News Release: Innovation Ohio Raises Questions About Casino Deal

For Immediate Release: June 16, 2011
Contact: Dale Butland  614-783-5833

INNOVATION OHIO RAISES QUESTIONS ABOUT CASINO DEAL
What did the State get for what it gave up?

Columbus—Innovation Ohio, a progressive think tank headquartered in Columbus, today raised several questions about Governor Kasich’s casino deal with Rock Ohio Caesars gaming company. ROC will build and operate two Ohio casinos in Cleveland and Cincinnati, while Penn National Gaming will construct and operate casinos in Columbus and Toledo. Penn National reportedly pulled out of the agreement at the last minute and is not now a party to it.

News reports indicate that under the agreement, ROC will pay Ohio an additional $110 million in fees over the next 10 years. In return, Gov. Kasich agreed to (a) reduce tax rates from 50% to 33.5% on the proceeds from video lottery terminals (VLTs) that will be installed at Ohio’s 7 horse racing tracks and (b) reduce upfront fees from VLT operators from $65 million to $50 million per track.

Said IO Communications Director Dale Butland:

“Like all Ohioans, we believe casino operators wrote themselves a sweet deal in the constitutional amendment voters passed in 2009. And while we applaud the Governor’s pressing them for more money, we believe the deal he struck with ROC poses some significant questions concerning what Ohio got versus what it gave up. Specifically:

  • In the past, the Governor has repeatedly said—and we agree—that the 33% tax rate on casino revenue passed by voters in 2009 was a ‘bad deal’ for Ohio. Why did he extend the same ‘bad deal’ to VLT operators? Why is a 33% tax rate on profits from slot machines located in casinos a ‘bad deal,’ but a 33% tax rate on profits from slot machines located at race tracks an acceptable deal?
  • It appears that in return for the $110 million in voluntary casino fees Ohio will receive over the next 10 years, the Governor has given up significantly more than that in casino and VLT tax revenue and upfront fees. Specifically, over $1 billion in annual VLT revenue was originally to be taxed at a 50% rate, with each track paying $65 million in upfront licensing fees. Kasich has reduced the tax rate to 33.5% and the licensing fees to $50 million. This is in addition to lost revenue from the Commercial Activities Tax. Can he explain how his ‘deal’ isn’t a net loss for Ohio?
  • It has been reported that the consultancy firm the State hired—Moelis & Co.—will receive a percentage of whatever additional revenue they get casinos to pay. How much will Moelis receive from the deal struck with ROC? How much additional money will they receive if the same or a substantially similar deal is struck with Penn National?
  • Kasich has made the policy decision to expand the State’s Lottery into racetrack slots. Is there now legal and Constitutional clarity to allow for this expansion of gaming in Ohio?”

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