Cities in Montana that host casinos no longer can lay claim to a significant portion of gambling tax revenue. The state earned million from its 15 percent in annual video gaming tax in 2014, when keno and poker machines took in 9 million. But most of the tax revenue goes to the state treasury. Just a small portion goes to local jurisdictions, although a large share of the population still thinks municipalities directly gain from licensing more gambling operations.
Rick Ask, administrator for the gambling control division of the Montana Department of Justice, said, “Fifteen years ago, I could have told you with some assuredness that yes,” new gambling parlors would have a significant local impact. But that was before Montana law changed in 2001, when lawmakers passed a bill affecting state taxes owed to local governments.
Columbia Falls City Manager Susan Nicosia said, “It did get cities out of the gambling business. There was a perception in some circles that cities approved casinos because it put money in their fund.”
Prior to 2001, cities and counties took in millions from video-gambling taxes. After the state collected its 15 percent of gross income, it kicked back two-thirds to local governments. But in 2000, lawmakers appointed a task force to look at tax revenue distribution to local governments. “We looked at revenue streams and you had one dime moved around five times,” Nicosia said.
After 18 months, House Bill 124, the “Big Bill” known as the entitlement share payment system, was introduced with the concept of pooling resources instead of collecting and distributing gambling taxes, vehicle fees and other revenues separately. “The Big Bill–the entitlement program–bundled up all these revenues, including gambling, and put them all in a big pot,” Nicosia said. After the taxes and fees are collected the money is redistributed to cities and counties based on a “a complicated formula,” Ask said.
Noted Kalispell City Manager Doug Russell, “Directly, we don’t get money from gambling through the entitlement fund.” Nicosia said, “Kalispell had argued way back when the Big Bill was drafted that they would get more money” under the old system. The key benefit, she noted, was stable annual payments that would make budget planning easier. Casino-host communities do still receive $100 out of the $240 fee per new gaming machines installed at casinos. As a result, with 30 casinos in Kalispell, which are all capped at 20 machines each by state law, the city could have received a maximum of $60,000, or $2,000 maximum for each new casino—not much compared to millions of dollars generated in tax revenue.
Nicosia said the law established that a vote for a new casino is not based on greed. City councils view casinos like any other business when voting on issuing permits, she said.
So while casinos continue to make millions and can be a boon to their owners, cities are no longer direct recipients of those proceeds. A city is no more or less eligible for its entitlement share based on the number of keno or poker machines within its borders.
Nicosia said that this has been an ethical win for local officials, as it establishes that a vote for a casino isn’t a money grab. Casinos can be viewed like any other business by councils which are voting on planning and permits. “You don’t hear about it very much anymore because your council doesn’t make a decision based on machines,” she said.
