Lawmakers begin process of examining gaming expansion proposals, fix to local share assessment

Lawmakers begin process of examining gaming expansion proposals, fix to local share assessment

Author: Jason Gottesman/Tuesday, March 7, 2017/Categories: News and Views

The House and Senate committees responsible for oversight of gaming-related legislation began the process Tuesday of examining much-discussed proposals to expand gaming in Pennsylvania and also fix the local share assessment paid by brick-and-mortar casinos to host municipalities that the Pennsylvania Supreme Court found unconstitutional last year.

 

Tuesday’s joint hearing kicks off the start of considering comprehensive changes to Pennsylvania’s Gaming Act that are under significant time constraints.

 

Not only is the state budget for the current fiscal year counting on $100 million in revenue from gaming expansion, but the governor’s proposed budget is counting on gaming expansion revenue for the coming and future fiscal years.

 

A final spending plan for the next fiscal year is due in just over three months.

 

Adding more urgency to the local share assessment portion of the committees’ task, the Supreme Court has only given the legislature until May 26 to implement a fix that will pass constitutional muster.

 

That being said, it was apparent Tuesday that those helming the committee through the process of considering the immediate proposals were going to take a deliberate process in examining what the specific legislation should look like.

 

“The goal is to allow everyone to have a chance to state their peace in front of the General Assembly,” said House Gaming Oversight Committee Majority Chairman Scott Petri (R-Bucks). “There will be subsequent hearings, and certainly joint with the Senate, to talk about [the] issues and come before the committee.”

 

As the hearing began, it was clear members are seeking to protect the current industry, which in just over ten years of legalized slots gaming and over six years in legalized table games, has created an industry that provides property tax relief as well as funding to Pennsylvania’s General Fund.

 

“Our first priority must be to protect the gaming landscape in Pennsylvania, which has been a crucial economic benefit for the Commonwealth and many communities,” said Sen. Mario Scavello (R-Monroe), who is the Majority Chairman of the Senate Community, Recreational, and Economic Development Committee.

 

Though the hearing was meant to be a broad overview for new committee members who were not privy to the in-depth discussions last session, different interpretations on the effect of introducing things like iGaming to Pennsylvania and the response of the current industry were elucidated from testifiers.

 

Speaking on behalf of Caeser’s Entertainment, senior vice president of government relations and development David Satz said studies show that Pennsylvania’s iGaming market could bring in between $256 and $350 million annually, not counting fees and income tax on top of that.

 

“I think the internet is here to stay,” he said, later noting that online gaming already takes place in an unregulated, non-recouped format offshore.

 

“A simple prohibition does not work.”

 

Most were supportive of iGaming, so long as it is run through existing brick-and-mortar casinos.

 

That being said, not all from the industry were so optimistic about iGaming’s future and what it means for Pennsylvania’s existing casinos and current stream of revenues.

 

According to Anthony Ricci, CEO of Parx Casino, the differing taxes in proposed legislation—namely House Bill 392 introduced by Rep. George Dunbar (R-Westmoreland)—will result in more players seeking out online gaming and impacting the current revenue stream as well as brick-and-mortar facilities.

 

"If you assume generously that we could generate $100 million in revenue through the internet, I am certain that 50 percent of that total would come at the expense of an existing casino," he said in testimony submitted to the committees. "In that case the Commonwealth would lose almost $15 million dollars per year by trading for slightly more revenue at a much lower tax rate."

 

Ricci’s comments were in line with a number of members who were concerned about not only the varying tax rates, the dilution of the current gaming market given Pennsylvania’s uniquely developed casino industry.

 

“If we have internet gaming across the Commonwealth, I believe you will see less property tax relief and that’s not what the public bought into when we opened this,” said Sen. Lisa Boscola (D-Northampton).

 

“We also sold this as an economic development tool, for all the spinoff that happens when you have a brick-and-mortar casino…I don’t know if these brick-and-mortar casinos are really going to want to expand in those areas given internet gaming.”

 

Others, while noting the change in the current setup could have a detrimental impact to Pennsylvania’s bottom line, also said there are philosophical concerns with bringing gaming into people’s homes.

 

“Just the public policy of turning this into a casino in everybody’s home is just a bad policy from a moral standpoint,” said Sen. Tommy Tomlinson (R-Bucks).

 

One organization testifying Tuesday spoke directly to that moral component.

 

"Internet gambling is a threat to families and children," said David Cookson from the Coalition to Stop Internet Gambling.

 

"There is no way to prevent a legal player from letting a child use their device to gamble. There is no way to guard against a child using their parent’s password to access online gambling sites."

 

Meanwhile, others testified to the murky legal standing of sports betting—a proposal incorporated in some legislation—as well as the potential for VGTs (also known as video gaming terminals) to significantly impact current casinos.

 

As to the local share assessment, many casino operators testifying noted they have entered into a memorandum of understanding with municipalities and counties to hold them harmless from the Supreme Court’s decision pending litigation, however, they were light on suggestions for a new formula.

 

"[W]e are flexible on the approach so long as it does not increase our payments above the two percent county and $10 million township levels," Ricci said.

 

The committees are expected to hold another hearing on gaming expansion later this month.

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