Governor to study gaming provisions before acting
The Pennsylvania legislature passed a budget reconciliation bill to balance the state budget that has been in place since July 1, in a package that includes legalization of online gaming and daily fantasy sports, plus a variety of other gaming expansion measures that include authorization of up to 10 satellite “mini-casinos” in areas without current land-based casinos, tablet gaming at airports, and video gaming terminals, or VGTs, at truck stops.
The bill now goes to the desk of Governor Tom Wolf, who has opposed some of the gaming expansion measures in the past. Wolf commented that he will take a few days to study the gambling proposals before making his decision on whether or not to sign them into law.
Tucked inside a massive bill that relies on borrowing, legalized fireworks sales and new taxes on natural gas drilling and online retail sales, the gaming expansion package, projected to generate $200 million in revenue against the $2.2 billion budget deficit, was the last and most contentious portion of the package.
While Wolf’s signature would legalize online gaming, whether or not land-based casinos apply for iGaming licenses remains to be seen. While the iGaming provision sets a revenue tax of 14 percent for online poker and table-game revenue, online slot games—the most profitable form of iGaming—would be taxed similar to land-based slots at 52 percent, a rate most Pennsylvania operators have called a non-starter that would prevent them from seeking an iGaming license.
The online gaming provision would allow licensed commercial casinos—both in Pennsylvania and outside the state—to apply to the Pennsylvania Gaming Control Board for licenses to provide gambling websites for PC and mobile applications for use by people within the state. License fees would be $4 million each for online poker, table games and slot games, or $10 million for all three.
The iGaming provision also would extend to the Pennsylvania Lottery, which would be authorized to offer keno and other games online, including existing instant-ticket and raffle games. The lottery would be prohibited from offering casino-style games online.
Lawmakers included the online lottery provision to boost lagging sales. The Pennsylvania Lottery ended the recent fiscal year with an $18 million deficit, the first shortfall in the lottery’s 40-year history.
The VGT provision represents a compromise many thought would be rejected by Republican House leaders, who have been pushing for as many as 10 VGTs at each of thousands of liquor-licensed establishments across the state—a proposal that has been vehemently opposed by the state’s current casino licensees as unfair competition that ignores the billions they invested in the state’s gaming industry.
The VGT provision in the legislative package passed by the Senate on Wednesday and by the House on Thursday would allow only five machines at locations that meet a specific definition of a truck stop, with revenue split between the state, license holders, terminal operators and host municipalities.
Among the bill’s other provisions:
• Daily fantasy sports betting would be regulated and taxed, charging DFS operators a $50,000 license fee and taxing revenues at 15 percent.
• The state’s two resort-style casinos, which are limited to 750 slots and require patrons to spend at least $25 in the resort for entry to the casinos, would be relieved from those requirements of the 2004 gaming law for a fee of $2.5 million on slots and $1 million on tables.
• The 2004 provision limiting majority owners of one casino to a one-third stake in a second casino would be repealed.
• Casinos could apply to the gaming board to offer sports betting for a license fee of $10 million, should the federal ban be repealed. Online sports betting would be permitted.
• Casinos could apply to operate interactive gaming parlors at Pennsylvania airports, with consent of the local airport authorities. Eight international and regional airports in the state would be authorized to offer online-style gaming on tablets.
• The casino host fee to local governments, struck down last year by the state Supreme Court, would be reinstated at a flat $10 million annual fee to local governments. Operators of smaller casinos have said they will challenge the new fee on the same basis as the old fee—smaller casinos would pay a higher percentage of their revenues in taxes than their larger competitors.
• Each of the state’s 10 larger casinos would be authorized to bid on a satellite casino license that would allow up to 750 slot machines and 10 table games at a location that is outside a radius 25 miles from an existing casino. Under the bill, bidding would start at $7.5 million with table-game licenses costing an additional $2.5 million. License fees and taxes would go to local and state governments, public schools and civic development.
Even before the Thursday House vote, there were already threats of lawsuits to block the law if signed by Wolf. The Reading Eagle reported that Penn National Gaming is considering filing a lawsuit against the state over the 25-mile buffer zone for satellite casinos. Penn Vice President of Public Affairs Eric Schippers commented that two-thirds of the gamblers at the operator’s Hollywood Casino in the Harrisburg area come from more than 25 miles away, because Hollywood is the only casino in the mid-state region.
“We’re considering our legal options because this would have a uniquely punitive effect on our casino, more so than any other casino in the state,” Schippers told the Eagle. “We’re out in central Pennsylvania alone, so again, we could be surrounded by licenses that would have a profoundly negative impact on our casino and could result in job losses and cannibalization of our business.”
Schippers also called the 470-page gambling package an “ill-conceived plan that has been rushed through.”
That same sentiment was expressed by some lawmakers. “We will become a gambling state without parallel,” said Rep. Steve McCarter, according to the Associated Press. Others complained that there was too little time to study the complicated package of legislation, which some said was loaded with perks for individual districts. Philadelphia-area Rep. Margo Davidson called it “corporate welfare for casinos and special carve-outs for special people.”
Among those carve-outs was repeal of the casino ownership limit, which would render moot a lawsuit holding up construction of Philadelphia’s second casino over ownership stakes of one of the principals. One perk favors Delaware County area development projects that would benefit from taxes on Harrah’s Philadelphia, and another would give extra money to counties with lower-performing casinos.
Rep. Scott Petri, chairman of the House Gaming Oversight Committee, complained about the definition of “truck stops” in the VGT provision. In an interview with the Associated Press, Petri said the definition is “so broad, anything you think of as a convenience store is a truck stop. You literally could drive a truck through the definition and its ability to be misused.”
