Puerto Rico Could Legalize Slots Outside Casinos

Facing a debt of $72 billion, the junk-rated commonwealth of Puerto Rico is considering drastic actions—including legalizing and taxing black-market slot machines found in grocery stores and other retailers. Projected revenues from the games could reach $100 million the first year, and $300 million annually for the next three years.

With less than two weeks before the new fiscal year begins, lawmakers in Puerto Rico are struggling to complete the budget. The commonwealth, which is junk-rated, could lose access to the bond market. Borrowing to cover over deficits has left the government with billion in debt—more than any other state besides New York and California. The outlook is that Puerto Rico, with 3.5 million people, may not be able to raise billion from investors to keep its government running as it awaits tax revenue. Treasury Secretary Juan Zaragoza said, “I have to prioritize. I have to choose between paying for education and tax refunds. It’s a clear choice.”

As a result, Governor Alejandro Garcia Padilla is considering legalizing and taxing black-market slot machines that are available in supermarkets and other shops. Tax revenues from the games would bring in an estimated $100 million the first year, and reach as much as $300 million annually after three years.

Puerto Rico has an active casino industry.

Zaragoza noted delaying tax rebates, putting off payments to suppliers and borrowing from government insurance funds may result in an immediate cash shortfall, it’s only a temporary fix. “We recognize that that becomes a snowball. It’s not something that we can do for six months. It’s something that is not sustainable,” Zaragoza said.