April revenue
Ohio’s four casinos and seven racinos combined for more than $140 million in total revenue last month. They gave away nearly $22 million in free play, or promotional gaming credits.
Venue ……………………….. Revenue …… Free play
Hollywood Columbus ………………$18,647,077 …. $3,110,495
Horseshoe Cleveland ……………….$18,289,420 … $2,758,638
Hard Rock Rocksino …………………$17,222,088 …. $2,249,917
Hollywood Toledo ……………………$16,676,341 …. $926,233
Horseshoe Cincinnati ………………$15,901,783 …. $3,182,112
Scioto Downs …………………………..$12,410,333 …. $3,213,126
Miami Valley Gaming ……………….$10,648,019 ….. $2,176,992
Thistledown …………………………….$9,702,981 …… $1,606,710
Hollywood Gaming Youngstown ..$7,736,887 …… $553,312
Hollywood Gaming Dayton…………$7,222,766 …… $1,189,218
Belterra Park ……………………………$5,573,411 …….. $1,028,762
Digging deep
We have closely followed the gaming industry in Ohio since voters approved the building of casinos in 2009. We will continue to monitor the industry, which provides millions of dollars for schools and local governments.
A state senator from southwest Ohio says casinos and racinos have not lived up to revenue promises and wants to tax most of their free play as an incentive to build bigger operations.
State Sen. Bill Coley, R-Liberty Twp., wants to limit each facility’s promotional gaming credit total to $5 million per year — but only if they add more slot machines and table games and meet ambitious revenue goals.
Ohio’s 11 casinos and racinos gave out more than $200 million in non-taxed free play last year — a popular incentive used to entice customers — and are on pace to exceed that total in 2015. The gambling industry stands to lose tens of millions of dollars if Senate Bill 140 becomes law.
Coley is upset that Ohio’s casinos and racinos did not build their facilities as big as originally proposed. He pointed out that Michigan and Illinois tax all free play, and that Ohio could have raised $165 million the past two years had it done the same.
“We’ve given them several years now and it’s not working the way they said it would,” said Coley. “It’s time to start looking at protecting our schools and local governments.
“The people who own the casino facilities did not invest what they said they were going to invest. They said there were going to be 18,966 gaming positions and there’s a little over 11,000.”
One local senator has questioned Coley’s idea.
“I understand the numbers (amount of free play) are a little bigger than what some people expected, but I think we have to be a little cautious about when do we step into someone’s business model,” said state Sen. Bill Beagle, R-Tipp City. “I would exercise caution in telling our citizens how to run their business.”
Hollywood Gaming at Dayton Raceway, which is in Beagle’s district, operated 990 slot machines last month and gave away $1.2 million in free play.
Under Coley’s plan, the racino would have to add 1,260 slot machines and generate $165 million in revenue each year in order to give away $5 million in tax-free promotional credits. Free play above that threshold would be taxed.
The Dayton racino reported revenue of $7.2 million last month and is taxed at 33.5 percent.
Double tax?
The gambling industry says Coley’s bill amounts to a double tax and hurts its ability to build its businesses.
“Promotional credits are a marketing tool no different than retail coupons,” said Eric Schippers of Penn National Gaming, which operates the Dayton racino, plus a racino in Youngstown and two Ohio casinos.
The bill would require each racino to operate at least 2,250 slot machines and average $13.75 million in monthly revenue in order to give out tax-free credits. Only one — the Hard Rock Rocksino in Northfield — meets that criteria.
It would require a casino to offer 4,500 slot or gaming positions and reach $330 million in annual revenue. None of the four comes close to those numbers.
The Horseshoe Cincinnati casino, for example, houses 1,948 slot machines and 119 table games. It reported revenue of $198 million in 2014.
Under Coley’s plan, it would have to double its gaming inventory and increase its revenue by 67 percent in order to offer any tax-free promotional credits. It has given away nearly $10 million in free play the first four months of 2015.
“I know a lot of contractors who will help them build the facility out so that it’ll do what they said it will do,” Coley said.
Rock Ohio Caesars, which operates the Cincinnati and Cleveland casinos, said it was “stunned” by Coley’s proposal.
“These credits enable Ohio’s gaming destinations to remain competitive with casinos in surrounding states and are expected by guests throughout the industry,” Rock Ohio Caesars said in a statement. “These credits are not revenue to the casinos. These are previously taxed casino revenues that the casino has chosen to reinvest in the competitive marketing of our business.”
The state’s casinos are taxed at 33 percent and have added $720 million to Ohio’s coffers since the first one opened in 2012. Racinos have contributed $394 million to education. Coley says the state should get more, and that the facilities “are doing the classical definition of maximizing return on investment.”
“If you’re a banker, maximizing profitability is ‘get me the highest rate of return possible on my investment,’” Coley said. “I believe absolutely they’re trying to do that.”
‘Shooting from the hip’
Alan Silver, an Ohio University professor and gaming expert, says Coley’s plan would hurt the industry.
“He’s shooting from the hip. Even though you can max it out to more machines, it might not be the right time. Machines are very costly,” Silver said. “You can’t tax and torture them. The states that have the lower taxation structure are going to get more reinvestment.”
Coley said his legislation is modeled after what has been done in Indiana. The Indiana General Assembly recently passed a bill that would increase the amount of non-taxed free play for its casinos from $5 million to $7 million a year.
Coley acknowledged that some free play is expected by consumers and said “if the industry would support the bill with the increase from 5 to 7 (million), I will join them in their support.”
He said excessive free play hurts other Ohio businesses.
“When they go over and above (what the market demands), they’re really trying to drive business into their restaurants and bars, and I don’t think that’s fair to the other Ohio licensed beverage dealers or the good members of the Ohio Restaurant Association.”
The Ohio Restaurant Association would not comment for this story.
Phil Craig, executive director of the Ohio Licensed Beverage Association, says he’s concerned about competition presented by casinos and racinos.
“We support anything in the legislature that will encourage customers to frequent our member establishments,” Craig said. “We definitely see Senator Coley’s bill as moving in that direction.”
About the Author