Thursday, April 14, 2011

Kasich: "Ohio Got a Bad Deal" On Casinos; Did We?

Posted By on Thu, Apr 14, 2011 at 4:29 PM

Feed me to your slot machine.
  • Feed me to your slot machine.

Governor John Kasich is obviously an avid reader of the Scene. Yesterday, we dropped our cover story on the future of the state’s gaming industry. It just so happened the Republican top dog chose the same day to address reporters on the industry and his displeasure with what he sees as the casino developers’ sweetheart deal. Coincidence? We’re guessing the gov likes to take in alt-weekly journalism with his Wheaties.

But exactly how sweet is that setup? Kasich says he has a bitter taste in his mouth. “I think the taxpayers of Ohio got a bad deal,” Kasich said point blank yesterday. “Frankly the taxpayers of this state have a little leverage right now, and this may be the last time we have leverage.”

Kasich believes the state could get more money off the industry. But both the governor’s comments and the subsequent coverage are full of sound and fury signifying little. The real question we need to be asking is what exactly the governor is willing to do, and how far the casino developers will let him push.

The Plain Dealer’s story from today kicks off with the teaser that “Kasich is considering asking operators of the state’s four casinos to pay more — either through additional up-front fees or through the state’s commercial activity tax.” What exactly those “additional up-front fees” could be we never get; in fact, skip down a couple sentences, and we learn Kasich has already tossed the idea of increasing the one-time $50 million licensing fee or the 33 percent tax on gaming revenue because any alteration would require a voter referendum. What else then, you ask?

This article and other coverage make reference to mystery “fees” that could be slapped onto the projects. The governor’s soon-to-be-hired (actually, we’re hearing they’ve been hired already, announcement incoming) gaming consultant will examine the ways such fees could pick more money from the developers’ pocket. Also, the state could fiddle around with the commercial activity tax, 26 cents to every Benjamin Franklin a business makes.

But besides the ways the state can put the squeeze on developers, the real question is whether Kasich is right, whether we, taxpaying Ohioans with an itch for the action, got a bad deal?

Not really, say the industry experts Scene’s spoken with. Ohio’s tax rate is the third highest in the US, the PD reports. Yeah, we could have a higher tax revenue rate, like Pennsylvania. And that state is experiencing tremendous gaming growth. But there’s likely to be a ceiling on the momentum — some Pennsylvania projects already have had trouble getting off the ground. Just wait a couple years and see, insiders caution. Although Ohio’s tax rate is lower, it’s “a good rate that will foster smart growth” of Ohio’s business, a gaming expert tells us.

So Kasich’s comments yesterday — “What more are they willing to do, or do they think they’ve done enough?” — come off a little He Man chest thump — sound bite over substance. He can look tough by targeting the developers, but in the end they’re forking over more than the $50 million sticker price for each casino — we’re talking about billions coming into the state to essentially create an industry from scratch. Can Kasich really afford to look such a gift horse right in the pucker?

The developers are starting grumble back. Rock’s people have been quoted in the paper lately expressing frustration with the process. Yesterday Dan Gilbert shot this message out to the Twitterworld. “Ohio voters passed very strong casino deal. That’s why they voted in 2009 law after rejecting 4 prior attempts. Gov needs to do his homework.”

The irony here is that there is an answer on hand that could work for everyone involved: VLTs. Everyone involved already knows this, of course. If the governor is able to greenlight video slots and propose a reasonable tax rate on those winnings, it will likely shake up the business. And as this week’s story shows, the developers have planned ahead for that curveball.

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