With the issue of tax parity between New York’s commercial and tribal casinos expected to figure prominently in an upcoming report on gambling in the state, the Oneida Indian Nation has commissioned research of its own opposing any proposal to lower the rates paid by its commercial competition.
“Equalization,” as it’s termed, has emerged as a hot-button topic since four commercial casinos opened upstate beginning in late 2016. All four have fallen short of their revenue projections every year since in a statewide market crowded with gambling options𑁋including seven full-scale tribal casinos. They blame part of their struggles on the higher taxes they pay on gaming revenue vis a vis the tribes, a disparity they say prevents them from being able to fully compete, and they’ve been lobbying Albany hard for concessions.
The four pay slightly different rates: del Lago Resort & Casino in the Finger Lakes and Tioga Downs in the Southern Tier pay 37 percent of the win from their slots and electronic table games. Resorts World Catskills near Monticello pays 39 percent. Rivers Casino & Resort in Schenectady pays 45 percent. All four also are assessed 10 percent of the win from their live table games and sports betting.
Federal law prohibits the taxation of Indian casinos, but New York’s three gaming tribes, the Oneidas, Senecas, and Mohawks, have agreements with the state under which they share 25 percent of their annual machine gaming revenue in exchange for market exclusivity across broad areas surrounding their operations. Their table games and sports betting are not taxed.
“The gaming taxes are, just looking at the numbers, unequal,” said Brent Stevens, CEO of Pacific Entertainment, which owns del Lago, the hardest-pressed of the four by tribal competition: from the Oneidas directly to the east and from the Senecas to the west.
“A report that compares the whole roster of taxes and fees between commercial and Indian-operated properties would show ‘apples and oranges, or apples and pineapples,’” he complained. “When you look at everything, we pay more.”
He said del Lago has identified $50 million in capital improvements it could make to enhance its competitiveness, but its higher taxes are holding it back.
“That’s $50 million we can’t invest because of this tax inequality,” he said.
The Oneidas, which operate three casinos in and around Syracuse, commissioned Clyde Barrow, a Texas college professor and highly regarded industry expert, to challenge that argument. Barrow who prophesied the commercial casinos’ struggles back in 2014.
Barrow’s report, issued by a Massachusetts-based gaming research firm, Pyramid Associates, of which he is a principal, argues in essence that the New York market outside of New York City has reached that saturation point in which it would take increasingly larger investments to eke out relatively small incremental gains in revenue. It’s a reality, he argues, that prevails across most of the Northeast.
“There just isn’t the market demand (upstate), no matter what the taxes are,” he told the Syracuse Post-Standard.
“It’s really a zero-sum game. You’re not going to increase revenues by decreasing these taxes. The problem is lack of effective demand for more gaming. Reducing tax rates won’t affect demand.”
Equalization accomplished by lowering commercial casino rates, moreover, would only reduce the overall revenues the casinos provide to state and local governments, the report contends, while ignoring the fact that when all tribal services funded by casinos are factored in, like police, fire protection and education, the actual tax payments are basically the same.
“When casino-to-tribal government transfers are incorporated into the effective tax rate paid by tribal casinos, then for New York and Connecticut, at least, the ‘tax rate’ on tribal casinos is comparable to, or even higher than, the commercial gaming tax rate in New York,” it says.
The tribes also pay the highest revenue-sharing rates in the country (along with Connecticut’s), the report notes, and are also assessed quarterly fees to pay for state regulation and oversight.
In terms of actual payments, the report argues the “effective average” rate paid by the commercial casinos is actually less than in other Northeast markets, not to mention that casinos in states like Pennsylvania and Ohio pay higher rates, and they also benefit from numerous tax exemptions,
And while the commercial casinos have added considerably to the state’s total gaming revenues, the actual increment is in fact far less due to their cannibalizing effect on revenues from the state’s racinos, a calculation which according to Barrow works out to less in terms of new money than what the Oneidas have paid in revenue-sharing since their compact with the state was renewed in 2014.
“There is not significant disparity between Indian and commercial (casino taxes) in New York,” Barrow told the Post-Standard.
“The conclusion,” his report states, “is that New York’s commercial resort casinos are not at a competitive tax disadvantage relative to their regional commercial competitors or in comparison to tribal casinos.”
In delivering the report to the Oneidas, Pyramid also sent a copy to Spectrum Gaming, the firm that is conducting the statewide study sponsored by the New York Gaming Commission and due out in April.
“In light of these findings, we caution the commission against embracing any new tax breaks that fall under the misleading rubric of ‘equalization,’” Barrow said in a note to Spectrum accompanying the report. “The existing economic playing field for commercial and tribal casinos is more than fair to commercial operators. Taxpayers should not be exposed to new financial risks that offer little hope of positively reforming the underlying market and therefore even less hope of delivering a return on a new public investment.”
