VGTs join other proposed gaming expansion measures
As Pennsylvania lawmakers in both chambers continue work on an omnibus gaming expansion package, one element of that potential package has reappeared after a presumed death—video gaming terminals (VGTs) in licensed liquor establishments.
A VGT proposal was stripped from the state House measure passed at the end of last year’s session. The House bill’s main purpose was to legalize online gaming and daily fantasy sports, but last-minute amendments to expand gaming with measures including slot gaming at airports and off-track-betting facilities led the state Senate to kill that legislation. VGTs in bars was a controversial measure not even included in the final bill.
In this year’s expansion debate, not only is tablet gaming at airports included, but the VGT proposal is back, this time with bipartisan support.
A proposal revealed last week for VLTs in licensed liquor establishments is reported to have bipartisan support in both chambers of the Pennsylvania General Assembly. The plan would authorized as many as 40,000 gaming machines in licensed liquor establishments, truck stops and off-track-betting parlors across the state, with up to five authorized machines per location.
Supporters project the plan to generate as much as $100 million in the first year and up to $500 million annually in five years, and they meet criticism of possible cannibalization of gaming at the 12 current operating casinos by pointing out that the machines mainly would replace gray-area machines already operating, unregulated and untaxed, at taverns across the state.
“Pennsylvania State Police estimate over 40,000 illegal VGTs are now operating in Pennsylvania, and these illegal machines exist in an unlicensed, unregulated, untaxed platform,” said state Senator Guy Reschenthaler, sponsor of the yet-to-be-introduced Senate bill, at a Capitol news conference, according to the Penn Live website. “We need to legalize this industry to bring it out of the shadows.”
The proposal has the backing of the Pennsylvania Tavern Association, which has said that recent law changes allowing grocery stores to sell beer and wine, and beer distributors to sell six-packs and single bottles, put bars at a competitive disadvantage.
“The local tavern owner is looking at this as another way to receive some revenue to help stay afloat and also contribute to the many endeavors we contribute to—churches, little leagues, all kinds of youth programs,” Jerry McCardle of the Pennsylvania Tavern Association told Penn Live. “My consensus from the tavern owners that I have talked to is that if certain parts of this bill can be worked out, overwhelmingly the tavern owner is in favor of it.”
Rep. Mark Mustio, who is sponsoring the House bill, pointed to the 2009 Illinois VLT bill as a model. “Illinois was a great pilot program for Pennsylvania to use when passing this legislation,” he said at last week’s press conference, noting that VGTs have increased tax revenue in that state by more than $2.1 billion in three years.
A spokesman for Pennsylvania Governor Tom Wolf left the door open to the governor approving VGTs. “The governor is open to forms of revenue that are sustainable and will eliminate our structural deficit,” said Wolf spokesman J.J. Abbott, according to Penn Live. “The governor believes the solution should not be detrimental to existing gaming revenue from the lottery and other activities. He will continue to work with the General Assembly to meet their commitment to enact gaming legislation while not causing harm to existing operations.”
VGT revenues would be taxed at 34 percent under the latest proposal.
The proposal also includes measures to hedge against cannibalization of current casino revenues. It would eliminate the third Category 3 resort casino license that had been scheduled to bid this year, and would delay the awarding of the final Category 1 racino license (currently being pursued by Gettysburg businessman David LeVan) for at least three years.
Those hedge provisions were enough to garner support from at least one major current operator, Penn National Gaming. “Other casinos, the other 11, are going to have to sit down with their business people and accountants too and run the math,” Penn National spokesman Eric Schippers told Penn Live. “I can tell you from our perspective, this bill, in running that math, does a good job of striking that balance between helping to mitigate (cannibalization) and establishing a new industry in the commonwealth. Other companies will have to come to their own conclusion.”
In addition to the 34 percent tax on VGT revenues, the proposed legislation calls for VGT operators paying a 4 percent local-share tax, which would be divided evenly between the host municipality and county.
In addition to five machines for licensed liquor establishments, the measure would allow off-track betting parlors up to 10 VGTs each. A maximum bet of $5 would be imposed, with a maximum payout of $1,000 per day.
VGTs join online gaming, DFS and airport tablet gaming as proposals being debated by the gaming committees of the Pennsylvania House and Senate. Additionally, the lawmakers are working to come up with a local-share revenue tax to replace the host fee struck down in September by the state Supreme Court. The court has imposed a deadline of May 26 for lawmakers to pass a new local-share provision.
