Switzerland County and all other communities in the State of Indiana are again fighting off efforts to take away riverboat revenues from local entities, and the latest attempt could have devastating consequences.
The counties got a bit of a reprieve on Tuesday afternoon, as House Bill 1540 was amended during its second reading, with much of the most damaging language being taken out that would have taken a large percentage of riverboat revenues.
Switzerland County Economic Development President Jon Bond said that much of the credit for getting the harmful language out of the bill came through the work on State Representatives Randy Frye and Jud McMillin, who fought and worked through their Republican mates to at least temporarily save the funds.
The language that would have taken the funds was replaced during second reading by the appointment of an interim study committee, which will be held later this year, summer or fall, to discuss local gaming revenues. The amendment was offered by Representative Tim Brown, chairman of the House Ways and Means Committee – and the legislature who wrote the original amendments that would have basically crippled communities who receive riverboat funds.
The bill still contains language that will allow live dealers at the racinos in Shelbyville and in Anderson.
At press time, the bill was facing a vote in the House yesterday (Wednesday), and if the bill was not passed by the full House, it would die.
If the bill passes out of the House, it will then go to the Senate. Jon Bond said that it is in the Senate where most of the attacks trying to get local riverboat revenue has taken place, so although everyone can take a deep breath for a couple of weeks, there is still half of a session to go.
The controversy surrounding the bill has been fast and furious. Here’s a look at what the bill was, what it became, and how it could impact not only Switzerland County, but all communities with riverboat casinos in them.
House Bill 1540 began its journey through the Indiana House of Representatives as a bill aimed at making some changes for the riverboat industry in the state.
“It was an industry bill to change the competitive landscape a little bit,” Jon Bond said. “Most of the casinos didn’t like it. It allowed live dealers at the racetracks, where now they are allowed to have slot machines. They’ve kind of stretched that law to where they’re allowed to video roulette and things like that, but this would allow them to have the tables like a full, land based casino.”
Jon Bond said that the bill as it was originally written would have also allowed current riverboats to build on land; and also covered some other topics, such as extending the credit that the casinos get for promotional play.
“That would have cost the county a little bit of money,” Jon Bond said. “But it wasn’t anything like what we’ve seen now.”
So what happened to House Bill 1540?
When the bill was assigned to the House’s Ways and Means Committee, it was almost completely stripped of all of the language that it came out of the House with, as Committee Chairman Representative Tim Brown of Crawfordsville oversaw what amounted to a massive attack on casino money coming to communities.
“The committee did a substantial re-write,” Jon Bond said. “It passed out of House Public Policy with just some minor changes, but then the Ways and Means Committee – which typically just deals with the fiscal issues of a bill, they went in and restructured things.”
Leading the way was the restructuring of the wagering tax that casinos now pay based on the amount of money that is gambled in each facility.
“The brackets were basically designed on the face of it to help the lower casinos, the smaller casinos in the smaller markets,” Bond said. “But what it also did was lower the rates for most of them (casinos). That cost us over $1 million right there, here in Switzerland County.”
But the major blow that the bill deals to casino communities is that it would completely eliminate the admissions tax, which is the money that each casino pays for each person who goes into a casino.
“That’s also the part that the boat pays directly,” Bond said. “That’s $4.8 million for Switzerland County.”
If that wasn’t enough, the most controversial element of the rewrite is that the bill as rewritten basically ruled the development agreements – which have been in place between casinos and their communities since inception – null and void.
“They’ve basically told all of the communities that they have to go back to their casinos and negotiate a new one,” Bond said. “The number one out in the hall from elected officials was, ‘the boat’s been there for 10 years. What leverage do we have now to negotiate a development agreement?'”
Bond said that most of the focus of House Bill 1540 as it now stands helps the casinos themselves at the expense of the communities; as tax breaks and other incentives are figured in.
“This bill, if you add up all of the tax breaks on this bill, it’s $218 million for the casinos statewide,” Bond said. “And $190 million of that is local money.”
Bond said that the biggest hit to the county is the elimination of the admission tax, which he said, using state figures, if the bill would pass as it now stands, overall amounts to a $5.6 million hit – of which about $4.8 million of that is lost revenue from admission tax.
