Backers of a renewed effort to bring slots-like video gaming terminals to Pennsylvania's bars, private clubs, and other places are keeping their fingers crossed they have hit upon a way to win over the state's casino operators to support their plan.
A plan unveiled on Monday that for the first time has bi-partisan supporters in the House and Senate is estimated would allow as many as 40,000 machines in licensed liquor establishments, truck stops and off-track-betting parlors across the state. It is projected to generate as much as $100 million in the first year and up to $500 million annually in five years.
"Pennsylvania State Police estimate over 40,000 illegal VGTs - 40,000 illegal VGTs - are now operating in Pennsylvania and these illegal machines exist in an unlicensed, unregulated, untaxed platform," said Sen. Guy Reschenthaler, R-Allegheny County, the sponsor of the yet-to-be-introduced Senate bill, at a Capitol news conference. "We need to legalize this industry to bring it out of the shadows."
For bar and tavern owners, it's more about leveling the playing field with the recent law changes that allow grocery stores to sell beer and wine and beer distributors to sell six-packs and single bottles.
"The local tavern owner is looking at this as another way to receive some revenue to help stay afloat and also contribute to the many endeavors we contribute to: churches, Little Leagues, all kinds of youth programs; and stuff like that," said Jerry McCardle of the Pennsylvania Tavern Association. "My consensus from the tavern owners that I have talked to is that if certain parts of this bill can be worked out, overwhelmingly the tavern owner is in favor of it."
Rep. Mark Mustio, R-Allegheny County, who is sponsoring the House bill, said past efforts to legalize this form of gambling in Pennsylvania, along with a visit to Illinois where VGTs were legalized in 2009 and co-exist with casinos, helped lawmakers improve on past legislative efforts to craft this latest proposal.
"Illinois was a great pilot program for Pennsylvania to use when passing this legislation," he said, pointing to a chart that shows total tax revenue increased by more than $2.1 billion in the three years since that state's first VGT was installed.
He is hoping the measure will be considered by the House as soon as possible. Gov. Tom Wolf has indicated he is receptive to the idea with conditions.
"The governor is open to forms of revenue that are sustainable and will eliminate our structural deficit," said Wolf spokesman J.J. Abbott. "The governor believes the solution should not be detrimental to existing gaming revenue from the lottery and other activities. He will continue to work with the General Assembly to meet their commitment to enact gaming legislation while not causing harm to existing operations."
Mustio said Illinois has not seen a negative impact on its lottery ticket sales since legalizing VGTs. Closer to home, he pointed to casinos haven't hurt lottery ticket sales. In 2006, when the first casino opened in Pennsylvania, the lottery had ticket sales of $3 billion, whereas in 2016, ticket sales grew to $4.1 billion.
The provision in the plan that is hoped to quell the opposition from casinos reduces the amount of base slots tax they pay to the commonwealth from 34 percent to 29 percent. That is the revenue that the state uses to provide the Act 1 school property tax reductions.
However, the plan's supporters said the bill provides for revenue from a 34 percent tax on VGT revenues to be tapped to ensure that the amount of money available for property tax reductions does not decrease.
In addition, the bill would eliminate the one casino resort license that was to come on line this year and delay for at least three years the awarding of a racino license.
Eric Schippers, senior vice president for public affairs and government relations for Penn National Gaming, which operates Hollywood Casino in East Hanover Township, said those provisions removes the uncertainty looming over casinos about where those licenses might wind up.
The inclusion of those sweeteners for the state's casino industry was enough to draw Penn National's support. Whether it draws broader support from the state's other casinos remains to be seen.
"Other casinos, the other 11, are going to have to sit down with their business people and accountants too and run the math," Schippers said. "I can tell you from our perspective, this bill in running that math does a good job of striking that balance between helping to mitigate [the cannibalization of their casino] and establishing a new industry in the commonwealth. Other companies will have to come to their own conclusion."
Schippers also was careful to stipulate that Penn National's support is conditioned on the bill as currently written remaining intact.
Observers monitoring this effort from the casino industry say casinos will be looking to see what criminal background check requirements will be placed on bar and restaurant employees where the VGTs are located, whether those establishments will be required to have 24-hour surveillance, along with other provisions that casinos must abide by.
In addition to the 34 percent tax on VGT revenues, the proposed legislation calls for VGT operators paying a 4 percent local share tax, which would be divided evenly between the host municipality and county.
Other details in the plan that were shared at the news conference include:
- A licensed liquor establishment would be limited to 5 machines per location while truck terminals and off-track betting parlors would be capped at 10 machines.
- Maximum bet that could be placed on a machine is $5 and the maximum payout an individual can receive is $1,000 per day, both of which are attempts at minimizing gambling addiction, supporters say.
- No one under the age of 21 would be permitted to play.
- Key employees of establishments where VGTs are located would be required to receive training.
- Out of the 34 percent tax on VGT revenues, $2.5 million would go to firefighters and emergency services and another $2.5 million would be directed to combating substance abuse. The rest would go into the general fund to pay for state government operations provided none is needed to hold steady the amount available for property tax reductions.
Rep. Mike Sturla, D-Lancaster, said last year when the House considered the bill a concern was raised about the impact that legalizing VGTs could have on those municipalities that taxed the illegal VGTs in operation as sort of a hush payment.
"With the local share in this bill, we will actually be providing those local municipalities with more money than they are making off of the taxes they currently charge on the illegal machines," Sturla said.
Additionally, he said the penalties for continuing to operate illegal machines would be steep. He said liquor licensees could have their unregistered machine confiscated, face a fine and potentially have their liquor license revoked.