Sweeping gambling legislation that would allow live table games at two horse tracks near Indianapolis could cost the state more than $230 million in revenue over two years because it would also change how casinos are taxed, according to a new analysis.
The state’s Legislative Services Agency estimates that Senate Bill 528 would result in a loss of $149 million to $231.2 million to the state general fund in fiscal years 2014 and 2015. Local governments
The financial impact is a much different story than the one promoted as recently as Monday by casino representatives and lawmakers who favor the bill. They estimated state revenues would remain neutral to positive.
Most of the revenue losses stem from a provision in the bill that would eliminate taxes on complimentary play provided to customers by casinos, according to the analysis. The bill also would allow riverboat casinos to move gambling onto land adjacent to their docks, swap out a $3-per-person admissions tax for a new 2.5 percent supplemental wagering tax, and allow mobile gaming at off-track betting locations such as the Winner’s Circle in downtown Indianapolis.
The gaming industry argues the bill would provide Indiana casinos with the tools they need to compete with an onslaught of competition from neighboring states such as Ohio, where three new casinos opened last year and a fourth is expected to open in March just across the border in Cincinnati.
But the potentially big hit to the state budget is likely to be a major sticking point for the bill. Ultimately, the success of the bill is likely to depend on whether supporters can persuade lawmakers that the tools it provides casinos will attract more customers, more bets, and more revenue for the state, offsetting any losses.
On Tuesday, the chairman of the state Senate’s budget-writing committee, Luke Kenley, R-Noblesville, said the loss of state revenue concerns him. He said he will want proof that any state revenue losses would be greater if lawmakers do nothing.
That could become the bar for the bill, which is scheduled for a hearing before the Senate’s Public Policy Committee today at 1:30 p.m. If it passes there, it will have to go through Kenley’s Appropriations Committee before reaching the Senate floor for a full vote.
Mike Smith, president of the Casino Association of Indiana, said the new tools the industry is asking for would benefit both casinos and the state. “We’re going to have to ramp up marketing, ramp up free play to try and offset and stem the tide of some of the competition that is coming,” he said. “There is no question the state, as our partner, is going to be affected by the competition that is coming. We’re in this together.”
Indeed, state budget officials expect casino wagering taxes will shrink more than 15 percent by fiscal year 2015. Still, those losses range from $12.7 million to $46.6 million a year, far less than the losses that the Legislative Services Agency says the state would incur under the legislative proposal.
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The bill also would remove taxes on coupons that casinos provide to customers for free play. Most other states with gambling, including Ohio, don’t tax free play, according to Steve Jimenez, general manager of Rising Star Casino in Rising Sun.
That provision, however, is also the most expensive for the state. About $204 million of the $231 million in potential state revenue losses would stem from eliminating taxes on promotional free play, according to the Legislative Service Agency.