In a chart breaking down the different categories:
– Under “Projected Losses Under Admission Tax Repeal”, it has Switzerland County losing $4,360,535 and the Switzerland County Visitors Center losing $218,025. It has Ohio County losing $2,282,144; and the Rising Sun-Ohio County Visitors Center losing $228,213. One of the biggest hits comes in Lawrenceburg, where the city stands to lose $6.2 million.
– Under “Projected Losses Under New Wagering Tax Structure”, Switzerland County stands to lose $1.8 million; Rising Sun stands to lose $1 million; and Lawrenceburg will lose $2.5 million.
If the new structure is approved, casinos will not have to pay any wagering taxes on the first $10 million wagered and just five-percent on their next $10 million, which would be devastating to smaller casino communities like Switzerland County and Rising Sun, where there isn’t as much traffic as larger casinos.
“What we actually make money on is the Development Agreement, because they set parameters that those agreements had to be between two- and seven-percent, and ours is already under two,” Bond said. “The deal we have is already less than that. But right now, that money goes to the school, it goes to the towns of Vevay and Patriot; and it goes to a list of groups that get that Development Agreement money. That all gets voided out by this.”
And, if the bill passes and the Development Agreement is voided, Bond sees obstacles in getting a new agreement that will benefit the community as much as the current one does.
“We’ve got no say. There’s zero negotiating leverage as far as the county is concerned,” he said. “All we would have is, at the end of the day if we can’t reach an agreement, it would be arbitrated in front of the Indiana Gaming Commission. The gaming commission would then determine how much would be paid.”
But it would mean an increase in revenue, because Switzerland County would have to come up to the two-percent ‘floor’ that the bill establishes, which would be a projected increase of $579,343.
Along with the losses in Admission Tax and Wagering Tax, the community shouldn’t forget that in 2013 the State Legislature modified things – and those changes have already cost the county approximately $300,000.
So, when adding up all of the potential losses, factoring in the $300,000 already taken away in 2013; and figuring the modest increase in the development agreement, should House Bill 1540 pass as it is written, Switzerland County would see its riverboat revenues fall by $5.6 million for the county; the Visitors Center would see a loss of $218,000.
That takes the figure just over $6 million a year that the county will no longer have.
Currently, the county receives about $9.8 million each year – so should House Bill 1540 pass as written, this county would lost over 60-percent of the revenues that it has been seeing since Belterra opened its doors.
Bond also said that what’s not factored into the funds is competitive decline. If racinos would be allowed to put in live dealers and expand available games; and if competition in other states continues to grow; that would mean less revenue at established casinos, which would mean even less revenue sharing with the county.
“There’s really no way to measure that, but we can expect that,” Bond said.
By the way, House Bill 1540 includes a separate wage structure for the table games that would be placed in racinos – where 100-percent of the wagering tax on those games goes to the state. Also: the elimination of the wagering tax will keep $48 million in State coffers, because that was the money that the state was paying out of its share to bring under performing casinos up to a pre-established ‘floor’.
Bond said that after all expenses are paid, the State of Indiana is pocketing about $300 million per year from having casinos in Indiana.
But there is still a threat that Switzerland County and other communities could lose two-thirds of what comes in now.
“This would result in a fundamental restructuring of how the county operates if this were to happen,” Bond said. “This isn’t a matter of cuts, that would be policy for the elected officials, but this is major. There are things that we won’t have anymore.”
Some good news came early in the week, as the bill was originally scheduled for second reading on Monday, but was pulled.
“The thing that really stunk about this was that our legislators did not know about it until literally mid-afternoon the day before it was going to be inserted into the bill,” Bond said of Representatives Randy Frye and Jud McMillin. “The committee hearing lasted less than a half hour, and no testimony was taken. We found out after the fact that a lot of these members didn’t even know what they were voting on. It’s been hustled through.”
So, all of the clamoring and tension could have all been for naught, but that doesn’t mean that riverboat counties don’t need to stay alert to more attempts to grab local revenues in the future.
– Pat Lanman