Kasich OKs racetrack slots in casino operator deal

Gov. John Kasich answers ques­tions dur­ing a news con­fer­ence in Cleve­land Wednes­day. Kasich and casino devel­oper Dan Gilbert announced an agree­ment on fees and taxes to be paid by casi­nos in Cleve­land and Cincin­nati. (ASSOCIATED PRESS | MARK DUNCAN)

JULIE CARR SMYTH

Asso­ci­ated Press

CLEVELAND — Ohio Gov. John Kasich said Wednes­day he is mov­ing for­ward with legal­ized race­track slot machines and mak­ing tax con­ces­sions to one of the state’s two casino devel­op­ers in his efforts to get more money from expanded gam­bling for taxpayers.

“This was not fun. I mean, this was not easy,” said Kasich, whose push for more cash for the state led the devel­oper to halt con­struc­tion until a deal was reached.

The deal was announced by Kasich and Rock Ohio Cae­sars CEO Dan Gilbert, whose com­pany is devel­op­ing casi­nos in Cleve­land and Cincin­nati, in a for­mer depart­ment store where the ini­tial Cleve­land casino phase is sched­uled to open early next year. Gilbert is also owner of the Cleve­land Cavaliers.

The deal frees ROC from pay­ing the state’s com­mer­cial activ­ity tax on all wagers, a stick­ing point between the com­pany and state bud­get writ­ers in Columbus.

The Republican-controlled Ohio House had added a pro­vi­sion to Kasich’s nearly $56 bil­lion, two-year state bud­get that said the so-called CAT tax applies to wagers plus pay­outs, a def­i­n­i­tion casino oper­a­tors said would cost tens of mil­lions in extra taxes and vio­late terms of a con­sti­tu­tional amend­ment approved by vot­ers in 2009.

The deal taxes the com­pany on wagers minus payouts.

In exchange, it requires an addi­tional $110 mil­lion in pay­ments from ROC over the next decade and an increase in the company’s over­all invest­ment in the state from $500 mil­lion to $900 mil­lion. The casino appli­ca­tion fee would be $1.5 million.

A big­ger sur­prise in the pact was Kasich’s deci­sion to open the door to slots-like video lot­tery ter­mi­nals at Ohio’s seven horse tracks. Licenses to oper­ate VLTs would cost $50 mil­lion each, for a total of $350 mil­lion at seven tracks, plus 33.5 per­cent of sales revenue.

The deal requires VLT sales agents to invest at least $150 mil­lion in their facil­i­ties, includ­ing VLT machines, with a max­i­mum credit of $25 mil­lion for the value of exist­ing facil­i­ties and land. Sales agent com­mis­sions couldn’t exceed 66.5 percent.

Race­track bet­ting par­lors, often called raci­nos, would have to open within three years of being licensed.

Through its joint ven­ture with Cae­sars, Rock Ohio Gam­ing would con­trol one track: north­east Ohio’s This­tle­down. Five of the other six are also con­trolled by casino interests.

Kasich said the deal would help Ohio’s strug­gling horse rac­ing indus­try. How the horse rac­ing industry’s share of the state take will be split remains sub­ject to nego­ti­a­tion, the gov­er­nor said.

Kasich said he was deter­mined to press for a bet­ter deal for the state as part of a com­pre­hen­sive gam­ing plan. “I didn’t want any more bal­lot issues here” on gam­ing issues, he said.

The gov­er­nor said he didn’t feel pres­sured by the halt to casino con­struc­tion. “I stood pretty firm,” he said.

By putting the VLT rules in a mem­o­ran­dum of under­stand­ing with ROC, Kasich skirted one legal conun­drum faced by his pre­de­ces­sor, Demo­c­ra­tic Gov. Ted Strick­land. Strickland’s pro­posal to legal­ize video lot­tery ter­mi­nals at the tracks was side­lined by a court chal­lenge and ulti­mately dropped.

Oppo­nents were swift to attack the move by Kasich, a Repub­li­can, as an end-run around voters.

“If John Kasich were a com­men­ta­tor on Fox News right now, and some gov­er­nor some­where was try­ing to do this, he would be on a rant about how they were step­ping on vot­ers’ con­sti­tu­tional pro­tec­tions,” said David Zan­otti, whose Ohio Round­table has led the charge against legal­ized gam­bling in the state for more than a decade.

In a state­ment Wednes­day, the Round­table said the casino amend­ment, Issue 3 as writ­ten and cham­pi­oned by casi­nos, required casi­nos to pay the CAT tax and “can’t be changed by back room deals.”

“If the Gov­er­nor is seri­ous about get­ting a bet­ter deal for Ohio, he should ask the leg­is­la­ture to place an amend­ment on the bal­lot to recon­struct Issue 3,” its state­ment said. “He could do this in very short order, tak­ing less time and money than all the back room deals have spent to date.”

Zan­otti said Penn National, which is build­ing casi­nos in Colum­bus and Toledo, was required to pass a con­sti­tu­tional amend­ment just to move its loca­tion from one part of Colum­bus to another — so a total over­haul of the casi­nos’ finan­cial arrange­ments with the state should also go to voters.

“So the Kasich peo­ple are going to put VLTs in the race­tracks, in essence grant casino licenses to these facil­i­ties with­out a statu­tory amend­ment, with­out a pub­lic hear­ing. How does that work?” he said. “Is this King George III? Did we just lose out whole form of rep­re­sen­ta­tive government?”

The $110 mil­lion in extra casino rev­enue from ROC would come in the form of $10 mil­lion more annu­ally for the first five years and $12 mil­lion annu­ally for the five years after that.

The admin­is­tra­tion noted that por­tions of the agree­ment would have to be approved by law­mak­ers, and in some cases by the Casino Con­trol, Lot­tery and Rac­ing commissions.

Penn National has not yet agreed to terms with the gov­er­nor. Spokesman Bob Tenen­baum said the com­pany declined com­ment on Wednesday’s deal because its talks with the Kasich admin­is­tra­tion are ongoing.

Penn owns two Ohio tracks — Beu­lah Park in sub­ur­ban Colum­bus and Race­way Park in Toledo — that would ben­e­fit from the administration’s autho­riza­tion of VLTs. The com­pany has told state rac­ing reg­u­la­tors it would relo­cated Beu­lah Park to Day­ton and Race­way Park to Austin­town near Youngstown if VLTs were allowed, in order to avoid com­pet­ing with the new casinos.

The ini­tial casino phase in Cleve­land will include more than 2,000 slot machines, 65 table games and a VIP play­ers’ lounge. The sec­ond phase will be built one block away on a river­front location.

Posted by AP News on Jun 15 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.