Casinos to oppose host-fee fix
After the Pennsylvania legislature added last Thursday as an extra voting day after the scheduled adjournment of the two-year session, the state House of Representatives passed a bill legalizing internet gaming and daily fantasy sports regulation as part of an emergency bill to replace the host-community fee struck down by the state Supreme Court.
The House had previously rejected the state Senate’s attempt to pass a straight iGaming bill, having passed a comprehensive gaming expansion package that included slot machines at airports and off-track betting facilities as well as legalizing iGaming with a 14 percent revenue tax and providing a framework for regulation of DFS.
The bill passed by the House last week does not set out the tax rate, and provides little detail other than authorizing the state to regulate and tax internet gaming and daily fantasy sports.
The main purpose of the bill, though, was to replace the host-community fee casinos pay to municipalities and counties where they are located. The 2004 gaming law required casinos to pay their host communities 2 percent of slot revenues or $10 million, whichever was higher. With support of several other casinos, Mount Airy Resort filed a lawsuit challenging the provision on grounds it violated the state constitution’s requirement that taxes must be uniform. Small casinos like Mount Airy were paying a higher percentage tax rate than large casinos, and most of the time, the casinos had to make payments to the municipalities at the end of each year to satisfy the $10 million minimum.
On Wednesday, the state 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 Senate had adjourned its two-year session by the time the House passed the measure. However, lawmakers have one more chance to vote on it after the election, when the legislature reconvenes for a two-day lame-duck session on November 16. Should the measure not be voted on by the official November 30 end of the session, it will die with the session, and the issue will have to be addressed by the new legislature early next year.
The fix is not likely to survive a promised legal challenge from Mount Airy and other casinos, with critics saying the flat fee poses the same constitutional problem—it imposes a larger percentage tax on small operators than on large operators.
Casinos also complained that the measure would impose a different formula, prorating the $10 million over the entire year. “This isn’t status quo, and it isn’t helping anyone,” Mount Airy attorney Michael Sklar told the Allentown Morning Call. “Casinos budget to pay 2 percent a month and more later, not $833,333 a month.”
Sklar vowed to file a new lawsuit if the measure is signed into law, and to seek a refund of any host fees paid under the bill.
Meanwhile, municipalities that host Pennsylvania casinos are urging lawmakers to replace funding on which they have come to rely. Some casinos—notably Rush Gaming’s two properties, Rivers Casino in Pittsburgh and SugarHouse in Philadelphia—have already said they will continue to provide monthly payments under the old formula while lawmakers decide on a fix. Others, like Sands Bethlehem, have been noncommittal when asked for continuing funds for the local municipality. Bethlehem relies on revenue from the Sands for 12 percent of its budget.
State Senator Pat Browne, who represents the Lehigh Valley where Sands is located, told the Morning Call senators will examine the House-passed bill on November 15, but would not commit to acting upon it.
“We’ll definitely come back in a few weeks and take a look at it, but we still haven’t decided whether to vote on it,” Browne, who chairs the Senate Appropriation Committee, told the newspaper. “We know keeping that host fee is extremely important. That’s why we worked so quickly to draft an amendment. But we also know that not everyone wants gambling expansion. We’ll have to see.”
The Senate previously rejected the House-passed iGaming bill because of the package of gaming expansion measures. Many feel the inclusion of internet gaming and DFS in the current measure could result at least in iGaming being pushed to the new legislative session.
As for the host-fee fix, Mount Airy is proposing to double the portion of revenues now paid to fund infrastructure and job training.
“Mount Airy recognizes the benefits of the local share tax and its importance to the local communities,” Sklar told the Pittsburgh Post-Gazette. “The uncertainty and confusion they’re facing right now is incredibly problematic.”
