June 16, 2011

The Kasich-Rock Gaming Casino Deal

Filed under: Economy,Taxes & Government — Tom @ 10:18 am

I am no fan of casino gambling (look how it turned around Detroit — not), but if you’re going to have it, you might as well get the best possible taxpayer deal.

Here is a bit of The Cincinnati Enquirer’s coverage of the Kasich-Rock Gaming deal:

Calling an end to a months-long taxation spat that led to a month-long suspension of casino construction in Cincinnati and Cleveland, Rock Gaming and Ohio Gov. John Kasich unveiled the terms of their truce on Wednesday, headlined by the developer’s agreement to pay an extra $110 million over a decade to Ohio covering both of its properties.

… In the end, it was difficult to say who “won” the dispute. After calling the 2009 casino amendment a “raw deal” for Ohio, Kasich secured extra $10 million to $12 million annual payments over the next 10 years from two projects that were already projected to generate a combined $385 million in gambling taxes a year.

Rock Gaming ultimately paid more money, but nothing close to what Ohio officials threatened.

Under terms of the agreement reached Saturday, Rock Gaming will make five annual payments of $10 million to Ohio, followed by five annual payments of $12 million. Those payments are on top of normal business taxes, a 33 percent tax on gambling revenues and a $50 million one-time fee for each property for a license.

In exchange, the Kasich administration agreed to drop Ohio’s bid to apply its Commercial Activity Tax (CAT) against total betting as lawmakers have been suggesting during the budget process – sparing Gilbert’s casinos a combined $25 million annual additional tax burden. Instead, the CAT will only apply to the casino’s winnings.

The results:

  • It’s isn’t definitively stated whether the casinos will open on their targeted completion dates, or whether the recent delays will cause the openings to slip. The guess here is that there won’t be any slippage, given that the targeted opening dates are so far out (Spring 2013? How can it take so long? Are the local bureaucracies or job work rules in the way?). That’s a good thing, because the state receipts lost by missing by a few more months would wipe out much of the $110 million gained.
  • Kasich gets a “see, I told ya” against those who said the voter-approved constitutional amendment(s) meant that nothing was negotiable.
  • The “it’s difficult to say who ‘won’” statement means that Kasich at the very least avoided a potentially significant embarrassment.

There’s no indication that extra payments from Rock Gaming can also be obtained from Ohio’s other casino operators, but it’s hard to see why not.

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2 Comments

  1. I don’t think the Detroit situation is much in the way of evidence against the merits of casino gambling, since that city is such a basket case I don’t think anything short of a complete start over would turn that place around.

    Fact is, gambling HAS helped a lot of places the Detroit example notwithstanding. And by the way, I would add that claims that casinos attract more crime is vastly overstated.

    Comment by zf — June 16, 2011 @ 10:27 am

  2. #1, the personal and social costs are there, and I’m not comfortable saying “they made their bed” when the state effectively entices them to indulge in an activity which has proven to be dangerous to people with certain tendencies and in certain life situations. State lotteries are acceptable but still dangerous, although the exposure to huge losses is far lower.

    Comment by TBlumer — June 16, 2011 @ 10:35 am

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