Lawmakers scramble to replace millions
The Pennsylvania Supreme Court has struck down the provision of the 2004 gaming law that provides 2 percent of gross slot-machine revenues to host communities as unconstitutional, sending state lawmakers scrambling to replace around $140 million in revenues under a four-month deadline to replace the provision with something that passes constitutional muster.
The state’s highest court, in ruling on a challenge brought by a casino licensee, held that the host-community tax violates the uniformity clause in the state constitution, which requires that “all taxes shall be uniform, upon the same class of subjects.” The key provision in violation of the clause, the court held, is the requirement that all casinos pay at least $10 million to the host municipality, regardless of slot revenue.
That means that casinos generating less than $500 million in slot revenues are paying more than 2 percent, and must continually write “true-up” checks at the end of each year to make up the $10 million fee. Mount Airy Casino Resort, in the Pocono Mountains resort region of Eastern Pennsylvania, filed the lawsuit last year after writing a check for $7.2 million as a true-up payment.
Mount Airy is supported in its challenge by other casino licensees, such as Sands Bethlehem, which paid $4 million to make up its revenue requirement to the city of Bethlehem. Harrah’s Philadelphia in Chester and Rivers Casino in Pittsburgh filed similar challenges to the provision.
With slot revenues flat for the year, even Parx in Bensalem, the state’s most successful casino property, had to pay $2.4 million to reach the requirement last year. The most paid was $7.7 million by Presque Isle casino near Erie. (The host-community provision does not apply to table-game revenues.)
For Bethlehem, the onetime steel town rejuvenated when Las Vegas Sands built its casino resort on the brownfield site of the former Bethlehem Steel plant, the host-community fee represents 12 percent of the annual city budget. Leaders of other communities across the state decried the decision, which cannot be appealed, as potentially devastating to local economies.
“We respectfully disagree with the court,” said Lehigh Valley Senator Pat Browne in an interview with the Allentown Morning Call. “We will take action and we’ll do it in such a way to maintain the casino obligation to our local communities. This would absolutely devastate these towns.” Brown represents the district including Bethlehem.
Meanwhile, Bethlehem is asking the Sands for a “financial insurance policy” of sorts, according to the Morning Call. Bethlehem expects to bring in about $9.8 million in host fees from the casino, and the city
stands to lose about 12 percent of its $73 million budget, or the equivalent of 100 police officers.
Officials of the city of Pittsburgh are asking for a similar insurance policy from the Rivers Casino. Officials say they want Rivers to volunteer a payment of $10 million a year to make up for the host fee, should lawmakers fail to pass an alternative host-community arrangement. After a meeting of Pittsburgh’s Intergovernmental Cooperation Authority (ICA), city Finance Director Paul Leger told the Pittsburgh Tribune-Review he’s confident the casino will pony up the money.
“They expected to pay this when they opened the casino,” Leger said. “There has been no resistance from the casino. Our discussions have been very cordial.” Rivers spokesman Jack Horner confirmed in an email to the newspaper that the casino is considering the request.
The 2 percent carve-out of slot revenues for local municipalities, as well as a 4 percent cut for counties, was added to the 2004 gaming law after closed-door discussions that were criticized by many. In an interview with the Associated Press, former Democratic state Senator Vincent Fumo said he was “literally buying votes at that time by adding things for local governments.”
Many fear that attitude could derail the legislature’s effort to replace that $140 million in host fees within the four-month deadline the court has imposed. While Senate Minority Leader Jay Costa, a Democrat whose district includes Pittsburgh’s Rivers Casino, predicts a vote could take place as early as this month on a new revenue plan, others feel lawmakers representing non-casino districts will seize the opportunity to demand a piece of the casino revenue pie.
“I’m very concerned about the potential loss of funds needed for projects in our community,” state Senator Rob Teplitz, whose central Pennsylvania district includes Hollywood Casino, told the AP. “And I fear that opening up the gaming law to address the court’s concerns could produce a free-for-all that could jeopardize that funding even further.”
Added Fumo, “They’re all going to say, ‘I want a piece of the action, even if they’re 100 miles away (from a casino).”
The casino lobby also is expected to fight hard against any measure that will impose a uniform fee of $10 million or more for local communities. In his interview with the Morning Call, Browne said he’s ready for the fight. “They knew the deal when they applied for a gaming license,” he said of casino operators. “We’re not going to just let them avoid this obligation.”
