Senate explores future of Pennsylvania gaming & casinos

Since Pennsylvania has gotten into the casino gambling business the state has seen tax revenues grow every year. But according to a recent report on the gaming industry, that revenue declined last year for the first time, and it is a trend that is expected to continue.

The success of Pennsylvania’s gambling industry got off to a great start. Being able to bring in people from other states where gambling was illegal helped. But, now that surrounding states have legalized gambling, the market is becoming competitive. That is why Pennsylvania lawmakers are looking for ways to keep up.

Members of the Senate Community Economic and Recreational Development Committee held a hearing to look at what they can do to help Pennsylvania’s flat-lining casino industry; a trend that has been seen nationally for the last three years.

Some say the thrill of new casinos would help, while casino operators think the market is already too saturated, and believe that is part of the problem.

“Please consider that 12 casinos is enough,” testified Wendy Hamilton with SugarHouse Casino. “Pennsylvania’s revenue continues to decline and the Mid-Atlantic region is over-saturated. If this committee wants to fight off out-of-state competition and have Pennsylvania remain a nationwide example of how to do gaming right, then the premeditated weakening of the current operators is not the right strategy.”

Amenities
Representatives from the Gaming Control Board, local casinos and other organizations testified about a wide range of things they believe could either help or harm the future of the industry. Ideas like legalizing sports betting,  tax credits for casinos, and even changing amenities, like giving people more options to use their cash, were discussed.

“We encourage you to look for ways to increase further marketing and capital investments through things like tax credits, to which other industries have access, and remove barriers for customers to access their money,” testified John Finamore, Senior Vice President of Regional Operations with Penn National Gaming, Inc.

Other ideas being considered include smoking/nonsmoking casinos. “As operators, I would tell you that a non-smoking casino is a bad casino.” said Sean Sullivan, Vice President and General Manger of The Meadows Racetrack & Casino.

Sullivan also advocated for casinos to be able to allow people to drink after 2 a.m.

“We’re responsible for it. If we lose control of it, we will pay the fines and deal with the repercussions, but we think alcohol later in the evening is an incremental revenue generating discussion,” said Sullivan.

Online Gambling
Another option heavily discussed is online gaming. One game on the table is online Poker. “You’re not surrounded by strangers, you don’t have to face anybody at the table, and it allows you to learn rules of the game. They also allow for very low stakes tables and very low stakes games. It’s an easier way to learn the basics,” one person testified.

“We’re supportive in concept of Pennsylvania authorizing internet poker, provided it’s done in such a way that the existing brick and mortar establishments are the sole licensing or licensed agents,” said Finamore.

“If you consider internet gaming I would urge you to use caution in developing revenue estimates and look to the experiences of New Jersey thus far,” said Bill Ryan with the Pennsylvania Gaming Control Board. “I can assure you that the board will work diligently on this, but we will not sacrifice the protection of the public and the casinos for speed. Therefore we would request an effective date of one year to implement internet gaming.”

Study
The hearing referenced a study of the current decline of casino gaming in Pennsylvania, as well as the future gaming environment conducted by: Econsult Solutions, Inc.

Summary of the study: [from Econsult Solutions, Inc.]

The Pennsylvania gaming industry generated a total of $3.1 billion in total revenue and nearly $1.4 billion in state and local taxes in 2013. Revenues grew steadily as a significant new supply of slot machines entered the market each year from 2006 and 2010, in addition to the implementation of table gaming starting in July 2010. Total gaming tax revenues have stabilized, falling slightly in 2013. The decline is a result of four broad trends:

1)    Table Game Tax Rates – Table game effective tax rates have declined because casinos pay a higher rate in the first 24 months of table games. The majority of Pennsylvania casinos hit the 24 month cut-off midway through 2012, meaning that 2013 was the first year to fully incorporate the lower rates for most properties.

2)    National Trends – Macro-gaming patterns regarding slot (decline) and table (growth) activities respectively may have contributed to the tax revenue decline.

3)    Cannibalization — The flight of previous revenue to nearby states (Ohio and Maryland) with new gaming venues may also be a contributing factor to the revenue decline.

4)    Casino Openings – As casinos open in Ohio and Maryland, gamers deviate from their normal casino to investigate the new casino. Many of these gamers will return to their original casino, but the momentary shift will offset revenue.

Gaming tax revenues grew each year from 2007 to 2012, exceeding $1.4 billion annually before falling slightly in 2013. Approximately 92% of tax revenue generated by Pennsylvania casinos in 2013 came from slot earnings.

To view the FULL Gaming study click here

To view the PA Gaming Revenue Report click here