Significant differences in House, Senate legislation
Two members of the Pennsylvania House of Representatives have filed a co-sponsorship memorandum outlining upcoming legislation to expand gaming in the state, including the legalization and regulation of online gaming and daily fantasy sports, as well as new regulations to make it easier to get new styles of slot machines into casinos.
The memorandum also includes a plan floated last year to permit slot gaming on tablets at state airports.
The document also contemplates legislation to replace the local host-community share provision for slot-machine revenues, which was declared unconstitutional last September by the state Supreme Court. The new provision would require all state casinos except for the small, Category 3 resort-class casinos to pay a flat $10 million annual fee to host municipalities.
The co-sponsorship memorandum, filed by state Reps. George Dunbar and Rosita Youngblood, states an intention to introduce “omnibus gaming legislation that will protect consumers, maintain and improve the competitiveness of Pennsylvania’s casino industry and generate needed revenues for the commonwealth.”
Eleven key features of the memorandum would:
• Fix the local share assessment issue by requiring all casinos, except Category 3 casinos, to pay a $10 million annual fee to host municipalities;
• Regulate and tax iGaming, including a full slate of online casino games and online poker, with land-based casinos operating the sites along the New Jersey model;
• Impose consumer protections on and tax online fantasy sports operators;
• Allow gaming tablets in international airports;
• Remove the Category 3 casino amenity requirement, which currently requires purchase of at least $10 in goods and services at a resort-class property for access to the casino;
• Streamline non-gaming vendor registration requirements;
• Permit gaming manufactures to utilize private laboratories to test gaming devices;
• Authorize the Pennsylvania Gaming Control Board to create new regulations to allow for new types of slot machines, a provision that could introduce skill-based mobile-style and arcade-type games as in New Jersey;
• Increase license, permit and registration renewal periods;
• Allow multi-state linkage of slot machines to increase progressive jackpots; and,
• Require uniform advertisement of the problem gaming assistance number.
The host-fee provision is likely to be scrutinized closely, as many believe that in its present form, it will be struck down by the courts for the same reason the original gaming law’s provision was struck down last fall. The original provision required all but the resort-class casinos to pay host communities 2 percent of slot revenues or $10 million, whichever was greater, to cover additional traffic, police and other costs associated with the casino.
In striking down the provision, judges agreed with the plaintiffs in a lawsuit filed by Mount Airy Casino and joined by other small properties that the law violated the tax uniformity clause of the state constitution because it placed a larger percentage tax on properties with lower revenues. The provisions in the new co-sponsorship memorandum are similar to those in a bill passed last year by the House, which was rejected by the Senate partly because it contained expansion measures such as slot gaming at airports.
Mount Airy officials have stated publicly that they would challenge the new provision on the same grounds as the old, since a flat $10 million fee still represents a larger tax burden on properties with smaller revenues. Critics of the provision also note that no Pennsylvania casino has ever generated enough slot revenue to exceed the $10 million fee level—thus, the new scheme would change nothing.
Many casinos have pledged to maintain payments on the original scheme of $10 million a year until a new law is passed. The next payment would be due in April. Some casinos—notably the Sands Bethlehem—have refused to pledge to continue support under the old revenue scheme.
The memorandum joins a similar one filed in last month in the state Senate by Senator Jay Costa, but many details of the plans remain to be debated and possibly reconciled. One main issue of contention is likely to be tax rates on iGaming. Last year’s House bill contemplated a 14 percent tax on online gaming, plus 2 percent for local communities to be distributed via an economic development grant program. Costa’s proposal contemplates a 25 percent tax rate on online gambling.
Few feel the Senate tax rate will be acceptable to operators, who already pay revenue taxes among the highest in the industry—55 percent on slot revenues and 16 percent on table games.
Costa’s iGaming fee structures also are much higher than the House plan. The Senate document contemplates a $10 million operator licensing fee, plus $5 million from suppliers, such as content providers. The House version contemplates $8 million operator license fees spread out over five years, with a $2 million supplier fee, also over five years. (Costa did not indicate the term length of the license fees.)
Other legislative battles are likely to rise over the expansion measures in the House bill. Representatives are likely to push for measures in last year’s bill that were rejected by Senate leaders, such as slot machines at off-track betting parlors, physical slot machines at airports, or even video gaming at bars and taverns.
House and Senate leaders have pledged early action on gaming, and there is a push to clear at least the host-fee measure before the April payment is due.
