National Gaming Inc.

Ohio Sen. Bill Coley of Liberty Township in Butler County, R-4th, said since he introduced the legislation he hasn’t had negative feedback from anyone except casino owners or workers. “So it’s kind of an interesting dilemma,” he said.

The bill was assigned to the Senate Finance Committee on Wednesday and has four other Republican co-sponsors, all from the Dayton and Columbus areas: Sen. Troy Bladerson of Zanesville in Muskingum County, R-20th; Sen. Dave Burke of Marysville in Union County, R-26th; Sen. Bob Peterson of Washington Court House in Fayette County, R-17th; and Sen. Joe Uecker of Miami Township in Montgomery County, R-14th.

The Dayton and Columbus areas feature two racinos and one casino.

Four casinos were allowed to open after voters passed Issue 3 in 2009 in Toledo and Columbus (Penn National properties), Cincinnati and Cleveland (Dan Gilbert’s Rock Ohio Ventures properties, a partnership between Caesars Entertainment and Gilbert’s Rock Gaming.)

Earlier this year, Rock Ohio bought out the 20 percent that Caesars had owned. Caesars is continuing to manage the Horseshoe Cleveland and Cincinnati casinos, as well as the Thistledown Racino in Cleveland.

Casinos are required to pay a 33 percent tax on their gross receipts. Issue 3 defined receipts as earnings minus payouts, though lawmakers later passed legislation for operators to deduct promotional credits from the total.

Coley is seeking to limit deducting promotional credits to $5 million for qualified facilities. To be qualified under his bill, a facility must have 90 percent of slot machines or table games operating as it promised or was allotted by the state constitution or law.

Locally Penn National dropped the amount of machines it would open with from 1,500 to 850 during the planning process.

“If promotional gaming credit was so vital to Penn National and Rock casinos, then why didn’t they put it in the [Issue 3] amendment and let the voters vote on it?” Coley asked “You don’t need the Ohio taxpayers to forgo $165 million in tax dollars.”

That figure was calculated by Coley’s office based on casino operators deducting more than $500 million in promotional gaming credits from revenues since 2012, Coley explained.

Penn National officials have countered that casino operators have deducted $250 million.

“I think it’s just time to correct the problem,” Coley said.

Within those projections, Coley’s office calculated that Mahoning County would have received an additional $398,564.88 in taxes. Youngstown, a city with more than 50,000 residents, would also have received $398,564.88 in more tax money

When reached to comment, Eric Schippers, Penn National’s senior vice president/public affairs, referred to a statement from March 31: “Eliminating or reducing the discount on promotional credits would nullify one of the very weapons the state needs to help keep Ohio competitive” in regional gaming, Schippers said.

“This proposal seems to be based on the theory that customers receiving promotional credits would have wagered the same amount of money even if they didn’t have the credit. Our experience indicates that’s simply not the case.”

Similarly, Rock Ohio referred to a March 31 statement: “This could lead to a domino effect of a loss of jobs and a loss of millions in tax revenue for the state,” said Rock Ohio.

Both Penn National and Rock Ohio said projections Coley refers to were based on Ohio having only four casinos – not the additional seven racinos, which came later.

The Ohio Office of Budget and Management and Department of Taxation, however, released an Oct. 2, 2009, study on the casino ballot initiative that had tax projections for both scenarios — only casinos, and casinos and racinos. Casinos alone would have raised $643 million in tax revenue versus $470 million in annual tax revenue for the four casinos and seven racinos — an illustration of how the racinos are drawing patrons away from the casinos.

Alan Silver, Ohio University assistant professor of restaurant, hotel and tourism and a casino expert, is skeptical of the Senate bill. He said the gaming industry uses direct marketing, which involves sending free play to patrons much like a shoe store might send a customer a buy one, get one free coupon.

“That’s all marketing, and the industry in Ohio is a new industry and free play is a marketing expense,” said Silver. “If you’re going to tax them on that, you’re going to hinder the operations that traditionally work.”

Rob Walgate, vice president of the Ohio Roundtable, a conservative group challenging Gov. John Kasich’s expanding the Ohio Lottery to make way for the state’s racinos, agreed with Coley’s argument on fewer machines being installed.

“When it comes to the gambling industry and all that’s been done, there were a lot of promises made,” Walgate said. “Any way that we can see the gambling industry deliver on the promises that they made, we’d love to see that happen ... This proves once again that the gambling industry continues to over-promise and under-deliver.”

Coley is quick to say that this is not meant to harm the gaming industry. “We want them to succeed. However, I don’t see where Ohio taxpayers have to expend and forgo the revenue to local schools and government,” he explained.

“To me, the whole thing sounds very anti-gaming, and it’s not supporting the industry,” Silver said.

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