2017 calendar favors continuous local funds
State Senate leaders in Pennsylvania say a vote on the combined measure to legalize internet gaming, regulate daily fantasy sports and restore the community host tax that was struck down by the state Supreme Court is not likely to happen this year.
Senators have one last two-day lame duck session on November 15 to vote on a last-minute measure passed by the state House in an extra voting day two weeks ago. House supporters of iGaming took advantage of an urgent need to pass a fix to replace the community-host fee struck down by the state Supreme Court, attaching a straight authorization of iGaming and DFS to a host-fee fix already passed by the Senate.
The host fee established by Pennsylvania’s gaming law—2 percent of slot revenues or $10 million, whichever is greater—was held to violate the state constitution’s requirement for uniform taxes. The court instructed that lawmakers pass a substitute fee by January 26.
As the regular session drew to a close, the Senate overwhelmingly passed a bill that would require casinos to pay a flat $10 million fee to the local host community, prorated, until May 1, to give lawmakers time to negotiate a permanent fix in the next legislative session. The House stripped the sunset provision, making the fee permanent. The casinos that originally challenged the host provision are likely to challenge the flat $10 million fee on the same grounds of uniform taxes.
As for iGaming, there was no guarantee the Senate, which has previously rejected various gaming expansion measures, would pass it even if it is brought up at the one-day session. Senate leaders, speaking to the Allentown Morning Call, say the last-minute addition of iGaming and DFS to the host-fee bill virtually guarantees it will not come up at the session, and the measure will die with the two-year session.
“We told the House before, we don’t have consensus on iGaming, yet they chose to load it into the host fee bill,” Senate Majority Leader Jake Corman told the newspaper. “That basically killed it for this session.”
Senator Pat Browne, chair of the Senate Appropriations Committee, sought to calm officials of local municipalities such as his home district of Bethlehem, which depends on community host fees for 12 percent of its budget, that lawmakers can keep the casino money flowing to municipalities through an early 2017 resolution.
Browne noted that the Supreme Court decision cuts the host fee off as of January 26, after which the next installment of the annual $10 million fee being contemplated would not be due until April 15—giving lawmakers enough time to pass a new host-fee bill. “Any municipality preparing their budget can book the casino number they were expecting, because it’s probable revenue,” Browne told the newspaper. “We may not have a deal before the court deadline, but we’ll have it settled before they miss a check. I believe that.”
Absent quick passage, municipalities could opt for tax anticipation loans, lines of credit or other stopgap measures until a new host fee is passed.
Even if that happens, the problem is not likely to go away. Attorneys for Mount Airy Resort, which filed the original lawsuit challenging the host fee, have said they are certain to file another suit challenging a flat $10 million fee, which they say puts a larger tax burden on smaller casinos than on the most profitable ones.
No casino has ever registered high enough revenues from 2 percent of slot take to equal the $10 million minimum. Casinos must give the state a so-called “true-up check” at the end of each year to satisfy the minimum.
