In Troubling Times, Casinos Are Looking For A Little Relief

There has not been much good news for the casino industry lately and sometimes even the good news is not really good. For example, two jurisdictions reported an increase in gaming revenues in April. Atlantic City reported an increase in revenue for the first time in years. The casinos in Atlantic City once again reported less revenue for the month, but when the online gaming revenue is added in, the total gaming revenue increased by 3 percent. Across the state line in Pennsylvania the casinos reported a one percent increase in table game revenue. When the table game revenue and the slot revenue are combined, the total gaming revenue for April was down 2.5 percent. I guess that means the news is not really good. The trend in those two states is much like the trend in most jurisdictions – downward, ever downward. Pennsylvania is now fully onboard the Atlantic City express, where each month brings you a little less casino revenue than the year before. For both Pennsylvania and Atlantic City it will get worse when the casinos open in New York.

Atlantic City came out on top in gambling revenue when Internet wagering numbers are combined with land-based casino revenue last month. Combined, the city saw a 3 percent rise in gambling revenue, increasing from $228.5 million in April 2013 to $235.9 million last month. While land-based casino revenue in April was down nearly 2 percent to $224.4 million, $11.4 million earned in Internet gambling revenue for the month, more than made up the difference. Jennifer Bogdan, Press of Atlantic City, 5-15-14

Overall, Pennsylvania’s 12 casinos brought in $62.2 million and paid $8.9 million in table games taxes — a 1 percent increase over 2013. Coupled with figures on slot machine revenue released earlier this month, overall gross revenue from both slots and tables was $259.9 million this April, a 2.5 percent drop. Matt Assad, Morning Call, 5-19-14

Politically, the decline in slot revenue in Pennsylvania is a much more sensitive subject than the revenue declines in any other jurisdiction. In other states, the declining tax revenues are putting pressure on the state budget. But in Pennsylvania the lost revenue is going to start putting pressure on the budgets of individual citizens. In Pennsylvania, a portion of the tax on slot revenue goes directly to citizens in the form of property tax reduction. If that property tax subsidy goes down every year, as it is certain to do, there will be serious pressure on the state’s lawmakers. That pressure is apt to put the casino industry in Pennsylvania in a more difficult situation than it is in other states. It will be a situation in which it is unlikely the industry could expect any relief from lawmakers. Pennsylvania has a very high tax rate of 55 percent on slot machine revenue. A reduction in that rate would definitely help the state’s casinos to compete and survive.

Pennsylvania charges the highest tax rate on slot machine revenue in the country — about 55 percent — meaning the state has been racking up tax proceeds like T-shirt sales at a rock concert. But the golden age of gambling growth may have peaked in the Keystone State, and casinos will have to look for new ways to attract guests just to hold their own. Homeowners looking to gaming for property tax relief, take note: This is about as good as it’s going to get. Revenues from the state’s casinos may have topped out, and with that, so may have the tax relief. Howard Frank, Pocono Record, 5-19-14

The casinos in Pennsylvania are not likely to get that reduction with so much political capital at stake. However, in other states there is reason to hope for tax breaks, reduction in regulatory costs and other measures to protect the local casinos. As the casino industry sinks deeper into the pit of lowered consumer spending, market saturation and intense competition, relief from lawmakers is getting to be a major issue. In Rhode Island, Indiana, Delaware and Missouri, measures have been introduced recently to reduce tax rates, allow riverboats to move onto land, increase credit limits to attract high-rollers, impose limits on the introduction of new casinos and reduce regulatory costs.

The casino industry is at a tipping point; it is on the edge of tipping from an era of go-go, expand and then expand more to an era of entrenchment and even retreat. Some expansion is still being proposed, but it is being tempered with voices of caution. In New Jersey there is a movement to allow the Meadowlands to become a casino, Illinois is considering yet another expansion initiative, Pennsylvania is debating an additional license for Philadelphia and several states are considering online gaming. But in almost every case there is strong opposition to expansion, often backed up with studies citing market saturation and declining revenues. Even in Pennsylvania a report has been issued that suggests the tax rate is too high and the regulatory costs are excessive. In the opinion of the report writers, only Philadelphia is large enough to support one more casino.

Sponsored by Sen. Brian Bushweller, D-Dover, casino bailout legislation largely mimics the March recommendations passed on by the Lottery and Gaming Study Commission. The legislation awaits a hearing in the Senate Finance Committee… Denis McGlynn, president and CEO of Dover Downs Gaming and Entertainment and Dover Motorsports Inc., has said not receiving any money from the state would spell disaster for casinos, leading to potential layoffs, shutdowns of certain operations and a cutback on marketing. Jon Offredo, News Journal, 5-21-14

A credit line of up to $75,000 could be extended to gamblers at Twin River under legislation set to be reviewed by the Rhode Island House Finance Committee. The introduction to the bill calls it imperative that legislative steps be taken to “preserve and protect the state’s ability to maximize revenues at Twin River in an increasingly competitive gaming market.” Rhode Island is projecting a significant loss of gambling revenue because of expected gambling expansion in Massachusetts. Associated Press, 5-21-14

A proposed Lawrence County racetrack and casino would have an impact, though not a large one, on revenue at Rivers Casino, according to a report on Pennsylvania gaming commissioned by the state Legislature. The report, by Econsult Solutions of Philadelphia, found Pittsburgh-area casinos face increased competition from Ohio venues and from the proposed Lawrence Downs, about one hour north of Pittsburgh. Karen Langley/ Bill Toland, Pittsburgh Post-Gazette, 5-8-14

The oversight body for Pennsylvania’s gambling industry has more employees per casino than any other state, including Nevada. A legislative report found the Pennsylvania Gaming Control Board has 15 times more workers per casino than Nevada. The Keystone State has about as many employees as New Jersey, home to Atlantic City’s boardwalk destination casinos. Melissa Daniels, Pittsburgh Tribune-Review, 5-9-14

The casino industry has reached a tipping point. The attitude of proponents of expansion in New York, Maryland and Massachusetts is still one of unbridled expansion. But those states and those proponents stand in stark contrast to the rest of the country. The casino industry and lawmakers in the rest of the country are starting to recognize a new era. In the next few years, expansion will become a minor issue. Instead of debates over expansion, there will be many attempts to bring some relief to casinos. Most states are beginning to realize that casinos are struggling under the weight of taxes and regulations formulated in better times. Casinos are all faced now with increased and intense competition for what seems to be a diminished gaming dollar. Increasingly, casinos will be going to the statehouse looking for a little relief, a helping in hand in trying times.



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