Pa. Supreme Court casino ruling could prove costly for counties, municipalities
September 30, 2016 12:13 AM
A portion of Pennsylvania’s casino law was declared unconstitutional Wednesday by the state Supreme Court.
By Mark Belko and Karen Langley / Pittsburgh Post-Gazette
Frank Siffrinn is confident that legislators will fix the portion of Pennsylvania’s casino law declared unconstitutional Wednesday by the state Supreme Court. But, just in case they don’t, he has two words for them: tax increase.
The North Strabane manager said Thursday the ruling would cost the township, which is home to The Meadows Racetrack and Casino, $2.7 million a year — money being used to pay off a $9.8 million bond issue.
Without the funding, the township — once reserves are exhausted in two to three years — could be facing its first tax hike in more than two decades. “If you lose $2.7 million a year, it’s definitely going to have an impact,” Mr. Siffrinn said.
In its ruling, the state’s high court struck down the municipal portion of the local share tax that most casinos pay on their slot machine earnings. But the decision also affects money paid to host counties, including Allegheny and Washington.
Unless rectified, the ruling, which was the result of a lawsuit brought by Mt. Airy Casino, could cost municipalities and counties statewide more than $140 million in revenue each year, according to the state gaming control board.
Under the state’s gambling law enacted in 2004, all casinos except those in Philadelphia and the resort venues in Nemacolin and Valley Forge are required to pay the greater of 2 percent of their gross terminal revenue or $10 million a year to the host municipality.
They paid 2 percent if revenues topped $500 million a year or $10 million if they did not. Since the law was enacted, every casino has paid the $10 million.
Justices ruled that the provision violated the state Constitution because it, in essence, imposed different tax rates on casinos depending on their size, violating uniformity standards.
And because the 2 percent county share appears to “overlap” with the municipal portion, it, too, is subject to the ruling, they stated. They gave the Legislature four months to fix the law.
The city of Pittsburgh stands to lose $10 million a year and Allegheny County about $5.5 million. In addition to the $2.7 million hit North Strabane could take, other Washington County townships could lose $3.3 million and the county $8.5 million, based on the fiscal year ending June 30, according to the gaming board.
“It’s going to have a huge, huge impact on Washington County and local municipalities,” said Larry Maggi, chairman of the county board of commissioners.
The county, he said, has received $50 million over the past eight years from the tax, allowing it to leverage another $250 million for road, bridge, sewer, water and community service projects.
Kevin Acklin, chief of staff to Pittsburgh Mayor Bill Peduto, said the loss of the revenue would make it more difficult to fund city pensions and rehab public and neighborhood facilities.
“The ruling also represents a broken promise by the casinos to contribute to the host city as a condition of the granting of their license, and a promise that they voluntarily made when applying for their license. We intend to pursue all available legislative and legal channels to hold them accountable,” he said.
Allegheny County Executive Rich Fitzgerald said the loss of the gambling money would force the county to cut services or find other ways to raise revenue, including a possible tax increase. “The folks that applied for these licenses knew the rules. [Legislators] just need to tighten up the language on the legislation and get it back to where it was,” he said.
A tangle of gaming issues
Area legislators vowed to do just that. But some feared the fix could get bogged down if it was included in a larger proposal to expand gaming.
Senate Minority Leader Jay Costa, D-Forest Hills, said his goal would be to ensure that municipalities do not receive less money than they are now. He said a fix can be completed in October if the Legislature does not also venture into the broader issues of gaming expansion.
“If we just focus on the local share issue, I believe we can get it done in October,” he said.
An expanded gambling proposal was used to book revenue for the current state budget even though the legislation has only passed the House.
Because the state’s fiscal year runs from July through June, legislative leaders had said it would be possible to wait until January after new lawmakers are sworn in to finalize that legislation.
But House Majority Leader Dave Reed, R-Indiana, said Thursday that the Supreme Court’s ruling would intensify pressure on the General Assembly to address gambling issues this fall.
Both the House and the Senate are scheduled to meet for six legislative session days in the second half of October.
“This adds a new wrinkle, but it’s probably an opportunity to maybe bring gaming as a whole to a head and resolve both issues at the same time,” Mr. Reed said.
The House in June backed a bill that would legalize online wagering and permit slot machines in airports and off-track betting locations, but that legislation has not moved in the Senate. Despite that, the state budget includes $100 million in revenue from expanding gambling.
Mr. Reed said that staff lawyers are reviewing the Supreme Court decision, and that he does not know what form a potential fix for the local slots tax might take.
“I think it certainly puts more pressure to deal with gaming in the fall,” he said.
Keeping at it longer
State Sen. Camera Bartolotta, R-Monongahela, said she is willing to add session days to fix the law struck down by the court. “We’re going to do whatever we can, whatever we need to do to make this right,” she said.
Jennifer Kocher, spokeswoman for Senate Republicans, said there is a desire in the Senate to take action in response to the ruling, although she could not say when that would be or what would be done.
With the court ruling still fresh, “It would be premature to comment on any specifics” regarding possible changes to the law, said Jeff Sheridan, spokesman for Gov. Tom Wolf.
As for the issue of expanded gambling, “The governor has been clear he expects the Legislature to work on this matter, as it was part of the budget agreement,” he said.
Officials at Rivers Casino, which also challenged the law and then dropped it, were not available for comment. Pinnacle Entertainment, the new Meadows owner, is “simply not in a position to comment, based on many uncertainties,” a spokesman said.
Mark Belko: firstname.lastname@example.org or 412-263-1262. Harrisburg Bureau reporter Karen Langley: email@example.com or 717-787-2141 or on Twitter @karen_langley.
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