The delayed Pennsylvania gaming bill is costing cities millions in casino host fees. For the past few years, Pennsylvania casinos pay a $10 million hosting fee to the cities and counties where those casinos are located.
Pennsylvania law calls for casinos to pay either 2% of their slots revenue or $10 million in host fees — whichever is highest. The city and county hosting the casino split the proceeds. Because 2% of a casino’s slot machine revenues never amount to $10 million, the host fee in effect is a flat $10 million fee.
Mt. Airy Casino Lawsuit on Casino Host Fees
Last year, Mt. Airy Casino in Monroe County sued. In court, the casino’s lawyers argued that host fees are applied unfairly to smaller casinos in more remote locations. Mt. Airy Casino pays the same as Bethlehem Sands Casino, the resort with the largest revenues in the state. Mt. Airy Casino argued that was not the intention of the law.
In late 2016, the Pennsylvania Supreme Court ruled in favor of Mt. Airy Casino. The Supreme Court told Pennsylvania’s State Legislature to fix the law to produce a fairer system, or the court would invalidate the law.
State Missed Two Deadlines
The legislature had until January 1, 2017 to fix the law. When that deadline passed, the court extended the deadline to May 26, hoping the legislature could patch the law with an addition 5 months. That deadline passed, as well.
Since May 26 of this year, Pennsylvania casinos no longer have to pay their host fees. Most of the state’s casinos have continued to make their payments to their host city and casino, as a sign of goodwill. These businesses plan to coexist with local civic leaders for many years to come, so they’ve continued paying.
Bethlehem Sands Casino Refuses Fee Payment
Bethlehem Sands Casino in Northhampton County refused to pay its host fee. That is causing hardship, especially on the host city of Bethlehem (picture). City Business Administrator David Brong says that the lack of payments have caused a $2 million shortfall for the Bethlehem city budget for 2017.
David Brong placed the blame not so much on Las Vegas Sands, the owner of the local casino, but on Pennsylvania lawmakers. Brong said, “We budgeted $9.8 [million], and the reason that there’s a shortfall is because of the legislative stay.”
Pennsylvania Budget Shortfall Negotiations
Pennsylvania’s legislature was supposed to pass a comprehensive budget bill by July 1. In early July, a $32 billion omnibus spending bill was passed, but it had a $2 billion shortfall. A multi-faceted gambling bill was a vital part of the plan to bridge the shortfall, so it got caught up in the subsequent political wranglings over how to pay for the deficit.
Democratic Gov. Tom Wolf agreed in principle with a bill passed by the Republican-controlled Pennsylvania Senate which would fund the debt with new gambling taxes, fees on the Marcus shale oil reserve, and a bond issue taken against the 1988 cigarette settlement. Republican House Speaker Mike Turzai wants to fund the debt with expanded gambling and a borrowing $1.5 billion.
David Brong Calls for Casino Host Fee Resolution
Because neither side would budge during the July negotitations, the budget talks were postponed until the legislature reconvenes in September. Both gaming bills look as if they will have a solution to the hosting fee. Meanwhile, Pennsylvania’s cities and counties associated with the casino industry are coping with their own budget shortfall — at least those areas where the casino owners do not make payments voluntarily.
David Brong said Bethlehem can handle the shortfall for the time being, but the casino host law needs to be fixed in the near future. Brong added, “We’ll start to see a decline in that cash balance starting now. And it certainly needs to be fixed before 2018.”
